The issue of ‘unfair practices’ at the NSE, India’s largest stock exchange, involving its co-location facility, may take another turn with SEBI conducting further investigations into the matter, this time to ascertain or fix responsibility on those involved in the alleged wrongdoing.

A report by SEBI’s Technical Advisory Committee (TAC), comprising experts from IIT Mumbai, had concluded in 2016 that there were systemic lapses at the NSE and asked SEBI to probe ‘collusion’ at different levels in the exchange.

For the first time since allegations were levelled against the NSE in 2015, SEBI has now formed its own internal team of core officials to look into various evidences collected in digital form, reports from experts and forensic investigators to unravel the ramifications of the alleged scam and pin down the ultimate beneficiaries, two sources told BusinessLine . The sources also said that in December, SEBI officials had visited NSE’s premises and offices of several stock broking entities to take over or copy data in digital devices and computer hard disks.

Higher level official team

SEBI’s probe team comprises officials at the level of chief general manager and above from market regulations and other departments, the sources said. Through this probe, SEBI is trying to know the exact role or collusion of each of the NSE employee, who were showcaused by it earlier or even others who could be linked to the matter.

Separately, it is learnt that the regulator is also looking into the ownership pattern of companies linked to the NSE and even those holding a stake in it to find out if there is any credence to the allegation of a former Union Minister in the Manmohan Singh government and his son having financial interest in the exchange, the source said. This probe depends mainly on documents and cues provided by income tax and enforcement directorate.

Prima facie, there were two questions that SEBI had to find answers to regarding the NSE giving ‘unfair access’. The first, if there was any case of systemic lapse, and the second, as to who colluded and benefited from it.

SEBI’s TAC in 2016 had stated in its report that “Preferential access was given by the NSE to stock broker(s), wherein it was possible for a stock broker to log into multiple dissemination servers through multiple internet protocols assigned to them.” While the NSE has consistently dismissed the allegations, SEBI’s TCA said, “It is clear that the NSE violated norms of fair access and allowed some brokers to benefit.”

Escrow account

Based on this TAC report, directives were issued to the NSE asking it to deposit all the revenue and taxes collected by the exchange from co-location into an escrow account. SEBI had also asked the exchange to alter its co-location or high frequency trading architecture to avoid any further lapse and fix the responsibility of wrong-doing in the matter after a thorough probe.

In September 2016, at a meeting of SEBI in the presence of former chairman UK Sinha and other TAC members, the entire report by TAC was read out to key members of the NSE board before issuing the directives. This meeting at the SEBI office led to a few top-level exits at the NSE in the following months.

Ball is in Tyagi’s court

Experts say, the ball is now in the court of current SEBI Chairman Ajay Tyagi, who is racing on all the fronts to clear the back log of cases and even crack the whip on some of the most sensitive matters. Even if SEBI has to decide on the fate of consent applications filled by NSE employees, the regulator first has to complete its investigations into the matter. So far, all the investigations into the matter were conducted by external agencies or experts but a core team of SEBI officials is looking into it only now.

The NSE declined to comment on the matter and an email sent to SEBI remained unanswered.