MUMBAI: Indias largest bourse National Stock Exchange (NSE) is facing a fresh regulatory probe.The Securities and Exchange Board of India (Sebi) is investigating an alleged leak of the exchanges internal documents to brokers and market players, said three people privy to the development.The capital markets regulator has issued a show-cause notice in the matter on December 16 and has summoned exchange officials to submit all the relevant records for inspection.
NSE is already contesting a Sebi order penalising it for allegedly giving a few traders and firms preferential access to its servers at the Securities Appellant Tribunal (SAT).The current probe involves leaks that happened during the period between 2011 and 2015 when Chitra Ramkrishna was the chief executive officer (CEO) of the exchange.The documents under question pertain to certain policy decisions taken by NSE in technology related matters including its colocation policy, minutes of board meetings etc.
It also includes some internal studies conducted by the exchange, said a person cited above.
NSE declined to comment on the matter.
An email sent to Sebi remained unanswered.NSE has filed a consent petition in the matter, said another person cited above.
Consent is a settlement mechanism through which alleged violations can be settled by paying fees to Sebi.
In such a settlement, the accused neither agrees nor declines the allegations leveled by Sebi.The case pertains to documents in the controversial colocation matter and needs deeper probe, said a person cited above.
Depending on the seriousness of the violation, Sebi will take a call on the consent application filed by NSE.Previously, Sebi had rejected the consent application of NSE in the colocation matter.
In April 2019, the regulator passed orders penalising NSE and some top and former officials.In the current case, the violations fall under two different regulations stock exchange and clearing corporation (SECC) rules, and code of ethics for market infrastructure institutions, said a legal expert.
Even if the violations were done by a single board member, the company has a responsibility to take suo motu action against the employee,The regulator is also looking into the appointment of Anand Subramanian as NSE's chief strategic advisor and subsequently making him the group operating officer, said one of the people familiar with the matter.The fresh show cause notices sent to NSE come at a time when the exchange is planning to revive its initial public offering (IPO) plans.
In its April 2019 order against NSE, Sebi had banned the exchange from accessing capital markets for six months, a timeline that ended in October.When NSE filed for its IPO in 2017, the market regulator had rejected the IPO application citing pending litigation in colocation matter.
Legal experts said it is still early to say if the probe will have any impact on the bourses IPO.
Most of the colocation issues have been resolved and hence it is unlikely to have an impact on the NSE IPO, said a lawyer who represents NSE in multiple matters.