The National Stock Exchange of India said 59 erroneous orders prompted a plunge in equities that briefly erased about $58 billion in value, underscoring the growing global concern about the integrity of financial markets.

Trading in the S&P CNX Nifty (NIFTY) Index and some individual companies stopped at 9:49 a.m. in Mumbai for 15 minutes after the 50-stock gauge tumbled as much as 16 percent. The volume of stocks in the benchmark index that were traded today almost doubled from the 100-day average, according to data compiled by Bloomberg.

Regulators around the world are probing market structures and electronic trading after a series of malfunctions. In May 2010, high-frequency orders worsened the so-called flash crash, which briefly wiped $862 billion from U.S. stocks. The Nasdaq Stock Market in May this year was overwhelmed by order cancellations and trade confirmations were delayed on the first day of trading in Facebook (FB) Inc., the largest initial public offering of 2012.

"India has joined the big league with this trading disaster," A.S. Thiyaga Rajan, a senior managing director at Aquarius Investment Advisors Pte., which manages about $400 million, said by phone from Singapore. "It's very surprising so many erroneous orders went through. Exchanges and regulators must be one step ahead as systems and technologies upgrade."

David Fuller's view I do not know the full details of this incident other than what I have read in this report from Bloomberg. Therefore I will not speculate on the specific causes but I do hope that this provides a wakeup call for exchanges everywhere, their regulators and the global investment community at large.

Bottom line - this sort of development is not good enough and we expect better. As a long-term private investor with interests in India, I do not feel that this specific incident affects me at all. However, it may deter others, as we know similar events have on Wall Street. Such evidence of instability within the market system creates fear and often reeks of casino capitalism. It can damage investors, including pension funds, and it will reduce their participation in the capital markets.

Some flash crashes may be innocent accidents but they suggest that the system is susceptible to abuse. They will impede the formation of capital, which is part of the lifeblood of our market economies, and the principal reason for why we have stock markets.

Here are some examples of today's flash crash in India. Reliance Industries (daily & intraday) is one of India's biggest companies in terms of capitalisation. It fell 20%, all the way down to its May-June lows in seconds before moving straight back up and closing higher on the day. The Nifty 50 Index (weekly, daily & intraday) briefly fell 16% before closing 0.70% lower. India's broader Sensex Index (weekly & daily) and the Bombay Banks Index (weekly & daily) were much less affected.

As you can see, India's stock market has been on a roll recently, reflecting a huge vote of confidence by investors in Prime Minister Manmohan Singh's efforts to break the coalition logjam and implement modernising reforms.