MUMBAI: In an unprecedented development, the Securities and Exchange Board of India (Sebi) has split the investigation of the high-profile National Stock Exchange (NSE) co-location case. Now, two Sebi officers will handle the matter instead of one as the complexity of the case has delayed its outcome.
“The case is very big for one person to handle it,” said a person familiar with the development. “This is a priority case, so things have to move fast. One of the allegations against Sebi is it is very slow to take action. So, this has been done to expedite the case.”
There are different aspects to the case. One is preferential access — where charges are against brokers, exchange and employees; second is dark fibre — the charge is against service provider, broker, exchange and employee and the third is breach of data — charges are against Ajay Shah for collecting trade data for research purpose and passing it on to a company which was into preparing algos. This is the first time the regulator has split its investigation.
The genesis of the case dates back to 2015, when a whistleblower wrote a letter to Sebi alleging that NSE gave preferential access to a few high-frequency traders and brokers to the exchanges trading platform.
Sebi on receiving complaints initiated an inquiry into the matter. Recently, Sebis internal team concluded its investigation on the case and submitted its report.
Following which, in July this year, Sebi issued show cause notices to NSE, some of the former and current senior NSE officials, brokers, services providers and Ajay Shah, professor of National Institute of Public Finance and Policy.
Sebi has initiated both adjudication proceedings and 11B proceedings in the case. Under adjudication, Sebi imposes monetary penalty, while Section 11B empowers Sebi to issue directions, including barring offenders from the securities market.
The adjudication proceedings will also be handled by two officers. Whole-time members G Mahalingam and SK Mohanty are hearing the matter under Section 11B. Meanwhile, NSE has filed a consent application to settle the matter.