Sebi issues show cause notice to NSE on preferential access to brokers

The Securities and Exchange Board of India (Sebi) has issued a show cause notice to the National Stock Exchange (NSE) following the market regulator's probe into the alleged preferential access given by the stock exchange to some brokers through its 'co-location' facility.

"We have issued a show cause notice to NSE and to 14 key managemenmt personnel," Sebi  Chairman Ajay Tyagi told reporters in response to a query on the NSE case, following a meeting here of the Sebi Board.

"The Sebi is looking at connivance between NSE employees and brokers in order to make unfair gains," he said.

"We have engaged forensic experts to aid in this investigation," the Sebi chief added.

Sebi began investigating the matter in early 2015 after receiving multiple complaints about some brokers allegedly getting preferential access through the co-location facility, early login and 'dark fiber', which can allow a trader split-second faster access to the data feed of an exchange. Even such split-second faster access can result in windfall gains for a trader.

Besides the Finance Ministry, the Reserve Bank of India also had asked Sebi to clarify whether these alleged lapses pertained to the operations of exchange traded currency and interest rate derivatives.