The Income Tax (I-T) department on Thursday swung into action in response to allegations of manipulation of trading systems at the National Stock Exchange (NSE).

An I-T official in Mumbai told Businessline that I-T searches were conducted on some former and current senior officials of the NSE and stock brokers, who figure in show-cause notice issued by the market regulator alleging possible collusion to give preferential access to stock brokers in NSE’s automated trading servers. These allegations are yet to be proven.

“All the conduits named in SEBI’s show-cause notice in the NSE case are under our watch as the amount of gains made in the scheme of things looks huge,” the I-T official told BusinessLine .

Escrow account SEBI had asked the NSE to set aside all its income from co-location, algo trading-related servers, in an escrow account till the issued was resolved. The amount set aside by the NSE so far runs into several hundreds of crores, giving the I-T Department an indication of the gains that could have been made by way of the alleged manipulation.

The NSE has been battling allegations of manipulation of the algo-related system by some exchange officials in collusion with brokers.

It has faced at least two major forensic audits by leading consulting firms Deloitte and E&Y and by a technical advisory committee of SEBI.

While Deloitte and the SEBI committee pointed to possible lapses in the NSE’s systems, a report submitted by E&Y last week may have given a clean chit to those who have been named in the alleged scam. The E&Y report has not been made public yet.

An entity that sold software for trading on NSE’s algo systems and a securities company were also searched by tax agents on Thursday.

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