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 an NSE spokesperson declined to comment.

“The panel submitted its report to the 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 (that led to unfair access), who executed them and who was responsible for them. But, it wasn’t out of any mala fide intent but due to following convention, rather than written down procedures," said one of the two people cited above.

Unfair access refers to those instances where some brokers were allowed to access NSE’s algorithmic trading systems with better hardware specifications.

On 22 May, Sebi sent a show-cause 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 corrected 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 show-cause 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 terabytes 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 the regulator had said it would do after its 21 June board meeting.

Considering that two of the leading auditors—Deloitte India and EY—have already looked at NSE systems, it would be slim pickings for the regulator.

Deloitte India was hired by NSE to look into the algorithmic trading in October 2016, and EY in March 2017 to look into the cash and equity segments.

Separately, following the technical glitch in NSE systems on Monday that stopped trading, Sebi wants NSE to submit a fact-finding report before the end of the week.

“Sebi also wants NSE to review its back-up systems, disaster recovery plans etc. If main servers face issues, then what is the backup mechanism? After the report, Sebi may re-look at its policy around disaster recovery systems," said the first person.

NSE had come under criticism from brokers for not using its disaster recovery site in Chennai when main systems were down.

NSE, in a preliminary report submitted to Sebi, has said that its systems suffered due to order taking systems not being able to communicate with the order matching systems.