NSE sub­mits 2 au­dit re­ports to Sebi on co-lo­ca­tion mat­ter

Business Standard - - THE SMART INVESTOR - SHRIMI CHOUD­HARY

The Na­tional Stock Ex­change (NSE) on Tues­day submitted two sep­a­rate au­dit re­ports to the Se­cu­ri­ties and Ex­change Board of India (Sebi), pre­pared by EY and In­dian School of Busi­ness (ISB), Hyderabad, re­lat­ing to the colo­ca­tion mat­ter.

Sebi be­gan in­ves­ti­gat­ing the mat­ter in early 2015, af­ter mul­ti­ple com­plaints that some bro­kers al­legedly got pref­er­en­tial ac­cess at the ex­change’s colo­ca­tion fa­cil­ity.

Deloitte had done a foren­sic au­dit on the mat­ter. Its re­port said Delhi-based bro­ker­age firm OPG Se­cu­ri­ties was con­sis­tently able to con­nect to the ex­change’s trad­ing sys­tem ahead of other trad­ing mem­bers. The re­port said this would not have been pos­si­ble with­out knowl­edge of the NSE team.

EY was ap­pointed by the NSE early this year to au­dit its cash, cur­rency de­riv­a­tives and in­ter­est rate fu­tures mar­kets, to as­cer­tain if these seg­ments were also prone to ma­nip­u­la­tion like the eq­uity de­riv­a­tives seg­ment. The ISB study was to de­ter­mine whether any ab­nor­mal prof­its were made as a re­sult of first log-in to servers by mem­bers named in the Deloitte re­port, the ex­change said. The NSE has re­fused to com­ment on the find­ings of the re­port.

Sources say the find­ings of the lat­est au­dit re­ports will help Sebi de­cide on the NSE’s con­sent plea to set­tle the colo­ca­tion mat­ter.

Soon af­ter Deloitte submitted its re­port, the reg­u­la­tor had called for another au­dit of the cash and cur­rency seg­ments. Based on Deloitte and Sebi’s in­ter­nal find­ings, Sebi had served show-cause no­tices to the NSE and 14 of its cur­rent and for­mer key man­age­ment per­son­nel for al­leged ir­reg­u­lar­i­ties at the colo­ca­tion fa­cil­ity.

Sebi has also or­dered another foren­sic au­dit to es­tab­lish any col­lu­sion be­tween bro­kers and of­fi­cials of the NSE.

Sources say the find­ings of the lat­est au­dit re­ports will help Sebi de­cide on NSE’s con­sent plea to set­tle the co-lo­ca­tion mat­ter

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