Co-Location Case: SEBI Lets Off Three Executives, Seeks NSE Enquiry Against Two

The market regulator exonerated three former senior executives of the National Stock Exchange from allegations of dereliction of duty in providing preferential access to some brokers and traders through co-location service, while asking the bourse to initiate action against two.

Subramanian Anand, former chief strategy officer; and Umesh Jain and Ravi Apte, former chief technology officers at the NSE, were left off charges of failing to perform their duty, according to the Securities and Exchange Board of India order uploaded on its website.

The regulator, however, held that Mahesh Soparkar and Deviprasad Singh, former heads of the product support and management teams, failed to discharge their duties, and asked the NSE to initiate enquiry under them under its employee regulations. The bourse has to submit its investigation report in six months. SEBI, however, didn’t impose any monetary penalty on them.

SEBI, in an earlier order, didn’t find fraudulent and unfair practices by the NSE and its two former heads Ravi Narain and Chitra Ramkrishna but held them guilty of lack of due diligence to ensure fair access through its high-frequency trading service. It ordered the NSE to disgorge Rs 1,000 crore in the co-location probe and about Rs 100 crore in the dark fibre case for violating rules. SEBI also imposed penalties on the two former heads of the exchange. The bourse, however, challenged the order at the Securities Appellate Tribunal.

SEBI had also initiated its probe against other senior executives of the exchange. It had alleged:

• Anand failed to perform his role in establishing adequate systems due to which certain brokers were allowed to breach the norms of fair and equitable access to the servers.
• Jain and Apte showed laxity and dereliction of duty by failing to take adequate steps to prevent manipulation of the tick by tick architecture.
• Soparkar and Singh, who headed the product support and management team from 2009-2013 and 2013-2016, respectively, failed to monitor the trading members who were connecting to the secondary server.

Anand contended that he was not involved in the co-location matter directly or indirectly, and later became a part-time consultant on contract advising on broader aspects of its architecture. SEBI observed that Apte was also a part-time consultant and Jain was responsible for certain other technical aspects.

Soparkar and Singh were responsible for monitoring access to the secondary server by the trading members and administering uniform standards.