National Stock Exchange vice chairman Ravi Narain has put in his papers following the decision of the Securities and Exchange Board of India (Sebi) to intensify the probe into alleged lapses in high-frequency trading offered through the exchange’s ‘co-location’ facility.
Narain, who was earlier MD and CEO of the NSE for 12 years, stepped down as vice chairman to ensure that the process with market regulator Sebi on the co-location case should not get effected by his presence on the NSE board, officials said. Narain has taken the decision keeping in mind the best corporate governance practices, they said.
Narain’s exit has come five months after Chitra Ramkrishna, MD and CEO of the NSE, quit for “personal reasons” in December 2016. Sebi has been looking into the role of some of top NSE officials in the high frequency trading — algorithmic trading or algo in market parlance which refers to orders generated at a superfast speed by use of advanced mathematical models that involve automated execution of trade while co-location involves setting up servers on the exchange premises. The case relates to some brokers allegedly getting preferential access through co-location facility at the NSE, early login and ‘dark fiber’ which can allow a trader a split-second faster access to data feed of an exchange. Even a split-second faster access is considered to result in huge gains for a trader.
Sebi’s Technical Advisory Committee (TAC) had in April 2016 said that NSE had violated norms of fair access and allowed preferential treatment to some brokers. It also recommended that Sebi should examine the issues raised by the TAC. Later Sebi asked the NSE to appear before its technical committee to explain the issues raised. Sebi then wrote a letter to NSE chairman Ashok Chawla.
The Sebi report had mentioned about brokerages having ‘co-location’ arrangement with the NSE and servers of these entities were located on the NSE premises.