Capital market regulator Securities and Exchange Board of India (Sebi) on Tuesday barred National Stock Exchange (NSE) from accessing the securities market for a period of six months in co-location case. The regulator has also asked the leading stock exchange to 'disgorge' Rs 687 crore with 12 per cent per annum interest in the Investor Protection and Education Fund (IPEF) from April 1, 2014.

The order is likely to delay NSE's highly anticipated Rs 10,000-crore initial public offering (IPO) as the exchange cannot access the capital market for six months.

Commenting on the order, a NSE spokesperson reportedly said: "NSE is in the process of examining Sebi order, and will take appropriate steps as may be legally advised."

The Sebi, which investigated into the alleged lapses in high-frequency trading offered through the NSE's co-location facility, also issued orders against 16 individuals, including the company's two former chief executive officers -- Ravi Narain and Chitra Ramkrishna. The watchdog asked the duos to pay 25 per cent of their salaries drawn for FY 2010-11 to 2012-13 to the IPEF within 45 days.

Narain and Ramkrishna have been also barred from associating with a listed company or a market Infrastructure Institution or any other market intermediary for a period of three years. "Narain and Ramkrishna have been directed not to hold, any position in the management or in the Board of any Stock Exchange or Clearing Corporation, recognised by SEBI or any related entity, directly or indirectly, for a period of 3 years," Sebi said in its order.

The co-location case came into light in 2015, when a whistleblower wrote a letter to Sebi alleging that the NSE gave unfair access to some brokers and traders to the exchange's high frequency trading platform.

The SEBI, in its order, directed on the following things:

NSE is prohibited from accessing the securities market for a period of 6 months

NSE is directed to take necessary legal actions against Ajay Shah, Infotech Financial Services Pvt. Ltd., Sunita Thomas and Krishna Dagli (Directors of Infotech Financial Services Pvt. Ltd.) for violating the provisions of the "Professional Service Agreement" signed with Infotech in connection with LIX project and for misusing the data made available to them by NSE.

NSE is further directed to submit an action taken report in this regard along with the observation of its Governing Board to SEBI, within three months from date of this order.

NSE is directed to review all the third party agreements having a data sharing component/provision therein signed by it from year 2009onwards and take necessary legal actions against the parties with whom such agreements were signed wherever any actions of irregularity, breach of terms and conditions and other provisions of such agreements are observed.

NSE is directed to prepare a detailed documented policy with respected to data usage and data sharing with external persons/entities in a fair & transparent manner, including data sharing with any researchers, commercial entities, overseas entities, etc., with due provisions for processes to be followed and disclosures of conflict of interest to be made at the level of any employee of NSE.

Edited by Chitranjan Kumar

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