NSE panel rules out collusion by staff
MUMBAI: A two-member internal panel of the National Stock Exchange of India (NSE) that was set up to look into the role of employees in the unfair access issue has absolved them of collusion and malfeasance. It has, however, found procedural lapses owing to a lack of written policy, said two people familiar with the matter.
An email sent to a spokesperson of Securities and Exchange Board of India (Sebi) on Thursday was not answered, while NSE spokesperson declined to comment.
“The panel submitted its report to NSE board and was subsequently sent to Sebi (Securities and Exchange Board of India) earlier this month. In the report, the exchange was able to identify who made these decisions (which led to unfair access), who exerected cuted them and who were responsible for them. But, it wasn’t out of any malafide intent but due to following convention rather than written down procedures,” said the first person cited earlier.
Unfair access refers to those instances where some brokers were allowed to access NSE’s algorithmic trading systems with better hardware specifications.
On May 22, Sebi sent a showcause to 14 NSE officials and the bourse itself asking whether they failed in their fiduciary responsibilities. This prompted NSE to constitute a committee to look into these allegations and examine the role of the officials.
According to the people cited earlier, the panel has told Sebi that the unfair access was owing to a lack of written policies on co-location, which it has cor- by redrafting its policy.
“Considering that the report doesn’t make a case for any malpractice, connivance, collusion, any criminal charges may not be sustainable legally,” said the second person cited earlier. “The report is now with Sebi.”
A key issue in Sebi’s notice to NSE and its officials was ‘lack of cooperation’ during the probe. Sebi had alleged that NSE officials gave contradictory answers and did not give the data in the desired format. “The report has also addressed the question of non-cooperation. For instance, 120 tera bytes of data pertaining to 21 servers over the last five years was restored and shared,” said the second person.
Meanwhile, Sebi is in the final stages of hiring a forensic auditor to look into the aspects of collusion, ill-gotten gains for brokers etc — something which the regulator had said it would do after its June 21 board meeting.