| Saturday, 03 August 2024 |
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Good morning [%first_name |Dear Reader%],
This whole thing is complicated, so I’m going to explain it using a fictional analogy.
Let’s say that you find out on the news tomorrow that there’s been a massive cyber attack on India’s National Stock Exchange (NSE). Preliminary reports state that unknown hackers from another country broke into the NSE’s online system and transferred shares worth a few thousand crores out of the exchange. These shares belong to large, listed companies that trade on the NSE. By the time the hack is discovered, the hackers take these valuable shares, execute a series of complicated financial swaps, and convert it to an international currency, which they proceed to withdraw through a Swiss Bank. All attempts are being made to trace these attackers, but the search doesn’t look promising because this was a fairly sophisticated attack.
At the end of the day though, Indian investors are impacted. Thousands of retail investors, plus mutual funds and other institutions, held stock of these three companies in their portfolio.
So what should the NSE do?
You may have an answer—perhaps you’ll say that the NSE had the responsibility to keep these shares safe, so it’s really the NSE’s problem, and that they need to buy these stolen shares back and make the investors whole again. Perhaps you’ll say that these things need to be insured, so the insurance company has to pay for it. Or perhaps you’ll say that India’s regulators need to step in and fine the people who were responsible for the shocking security lapse. Some of you may even argue that the three companies can simply annul the stolen shares and issue new ones back to the original investors. So many possibilities. All plausible.
But imagine if the NSE came out the next day and said that its master plan was to distribute the amount lost in the hack across every single person who traded on the exchange regardless of whether they originally owned these shares or not.
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