NSE panel rules out collusion by its staff
The two membered National Stock Exchange of India Ltd (NSE) panel has submitted its report to the Securities and Exchange Board of India or Sebi, where it did not find instances of maleficence on part of employees under investigation on allegations of unfair or preferential access, said two people who are familiar with the matter.
An email sent to Sebi spokesperson on Thursday was not answered, NSE spokesperson declined to comment.
“The panel submitted its report to NSE board and was subsequently sent to Sebi earlier this month. In the report the exchange was able to identify who made ‘these decisions’, who executed them and who were responsible for them. But, it wasn’t out of any mala-fide intent but due to following convention rather than written down procedures,” said the first person.
‘These decisions’ means the instances of unfair access, where some brokers were allowed to access NSE’s algorithmic trading systems with better hardware specifications.
In the month of May, NSE had formed a committee to look into the allegations and examine the role of the 14 NSE officials.
These 14 officials were showcaused by the market regulator that they failed in their fiduciary responsibility on 22 May.
According to these people, NSE in the report has further submitted that it was due to lack of written policies on colocation, which it has corrected by redrafting its policy.
“Considering that the report doesn’t make a case for any malpractice, connivance, collusion any criminal action may not be sustainable legally,” said the second person. “However, the report is now with Sebi, NSE may consider waiting for a guidance from the regulator,” he added.
In a communication in September 2016, Sebi had asked NSE to commission a forensic audit of its systems and fix responsibility.
One of key issues in Sebi’s showcause notice to NSE and its officials is the ‘lack of cooperation’ during the probe.
Sebi alleged that NSE officials gave contradictory answers and did not give the data in the desired format.
“Instances of non-cooperation was also brought out in the report. For instance 120 Tera Byte of data over 100 days across 21 servers, for the last five years was restored and shared. And around 600 man hours were spent in sharing the data,” said the second person.
Meanwhile, Sebi is in the final stages of hiring a forensic auditor to look into the aspect of collusion, broker ill-gotten gains etc.