Freak trade on June 1 was human error: BSE

Terming the freak trade in Reliance Industries, shares on June 1 when for a few seconds the countrys most valued companys shares plunged by 20 per cent as a human error....

Terming the freak trade in Reliance Industries shares on June 1 when for a few seconds the countrys most valued companys shares plunged by 20 per cent as a human error,the Bombay Stock Exchange on Wednesday claimed there was no manipulation involved in the sharp decline witnessed in the scrip.

After extensive review of trading of Reliance Industries (RIL) during this episode by the BSE,we wish to inform the market that there does not appear to have been any manipulation involved in the scrip. The price decline was the result of a human error, BSE said in a statement. On June 1,shares of RIL plunged 20 per cent in intra-day trade to a low of Rs 840.50. However,it recovered within minutes to close at Rs 1,011.55,down 3.21 per cent. However,the freak trade in RIL pulled down down the main index Sensex by over 600 points.

The exchange said erroneously a dealer entered a large sell order of 1.6 lakh RIL shares,instead of dividing the sell order and placing it in smaller quantities. As the order was at market (without any price limit) it swept through all the orders on the buy side, it said.

At the time the sell order for RIL shares was entered,there were a large quantity of buy orders in the order book and since the error happened during the market hours,those who placed their buy orders at a price lower than the market price they got the RIL shares,the exchange said. Since there was a dummy circuit filter of 20 per cent on the shares of RIL,which is also in the derivative segment,the fall was limited to that extent only,it said.

As the dummy circuit filter was set at the price of Rs 836.05 (20% below previous days close) and the lowest priced buy order in the order book was at Rs 840.55,it prevented the price falling further and all the balance quantity was executed at the price of Rs 840.55. The execution of the entire order took approximately 12 seconds in 1,610 separate trades with 222 counter parties.

Under the dummy circuit filter logic,limit orders of more than 20% above or below the previous days closing price are rejected upon order entry. This is the reason that there were no buy orders on the book below 20% and the reason that the price did not fall more than 20% below the previous days close,due to dummy circuit filter, the BSE said.