Selective data sharing: Why SEBI slapped Rs 25 lakh fine on BSE

The action against the BSE has come at a time when the National Stock Exchange (NSE) was facing regulatory action in the co‑location case. The NSE faced allegations that it provided preferential trading access —particularly data feeds and servers—to select brokers, enabling them to gain a high-frequency trading edge over others.

BSE’s information sharing issues

The regulator found that the BSE’s information-sharing process lacked mechanisms to ensure simultaneous and equal dissemination of material data, a critical requirement for preserving market transparency and preventing any unfair information advantage.

Based on these findings, SEBI concluded that BSE violated Regulation 39(3) of the SECC (Stock Exchange and Clearing Corporations) Regulations, 2018, which requires exchanges to ensure fair, equitable, and non-discriminatory access to all market users.

The regulator also flagged BSE’s failure to implement a Really Simple Syndication (RSS) feed, which could have ensured uniform and real-time disclosure access. Although BSE later introduced a time delay to bridge the gap, SEBI said the move was reactive and came only after regulatory intervention revealed the deficiencies.

In addition, SEBI identified serious gaps in BSE’s oversight of client code modifications—changes to trade details allowed only for genuine errors. The exchange was found to have neither initiated disciplinary measures against brokers with frequent modifications nor effectively monitored error accounts, raising concerns over compliance diligence and potential misuse.

BSE failed to take action

The BSE failed to take disciplinary action against brokers who frequently modified trade details and did not sufficiently monitor ‘error accounts’, raising red flags about potential misuse and a lack of due diligence in transactions between unrelated institutional clients.

The exchanges are supposed to be the first level of enforcement of regulatory rules and regulations.

SEBI, in its order, emphasized the critical role of stock exchanges as “the first layer of oversight” when dealing with material, price-sensitive information related to listed companies and their securities.

“As a premier recognised stock exchange, BSE is expected to maintain strong internal controls to manage and disseminate corporate announcements in a manner that fully aligns with its regulatory responsibilities,” the order stated.

SEBI further noted that allowing employees of BSE’s Listing Compliance Monitoring (LCM) team and select paid subscribers to access corporate disclosures before they were made available to the general public on the exchange’s website undermined the principles of impartiality, fairness, and transparency expected from a frontline regulator.

Additionally, the regulator found the exchange negligent in enforcing norms governing client code modifications. SEBI said this lax supervision further reflected a failure to uphold essential compliance standards.