NSE applies with Sebi for consent issue on unfair access issue

The National Stock Exchange of India Ltd (NSE) on Thursday applied to the Securities and Exchange Board of India (Sebi) for settling allegations of unfair access through the so-called ‘consent mechanism’ three days after Vikram Limaye took charge as managing director and chief executive officer. 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,” said the bourse in an emailed statement.

On May 22, the markets regulator had sent show cause notices to the bourse and 14 existing and former officials over charges of providing some brokers unfair access to its algorithmic trading systems. Sebi had alleged violation of Stock Exchanges and Clearing Corporation, and Securities Contract and Regulation Act norms, saying that the exchange had failed in its fiduciary responsibility. The terms of consent would be discussed by an internal Sebi panel which comprises of the investigating officer, legal department and the department which issued the show cause notice.

Once approved this, would then be sent to an external panel also called a High Powered Advisory Committee (HPAC). Then the application would be vetted by a panel of Sebi Whole Time Members, before finally being approved or rejected.

The decision to settle through the consent mechanism was taken in a June 7 board meeting, said a person familiar with the exchange’s thinking. The board had decided to opt for the route as it was causing reputational damage to the exchange, this person added.