INSUBCONTINENT EXCLUSIVE:
(Securities and Exchange Board of India) on Tuesday directed the National Stock Exchange to disgorge more than Rs 625 crore of profits
derived from dissemination of data in the co-location case and barred two former chiefs of the bourse for five years from being associated
with market intermediaries
Ravi Narain and Chitra Ramkrishna -- who had served as MD and CEO of the exchange -- have been asked to disgorge 25 per cent of respective
salaries drawn during a certain period.They have also been prohibited from "associating with a listed company or a market infrastructure
institution or any other market intermediary for a period of five years," Sebi said in a 104-page order.According to the order, the exchange
has also been prohibited from accessing the securities market directly or indirectly for six months.The bourse should also carry out system
audit at frequent intervals after thorough appraisal of the technological changes introduced from time to time
Further, the exchange has to reconstitute its Standing Committee on Technology at regular intervals to take stock of technological issues
and frame a clear policy on administering whistle-blower complaints, as per the order.Alleged lapses in high-frequency trading offered
through NSE's co-location facility came under the scanner of the watchdog after a complaint was filed in 2015.The bourse "shall disgorge
an amount of Rs 624.89 crore along with interest calculated at the rate of 12 per cent per annum from April 1, 2014, onwards to the Investor
Protection and Education Fund (IPEF) created by Sebi", the order said.Show-cause notices were issued to the exchange and 16 individuals
Out of them, the regulator has let off 14 individuals, including senior exchange official Ravi Varanasi.Passing the order in the high
profile co-location case, the watchdog said the exchange did not exercise requisite due diligence with respect to Tick-by-Tick (TBT) data
architecture.TBT data feed provides information regarding every change in the order book, was disseminated over Tranmission Control
Protocol/ Internet Protocol
Under this protocol, the information is delivered one-by-one
TBT data feed was disseminated sequentially in the sequence trading members connected/ logged-in to the server."I find that it is
established beyond doubt that NSE has not exercised the requisite due diligence while putting in place the TBT architecture
The same created a trading environment in which the information dissemination was asymmetric, which cannot be considered fair and
equitable," Sebi whole time member G Mahalingam said in the order.According to him, the NSE being a market infrastructure institution (MII)
cannot be treated at par with other market intermediaries or participants as it derives its power to act as a stock exchange from the
recognition granted to it.Issuance of any direction which would have a bearing on its status as a recognised stock exchange falls outside
the scope of these proceedings, he added." I am of the view that an order for disgorgement of a portion of the profits derived from the TBT
data dissemination activity during the relevant period, for being transferred to the IPEF would be an appropriate direction, commensurate
with the violations," the order said.For commutation of the disgorgement amount, the regulator took into account that TBT data dissemination
will take appropriate steps as may be legally advised.Get the latest election news, live updates and election schedule for Lok Sabha
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