Sebi has issued show-cause notices to the National Stock Exchange (NSE), a few of its former top officials — Chitra Ramakrishna, former managing director of NSE and its vice-chairman, Ravi Narain, and several brokers including Delhi-based OPG Security Pvt Ltd for alleged violations of norms in a case pertaining to algorithm trading, sources told The Indian Express.
Algorithmic trading, or “algo” in market parlance, refers to orders generated at superfast speed by the use of advanced mathematical models that involve automated execution of trade. Even a split-second faster access is considered capable of bringing huge gains to a trader.
The Sebi show-cause notices, sources said is based on the regulator’s recently concluded probe into allegations that some brokers got preferential access to the trading system through the co-location facility at the NSE.
The regulator has issued the notice under the Sebi Act for alleged violation of Securities Contract Regulation Act (SCRA) and Fraudulent and Unfair Trade Practices (FUTP), said a source. “Sebi’s investigation report is based on statements of individuals, documents, emails and reports obtained by it,” said the source.
A NSE official who spoke on the condition of anonymity said the exchange has received the Sebi notice and is examining it. Phone calls and text messages to Ramakrishnan and Narain did not elicit any response.
Earlier on June 21, Sebi chairman Ajay Tyagi had said the regulator has initiated enforcement action against various institutions and entities in the algorithm trading case. “We have received the NSE investigation report in the co-location case and have initiated enforcement actions,” said Tyagi.