BCI rules do not permit advertisement or solicitation by advocates or their firms. This website is for information only. See Disclaimer

NSE to take consent mechanism route to settle preferential access case with Sebi

Featured in

MUMBAI: The National Stock Exchange (NSE) will go for consent mechanism to settle the ongoing case with market regulator Sebi, which alleged that it gave preferential access to a few high-frequency traders and brokers to the exchange’s trading platform.

Consent orders are similar to an out-of-court settlement in securities law parlance.

It is a negotiated settlement between the capital market regulator and an entity by paying a penalty or by undergoing a voluntary ban from the stock markets. The exchange made this decision in a board meeting on Wednesday.

The board also accepted vice- chairman Ravi Narain’s resignation. “NSE will pursue the path of consent because the exchange is neither admitting nor denying the allegations,” said a person familiar with the decision.

The exchange believes that once the shadow of co-location issue is behind, it can pursue its listing plan which has been hanging fire for months.

“For quite sometime, NSE said there was nothing wrong (co-location issue). That is one of the things Sebi is upset with. We want to get away with this and only then we will go for the IPO (initial public offering),” said another person close to the development.

NSE will soon consult lawyers on the process to be followed for the consent mechanism.

Last week, Sebi issued show cause notice to the exchange and 14 officials — former and current — over the findings of a Sebi panel and the report of a forensic probe by Deloitte.

Narain, one of the founding members of NSE, quit as vice-chairman and board member following the notice.

This is the first time an exchange will approach the market regulator to settle a case through consent mechanism.

“Last year in August, Sebi had amended its Settlement Regulations to settle matters of securities frauds as long as they are not ‘serious’ and have market wide impact or cause substantial losses to investors in securities or affect the rights of investors in securities, especially retail investors and small shareholders. Except these kind of cases where discretion is limited, Sebi has wide discretion to administer. Sebi will have to see if it can apply this amendment retrospectively for past violations, and how serious are the violations,” said Sumit Agrawal, partner, Suvan Law Advisors and an ex-Sebi lawyer.

In January 2015, Sebi received a letter from a whistleblower that certain broker members who had availed co-location facilities at NSE gained unfair advantage by accessing market information ahead of others.