NSE plans to settle 'unfair access' case through consent mechanism

Decision taken at board meeting held on Wednesday; bourse to appoint lawyers to initiate the process

The National Stock Exchange (NSE) is plans to settle the allegations of preferential access to certain brokers at its co-location facility through the so-called consent mechanism. The decision in this regard was taken at the exchange's board meeting held on Wednesday, said two people with the direct knowledge of the development.

NSE will soon appoint lawyers through whom it will enter into talks with Sebi for a consent settlement, said a source.

 

Under consent settlement, an alleged wrongdoer can settle proceedings with Sebi without admitting or denying guilt by paying a monetary penalty and, or following any other directions, such as suspension, directed by the regulator. This route helps avoid lengthy proceedings.

The exchange is seen to settle the "unfair access" controversy in which it has been embroiled with the market regulator since 2015.

"The board was of the view that the organisation is suffering due to the overhang of the case. It decided it would be better to pay a monetary penalty instead of going through lengthy legal proceedings," said a source.

The board is of the view that the exchange has made the necessary changes to the trading systems and put in place new architecture that has been approved by auditors and even Sebi's technical committee. The board felt that for what has gone wrong, the exchange needs to come to some settlement with Sebi, said a source privy to the matter.

Last month, Sebi issued show causes notices to NSE and its 14 officials asking them to explain the alleged lapses at the co-location facility. The allegations of preferential access against NSE are for a period between 2011 and 2014, when certain brokers exploited the gaps in the trading system to gain unfair access.

The board also discussed the way forward for the 14 employees who have been served the Sebi notice.

Some of the employees who have been served the notice include chief of business development officer Ravi Varanasi, regulatory chief Suprabhat Lala, former CEOs Chitra Ramkrishna and Ravi Narain, former technology heads Ravi Apte and Umesh Umesh Jain and former chief operating officer Subramanian Anand.

The board will discuss with the lawyers if the consent settlement can be done for some the employees along with the exchange.