MCX Disruption Due to Predefined Trade Limit, May Face SEBI Penalty

The Multi Commodity Exchange (MCX), India’s leading commodity derivatives bourse, said on Friday that a four-hour trading outage earlier this week was caused by a surge in trading activity. The Mumbai-based exchange stated that a predefined limit on how many traders could use its system simultaneously was the primary root cause of the glitch on October 28.

“This is to update that the primary root cause has been identified as a predefined parameter limit relating to reference data such as the Unique Client Code (UCC) configured within the systems. This led to constraints beyond the threshold,” MCX said in a statement.

The UCC is a unique identification number assigned to every trader. In MCX’s case, the system had a fixed limit on how many UCC entries it could process. When trading volumes or client data exceeded that threshold, the system hit a technical constraint, resulting in the trading disruption.

“We have taken steps to address these constraints to prevent similar issues in the future. Notably, the trading systems themselves did not face any functional issues. Exchange systems are well positioned to support market volumes and growth,” the commodity exchange added.

Meanwhile, a Reuters' report said the Securities and Exchange Board of India (SEBI) is likely to penalise MCX for the outage, as the regulator is concerned about the delay in identifying the cause of the trading halt. The report also suggested that SEBI may direct MCX to enhance its system capacity.

Under SEBI regulations, trading activity must shift to a disaster recovery (DR) site if the main exchange halts. However, in this case, the backup system also failed to resolve the issue. Since the disruption stemmed from a capacity breach, the same problem persisted at the DR site due to the surge in trading volumes.

MCX said it has since implemented measures to resolve the constraints and prevent similar incidents in future.

The exchange’s share price dropped sharply on the day of the glitch, falling from ₹9,321 per share at the close on October 27 to ₹9,209 at the opening on October 28. It declined further to ₹9,036 the following day, but has since recovered most of the losses and was trading at ₹9,243 on the BSE as of October 31.