INSUBCONTINENT EXCLUSIVE:
New Delhi: Markets regulator Sebi has exonerated NSE's former chief technical officer Umesh Jain and two directors of Way2Wealth Brokers
in the exchange's co-location case.
C K Nithyanand and B G Srinath were non-executive directors of Way2Wealth at the time of
violation.
The order comes after the Securities and Exchange Board of India (Sebi) initiated investigation against several former and
current NSE employees and stock brokers in the co-location matter.
It was alleged that point to point (P2P) connectivity was installed by
two brokers of NSE -- GKN Securities and Way2Wealth Brokers -- for the co-location facility at the NSE by engaging an unauthorised service
provider, Sampark Infotainment, in violation of NSE's own circular which authorised four specific telecom service providers which provided
P2P connectivity to NSE's brokers.
Sampark allegedly laid dark fibre connectivity for the brokers with the promise of more bandwidth and
lower latency and continued the service even though it did not possess the requisite licence from the Department of Telecommunications, Sebi
noted.
In this case, it was alleged that Jain, being the chief technical officer, should have ensured that on technological matters NSE
complied with Sebi norms and should have incorporated checks and balances so that such incidents are detected early and appropriate actions
are taken.
However, Sebi said that Jain had no role in relation to allowing the two brokers to establish P2P connectivity with co-location
(Colo) facility of NSE with the service of Sampark as he had resigned from NSE in April 2015 and was relieved from service in June 2015,
while Sampark was allowed to install the Colo facility in July 2015.
"There is no evidence available on record to show that the noticee
(Jain) was involved with the functioning of Colo helpdesk and therefore, the noticee cannot be held responsible for any misconduct or
non-compliance as far as laying of P2P connectivity using dark fibre is concerned," Sebi said.
Regarding the brokerage firm, Sebi said it
was the responsibility of Way2Wealth Brokers to ensure that Sampark had requisite license to carry out such activity.
But it was noted that
the directors were appointed in non-executive capacity at the relevant point of time and were not involved in the day-to-day functioning of
the firm.
Sebi said "there is no evidence available on record to show that the noticees (directors) were involved with the day to day
functioning of W2W and therefore, the noticees cannot be held responsible for any misconduct or non-compliance as far as laying of P2P
connectivity using the facility of Sampark by W2W is concerned."
The NSE's co-location facility allows stock brokers to take on rent
specific racks and co-locate their servers and systems within the exchange premises in order to have a low latency connection to the
The servers and systems placed in these racks would receive the live market data feed disseminated by the exchange, process the data, and
accordingly place their orders to the exchange.