Home / Markets / Stock Markets /  13 more firms on Sebi radar as probe into NSE algo-trading case widens

Mumbai: The stock market regulator has expanded its investigation into the National Stock Exchange of India Ltd (NSE) co-location case and brought 13 more broking firms under its probe.

The regulator has asked India’s largest exchange to make its own investigations into these companies and issued administrative warnings to six other trading firms, according to a Securities and Exchange Board of India (Sebi) letter to the finance ministry. Mint has seen a copy of the letter dated 13 March.

“With new probes initiated at this stage, the completion of the case is pushed by another three to six months. Sebi will also send supplementary show-cause notices to NSE and its officials on the basis of new facts that may emerge from the new probes," said a person who is familiar with the matter and has seen the letter, asking not to be identified.

Between 2010 and 2014, some broking firms allegedly secured preferential access to NSE’s high-speed algorithmic trading platform using its co-location service.

Sebi, which started investigating the case in 2015, has so far issued show-cause notices to NSE, its officials and three broking firms, OPG Securities, its associate GKN Securities, and Way2Wealth Brokers Pvt. Ltd.

“The forensic analysis conducted on the brokerage firms and NSE systems pointed to at least 62 firms having an alleged unfair advantage. While Sebi has already concluded a probe on 15 firms, it last month initiated a probe against 13 more brokerage firms. These examinations are to ascertain whether there are any ‘ill-gotten gains’ because of the alleged unfair access. The examination by Sebi is underway," said a second person, who also spoke under condition of anonymity.

Separately, Sebi has put the consent plea by the exchange and its officials on hold, the two people mentioned above said.

An email sent to the market regulator seeking its comments were not answered till the time of going to press. An NSE spokesperson chose not to comment, saying the matter is with the regulator.

Mint had first reported on 11 January that Sebi is examining more firms for alleged unfair access after forensic analysis pointed to 62 firms. “NSE has to submit this report to Sebi in time-bound manner," Sebi said in the letter.

The capital markets regulator had last year started personal hearings of NSE and its officials on the basis of show-cause notices it had sent in June last year.

“NSE has given all the facts to the regulator based on the show-cause notices and cooperated. The rest is up to Sebi," said a third person familiar with the developments, asking not to be identified.

The delay means NSE’s public offer plans, which relied on settling the matter via the so-called consent route, must also wait.

“The regulator has put the settlement application of NSE and 13 of its current and former officials on hold. This is because of a Madras High Court ruling in a writ petition filed last year. The court had directed the regulator to put the consent proceedings on hold and there is no instruction from the court on the settlement proceedings," Sebi said in the letter.

Jayshree P Upadhyay
Jayshree heads a team of reporters focussing on legal, regulatory, investigative stories. She has worked for over a decade, reporting on financial scams, legal stories and the intersection of corporate and regulatory issues. She is based in Mumbai and has previously worked with Business Standard, Mint, The Morning Context and Bloomberg TV India.
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