Algo trading case: SEBI fines ₹11 cr on 8 entities, including NSE and others

Capital markets regulator Securities and Exchange Board of India (SEBI) on 30 June imposed penalties totalling 11 crore on 8 entities, including National Stock Exchange (NSE) and its former chiefs Chitra Ramkrishna and Ravi Narain.

The penalties were imposed in a case pertaining to software related to algorithmic trading.

The SEBI levied a fine of 1 crore each on NSE, Ramkrishna and Narain. Apart from this, the regulator imposed a fine of 1 crore on Suprabhat Lal, who was a NSE official at the time of violation.

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Among others, SEBI slapped a penalty of 3 crore on Ajay Shah – who was on the board of NSE’s subsidiary NSSCL, 2 crore on Infotech Financial Services Ltd – a company which was in the business of developing algorithmic software and selling it to market participants. A fine of 1 crore each has been imposed on the latter’s directors – Sunita Thomas and Krishna Dagli. Sunita Thomas is the wife of Suprabhat Lal and sister-in-law of Ajay Shah.

According to SEBI, the case relates to NSE not awarding the contract for computing Liquidity Index (LIX) to its own specialised subsidiary, IISL. While, it was awarded to Infotech indicating the undue support provided by the exchange to Infotech and Ajay Shah.

Also, NSE and its then officials – Narain and Ramkrishna – failed to take cognisance of the issues of conflicts of interest with respect to Ajay Shah, Sunita Thomas, Suprabhat Lala and Infotech.

“Ajay Shah, Infotech, Sunita Thomas and Krishna Dagli have collusively worked to fulfil their commercial goals by fraudulently using the data that was obtained by them from NSE to develop algo trading software,” Sebi said in its 86-page order.

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SEBI in its order also said that Ajay Shah and Infotech – along with its directors – made huge unfair gains by preparing software related to algorithmic trading at the cost of other investors who did not have the access to such software developed on the basis of confidential data shared by NSE.

Furthermore, SEBI charged Ajay Shah that he – in connivance with Infotech, its directors and with NSE and its officials – employed a device wherein the confidential and sensitive data provided by NSE for being used for research for LIX project was misused for creating algo trading software for sale to market participants for dealing in securities market.

With PTI inputs. 

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