MUMBAI: The Securities and Exchange Board of India (SEBI) on Tuesday barred Ajay Shah, credited with developing the Nifty 50 index, from holding any office with stock exchanges or intermediaries in India, besides handing out punishments to several former CEOs of the National Stock Exchange (NSE). SEBI, in four separate orders, has come down heavily on India’s largest stock exchange for misuse of data, unfair advantage to certain players and lapses in administration, leading to manipulation.
The exchange’s former managing directors Ravi Narain and Chitra Ramakrishna have been punished with a disgorgement of salaries for a certain period. The case brings to attention as to how they have been receiving data from NSE effortlessly from the start, and without even a formal agreement till 2012. The SEBI order on NSE and Corporate Governance said the entities involved have misused confidential and sensitive data provided by NSE for specific index project for developing algorithmic software for sale in the securities market, thereby compromising the integrity of the securities market.
The co-location case, which came to light on a whistle blower’s complaint, has detailed how the exchange’s Tick-by- Tick data feed gave undue advantage to certain brokers who aced the system. “The first one to connect to the lowest load server would get advantage in terms of receiving the data faster than others,” SEBI said. In markets, where a millisecond advantage can result in huge perks, preferential treatment to a few has worked against the equitable treatment for all members.
“Justice delayed is justice denied. In this case, when the regulator takes action, it is farreaching; it sends a strong message to all stakeholders,” said Arun Kejriwal of KRIS Research, who has been vocal about the unfair advantages colocation provided. “It is difficult to appreciate as to how so many mistakes can happen ‘inadvertently’,” observed SK Mohanty, whole-time director, in his order.
The order comes down heavily on Narain and Ramakrishna, and said their inaction even after complaints on misuse of data “smacks of deliberate negligence, unwillingness to recognise evidence and an overzealous attitude to protect the interest of Mr Ajay Shah and Infotech”. Further, in the case of dark fibre/leased line connectivity, the SEBI order has put several former employees in the dock, including its then CTO. It has asked brokerages Way to Wealth and GKN Securities to pay Rs 15.34 crore and Rs 4.9 crore respectively for wrongful gains,and NSE to pay Rs 62.58 crore.