NSE algo controversy heads for closure

Capital markets regulator Securities and Exchange Board of India (Sebi) has issued show-cause notices to the National Stock Exchange (NSE) and 14 individuals as a part of a probe against the exchange in the “unfair access” controversy. 

Sebi has sought inputs and explanations on alleged lapses at the exchange that came to light after the regulator’s internal probe and also one by third-party auditor Deloitte India. Sources said Sebi had expedited a probe in the matter and a final order could be passed within two months. 

Among those issued the notices are former chief executive officers (CEOs) Chitra Ramkrishna and Ravi Narain. The former had unexpectedly quit NSE in December 2016, while the latter currently serves as vice-chairman on NSE’s board. Others who have received the notices are some officers in the technology and business operations departments. 

Sources said all of them will have to reply to the notices in their individual capacity, while the exchange will reply separately. All the entities are learnt to have sought legal advice for responding to the notices. Those served the notices have been given 21 days.

The notices were sent after Sebi appointed an enquiry officer to examine the facts and findings of the case. 

The case dates back to 2015, when the market regulator received three complaint letters highlighting flaws in NSE’s algorithm trading systems. The letters also made allegations of “unfair access” to certain brokers at the exchange’s co-location facility. 

According to the letter, between 2011 and 2014, the set-up at NSE allowed certain brokers (who connected first to the exchange’s system) received data ahead of others and thus were able to react to information before anybody else.