Sebi Reverses Stand On Co-location Scam
Due to absence of sufficient material Sebi drops charge of collusion between NSE and brokers
Nearly six years after its first order in 2018, a new order by market regulator SEBI in the co-location scam lets off the National Stock Exchange (NSE) and Delhi based broker OPG Securities on the charges of collusion. The new order by SEBI whole time member Kamlesh Chandra Varshney says that nothing could prove connivence between broker OPG and NSE official in the scam. Sebi disposed off its proceedings against NSE and its former bosses Ravi Narain, Chitra Ramkrishna, Anand Subramanian, Ravi Apte and Umesh Jain.
"Due to the absence of sufficient material and objective facts on record in this case, the test of ‘preponderance of probability’ fails to produce enough justification for establishment of collusion/connivance between OPG and its directors" Sebi said.
Co-location scam relates allegations of unfair access that some brokers including OPG Securities had gained at NSE in the exchange's high tech trading systems.
According to Sebi, "There is no dispute to the fact that NSE did not have a detailed defined policy for the use of Colo (co-location) facility. It even failed to monitor the use of the secondary server by TMs without sufficient reason. The defence put forward by NSE about the issuance of welcome email in the form of ‘registration enablement mail’ at the time of providing Colo facility to TMs, can’t be said to be justifying its role as a first-level regulator."
"The issuance of guidelines without proper monitoring demonstrated a lack of due diligence," it added.
The regulator cited insufficient evidence for conclusion and closed the case without any direction. Earlier this year, Sebi had rejected a settlement application by the NSE in the co-location case.
The latest development can be seen as a boost to remove a major roadblock to NSE's much-awaited IPO plans from 2016, which were derailed following the co-location controversy.
Last month, the NSE restarted the process of its long pending public offering and applied for no-objection with the market regulator, according to reports. The exchange has reapplied for a ‘no-objection’ with India’s markets regulator for initial public offer, as per the reports.
