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Journalism of Courage
The debut of Tulip IT Services shares on the Bombay Stock Exchange was marred by a punching error that led to a loss of Rs 12 crore of investors8217; money on listing day.
Tulip shares changed hands at a meagre 25 paise as against its market price of Rs 185. Its shares were sold at 25 paise during the peak trading hours at 2.24 pm. Market sources estimate that over four lakh shares were traded at 25 paise.
A few seconds later, about 5.95 lakh shares of the company were sold at a price of Rs 100 a share. The share price then moved between Rs 160 and Rs 185 before finally stabilising at its intrinsic value Rs 185 at 2.25 pm.
The total number of Tulip shares traded in the bourse was about 11.78 lakh at a weighted average price of Rs 77.25. Tulip opened at Rs 180 at the BSE, sunk to 25 paise in the afternoon and finally closed at 182.55.
When contacted, BSE officials said they were in the process of resolving the problem.
8220;Transactions can8217;t be reversed automatically as the trading takes place through the electronic mode. If both buyers and sellers agree to reverse the transactions, then the error can be undone. The BSE should also find out whether it was a software error,8221; said a market source.
At the market price of Rs 185, the total turnover on 11.78 lakh shares should have been Rs 21.79 crore. However, at the weighted average price of Rs 77.25, the turnover works out to only Rs 9.10 crore, leading to a loss of Rs 12.69 crore. As the shares of a debutant firm on the listing day is not subject to any circuit breaker system, the error went unchecked.
Shares are subject to circuit filter ranging from 5 per cent and 10 per cent and trading is suspended automatically when prices exceed this limit.
Shades of Tokyo
The BSE punching error happened 15 days after Tokyo Stock Exchange president Takuo Tsurushima resigned following a 40 bn yen 333 m trading error. In December 2005, the exchange8217;s computer systems failed to cancel a mistaken order to sell 610,000 shares for 1 yen, instead of one share for 610,000 yen. The stock exchange8217;s problems come at a time when it is considering plans to float its own shares next year.8217;8217;
