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Informist, Friday, Oct. 4, 2024

 

--NSE, 9 others settle SEBI probe in members connectivity software case

--NSE pays INR 6.43 bln to settle SEBI probe in connectivity software case

 

MUMBAI – The National Stock Exchange of India Ltd. and nine former and current exchange officials, including former managing director Vikram Limaye, have settled a show cause notice issued by the Securities and Exchange Board of India alleging breach of various norms in the matter of an old members' connectivity software application, the market regulator said in a settlement order Friday. On Sep. 25, the NSE, on behalf of itself and the nine other individuals, paid SEBI a settlement amount of INR 6.43 billion, according to the settlement order.

 

SEBI said it had issued the show cause notice to NSE and others on Feb. 28, 2023, after concluding an enquiry into the problems with NSE's software application, called trading access point architecture and network connectivity, which was deployed by the exchange in 2008 on the servers of the trading members for managing connections, and order/trade messages. The market regulator said prior to the show-cause notice it had examined whether the connectivity software was being bypassed by members, whether a complaint made in November 2023 was dealt with adequately by NSE, and whether the lapses on part of the exchange amounted to breach of securities laws.

 

According to SEBI, NSE introduced a trimmed version of the trading access point connectivity software in December 2013, and another software application called direct connect in February 2016, both of which were alternatives to the original trading access point software. But, the exchange continued with the original software in the equity segment till September 2019.

 

In its February 2023 show-cause notice, SEBI alleged that NSE did not take remedial measures to prevent and discourage "possible bypass of TAP (trading access point)", and that it did not bring the November 2013 complaint on the deficiencies of the software to the exchange's standing committee on technology. SEBI also alleged that there was a delay in appointment of chief information security officer by NSE and non-implementation of encryption feature in the connectivity software which violated SEBI's Jul. 6, 2015, circular on cyber security and cyber resilience framework of stock exchanges, clearing corporations, and depositories.

 

The market regulator alleged that NSE had not designated its then chief technology officer as key management personnel. SEBI's show-cause notice was also issued to key NSE employees who were involved in the handling of the complaint dated Nov. 20, 2013. SEBI also framed charges in its show-cause notice against Limaye for delaying the discontinuation of the trading access point software.

 

After receiving SEBI's show-cause notice, NSE, Limaye, and eight others - Umesh Jain, G.M. Shenoy, Narayan Neelakantan, V.R. Narasimhan, Kamala K., Nilesh Tinaikar, R. Nandakumar, and Mayur Sindhwad, filed applications with SEBI under the settlement proceedings regulations. After a few meetings with SEBI's internal committee after November 2023, the high powered advisory committee accepted the final, revised combined settlement offer of INR 6.43 billion in July this year.  End

 

Reported by Rajesh Gajra

Edited by Ashish Shirke

 

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