SEBI Bans NSE From Capital Markets For Six Months In Co-Location Scam; Imposes Rs 624.89 Crore Penalty

India’s securities regulator SEBI on Tuesday (30 May) debarred the country’s largest stock exchange NSE from accessing the capital markets for six months and imposed a massive fine of Rs 624.89 crore for giving preferential access and speed to specific traders over others, reports Economic Times (ET).

“NSE has committed a fraudulent and unfair trade practice as contemplated under the SEBI (PFUTP) Regulations. It is established beyond doubt that NSE has not exercised the requisite due diligence while putting in place the TBT architecture," said G Mahalingam, whole-time member of Sebi in the order.

Tick-by-Tick (TBT) refers to the data feed which informs traders regarding every change in NSE’s order book.

According to the Securities and Exchange Board of India's (SEBI) estimates, National Stock Exchange (NSE) netted a profit of Rs 624.89 crore during 2010-11 to 2013-14 from its co-location scam.

Preferential Access

The NSE co-location scam relates to allegations of market manipulation at NSE by some members of the exchange by front running other members through faster access to market price information. The allegations first surfaced after a whistle-blower wrote a letter in 2015 on the modus operandi of the market manipulation.

The regulator has further directed the exchange to deposit the fine with an interest of 12 per cent per annum to its Investor Protection and Education Fund (IPEF).

Responding to the Sebi order, NSE spokesperson stated, "NSE is in the process of examining SEBI Order passed today and will take appropriate steps as may be legally advised."

Also Read: SEBI To Probe September Stock Market Crash Over Suspicion Of ‘Bear Cartel’ Involvement, Claims Report