Scrip had slipped about 27% in 3 trading sessions since Friday
Emkay Global Financial Services scrip rallied on the bourses after it announced that the National Stock Exchange (NSE) had reinstated its trading facility and allowed it to resume normal services.
Emkay touched an intraday high of R27.75 on the BSE, 9.9% higher than its close the previous day. It ended the day with gains of 4.36% at R26.35. The comeback is significant considering that the scrip had slipped about 27% in the three trading sessions since Friday. However, the counter is still down 23.6% over last Thursday?s close.
Emkay Global said on Wednesday that NSE had reinstated its trading facility on cash, derivative and currency segments after doing a review of the facts that led to the placement of the erroneous sale order. ?We have now subjected all our trading and risk management systems to a further rigorous examination and have taken various steps to avert any such manifest error in future,? the brokerage said in a statement. ?We are well capitalised and continue to conduct our business for both institutional and retail clients.?
According to sources, top stock exchange officials and Sebi are now working on creating a framework to avoid such an occurrence in future. Members of the Sebi-appointed secondary market advisory committee (SMAC) have also deliberated extensively on this issue.
It is believed that Sebi is looking at strengthening the risk-containment measures and margin requirements at the broker level to ensure such erroneous orders do not enter the exchange systems. It has been reported that while the 10% index circuit limit was triggered on Friday, the 50-share Nifty crashed by over 15% as some of the ?in flight orders? still managed to enter the exchange system. Institutional clients are now allowed to pay their margins a day after the transaction, a practice that could come under review, said sources.
Industry observers are of the opinion that Friday?s incident might create distrust in the minds of institutional clients. ?Considering that the incident was a failure of risk management, the brokerage may face a tough time getting empanelment from clients unless they give a convincing explanation,? said the institutional head of a mid-sized broking firm, on condition of anonymity.
Emkay?s error had led to the Nifty?s flash crash of about 900 points last Friday, which led to a halt in trading at NSE for about 15 minutes. The NSE had then blamed the crash on erroneous orders worth over Rs 650 crore for multiple trades by Emkay Global for an ?institutional client?.
During the three sessions from Friday to Tuesday, the firm?s market capitalization had dipped to Rs 61.7 crore from Rs 84.3 crore on Thursday. As of Wednesday, the firm?s market cap improved marginally to Rs 64.39 crore. The brokerage could have made losses of about Rs 110 crore as a result of the freak trade on Friday, according to estimates.
Emkay Global posted a consolidated net loss of Rs 2.1 crore in the June quarter against revenues of Rs 20.55 crore. For FY12, the firm had posted a net profit of Rs 1.07 crore against revenues of Rs 114.09 crore.
