Four-and-a-half years after a whistle-blower first highlighted that unfair access was given to stock brokers for high-frequency trading at the National Stock Exchange (NSE), markets regulator SEBI on Thursday declared it had initiated enforcement action against entities involved in the scam.

On May 8 this year, BusinessLine was the first to report that a final report by the Securities and Exchange Board of India (SEBI) on the scam may suggest “enforcement action” against those involved in manipulating the NSE’s trading systems.

The enforcement action was based mainly on the findings of SEBI’s Technical Advisory Committee (TAC) in 2016.

The TAC had said 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 in to multiple dissemination servers through multiple Internet protocols assigned to them.”

TAC findings

The NSE had consistently dismissed the allegations.

In September 2016, at a SEBI meeting, the TAC report was read out to key members of the NSE Board. Following this, some top-level executives quit the NSE.

“We have received the NSE investigation report in the co-location case...(We) have initiated enforcement action,” said SEBI Chairman Ajay Tyagi, while addressing a press conference. “Action will be against institutions and individuals.”

Thirteen NSE officials, including former top executives, have been issued show-cause notices by SEBI.

Among the stock-brokers who may have benefited from the scam, the name of Delhi-based OPG Securities figures prominently.

Responding to questions on the CBI’s charge that SEBI officials had also colluded with those involved in NSE scam, Tyagi said, “Let the investigative agency do its work and we will do ours.”

The CBI recently registered an FIR in the co-location case against unknown SEBI officials for collusion with a stock-broker, who, along with NSE officials, indulged in fraud, criminal conspiracy and destruction of digital evidence.

What SEBI probed

While the TAC committee was appointed under former whole-time members, Tyagi, who took office in April 2017, initiated the final leg of SEBI’s probe into the matter.

Prima facie, there are two questions that SEBI has looked at in its recent probe: first, if there is any case of systemic lapse; and second, who colluded and benefited from it? While a systemic lapse was established by previous probes, including the TAC, the final report was mainly to throw light on who mainly benefited from the manipulation, a source linked to SEBI said.

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