The National Stock Exchange (NSE) is planning to approach the the Securities and Exchange Board of India (Sebi) for more time to respond to a show-cause notice issued by the regulator for alleged violations of norms in a case pertaining to algorithm trading.
The bourse is also seeking expert opinion for filing consent application before the regulator, a second time, as Sebi has completed its investigation into the case, official sources told The Indian Express. “These are complex issues and the bourse may seek inspection of documents before adequately responding to the Sebi notice,” said an official.
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.
On July 4, Sebi issued show-cause notices to 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 violation of Securities Contract Regulation Act and Fraudulent and Unfair Trade Practices. The regulator gave three weeks to the noticees to respond to the show-cause notice, however sources said that NSE is yet to respond to Sebi as it wants inspection of certain documents relied upon by the regulator while issuing the notice.
The Sebi show-cause notices, sources said is based on the regulator’s recently concluded investigation into allegations that some brokers got preferential access to the trading system through the co-location facility (where brokers can buy “rack space” for their servers) at the NSE.