NSE seeks to settle unfair access issue with regulator

The National Stock Exchange of India Ltd (NSE) on Thursday sought a settlement with the markets regulator over allegations that it provided unfair access to its high-frequency trading systems to some brokers.

NSE applied to the Securities and Exchange Board of India (Sebi) for a settlement through the so-called consent mechanism three days after Vikram Limaye took charge as MD and CEO. Consent mechanism is a process through which entities can settle charges by paying a penalty without admission or denial of guilt.

“Sebi will review the application and get back to NSE on the future course of action. NSE will work with Sebi on early resolution of this matter,” the exchange said in an emailed statement.

On May 22, the markets regulator had sent show-cause notices to the bourse and 14 present and former officials over charges of providing some brokers unfair access to its algorithmic, or highfrequency, trading systems that allow thousands of orders to be executed in less than a second. Sebi said the exchange had failed in its fiduciary responsibility.

The terms of consent will be discussed by an internal Sebi panel which comprises the investigating officer, officials of the legal department and the department which issued the showcause notice. Once approved, the terms will be sent to an external panel, called High-Powered Advisory Committee. Then the application will be vetted by a panel of Sebi whole-time members before being approved or rejected.

NSE took the decision to settle the charges through the consent mechanism at a June 7 board meeting, said a person familiar with the development. The board decided to opt for the route as it was causing reputational damage to the exchange, this person added on condition of anonymity. When I started, we had set ourselves a plan, and milestones. The current quarter, I will call it as evidence of disciplined execution of strategy. As you know, some of the best strategies if not executed well, fizzle out. I believe this is one of my best quarters and we have got a momentum. I feel pretty good, as we have got results from client mining, (high growth) from top ten We have a clear vision and strategy. There has been no change in the strategy. When I came in, there were clear gaps. Design (we bought DesignIT), Cloud (we bought Appirio) and Germany (we bought Cellent). So we were very aggressive. Now, when I look, there still two-three gaps which I cannot disclose.

We need to find the right assets in these two-three areas. So overall, there is no change in our M&A strategy.