Mumbai: The Securities and Exchange Board of India (Sebi) has sought an explanation from National Stock Exchange of India Ltd (NSE) on a report by a Sebi constituted expert panel which had recommended action against the bourse for violating norms of fair access, said two people familiar with the developments.

The Sebi technical advisory committee (TAC) in March had submitted its findings to Sebi that some traders on the exchange had unfair access to market data and trading systems.

“An explanation has been sought on the findings of the expert panel, which had recommended an independent probe on allegations of unfair access by NSE," said the first person cited above.

A second person confirmed the developments without going into the contents of the queries sought by Sebi.

An email sent to Sebi on Monday did not elicit a response.

Mint first reported on 5 April that the Sebi panel concluded that NSE violated norms of fair access and allowed some brokers to benefit.

The panel recommended Sebi may initiate immediate action for lapses on the part of NSE and exploitations made by OPG Securities, a brokerage firm, under the guidance of the panel.

The panel further advised Sebi that it may constitute a team comprising people with appropriate background to investigate the collusion aspect between NSE officials and OPG.

This is the first clear indication that the market regulator has taken cognizance of the allegations made against the bourse and has launched an independent probe in the matter.

The report in question was prepared by a sub-committee constituted by TAC. This sub-committee had six Sebi officials and Om Damani, a professor of computer science and engineering at the Indian Institute of Technology, Bombay. In its report, the sub-committee said the bourse had not provided adequate details to the committee examining the issue.

NSE, in its reply, which is likely to be submitted next month would refute the findings of the Sebi panel.

Bloomberg first reported on Monday (which was independently verified by Mint), that, in its defence, NSE will make a submission to the regulator emphasizing that the expert committee’s conclusion of improper practices at the exchange are incorrect and that it broke no rules.

“NSE did not flout any rules and the allegations of collusion between NSE officials and certain brokers are unfounded," said the second person cited earlier in the story.

“The TAC appointed by Sebi has simply repeated allegations made by the whistleblower without an independent thorough investigation," he added.

In an email, a spokesperson for NSE said, “As a policy we usually do not comment on matters related to the market regulator."

Shriram Subramanian, founder and managing director, InGovern Research Services Pvt. Ltd, a proxy advisory firm, said it is a moral responsibility of the exchange to owe up to even minor infractions.

“The exchanges are the first line regulators and it is their responsibility to look into minor infractions and lapses. If there has been any manipulation by any intermediary, they should ideally hold themselves accountable and rectify the error," said Subramanian.

The issue first came to light when a whistleblower, who went by the pseudonym Ken Fong, wrote to the regulator alleging NSE’s systems were being misused, and that some people consistently enjoyed advantages to the detriment of others.

The minutes of Sebi’s TAC said it received three such letters from the whistleblower.

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