SEBI asks NSE to appoint auditor to investigate allegations
The Securities and Exchange Board of India has directed the National Stock Exchange to probe allegations of violating trading access norms. SEBI asked NSE to appoint an external auditor and submit a report on the findings to SEBI within three months. The request from SEBI to NSE to investigate itself seems unusual, because the external auditor would report not to SEBI, but NSE.
SEBI
The Securities and Exchange Board of India stands as the regulator for the country's securities market. Formed under the Government of India in early 1992, the institution is headquartered in Mumbai. Led by Upendra Kumar Sinha, who serves as SEBI's Chairman, the institution monitors and issues regulations regarding market securities and investors. It also deals with the listing of stock exchanges.
NSE
The National Stock Exchange (NSE) serves as one of India's largest stock exchange. Established at the same time SEBI was formed, the NSE has charted massive market capitalization, reaching over $1.65 trillion. The NSE is touted to be the 12th biggest stock exchange in the world. Currently led by Chitra Ramakrishna, the NSE counts investors such as LIC, SBI and IDFC under its belt.
What is algorithmic trading?
Algorithmic trading refers to a form of trading that is automated by computers. This is done by keying in trading instructions like the price and volume into the systems and enabling the computer to make the trade, negating human error and saving time.
SEBI report highlights NSE's trading violations
In early April, the Securities and Exchange Board of India (SEBI) had initiated action against the National Stock Exchange after a report revealed that the exchange violated trading norms. It highlighted that there was evidence to prove that NSE had given some traders unfair access to the exchange's trading and data systems. The exchange, however, vehemently denied the allegations.
How did the NSE affair come to light?
The issue on NSE violating trading norms surfaced when a whistle-blower, by the name Ken Fong, wrote to SEBI with claims on NSE providing unfair access to their trading systems to certain people.
SEBI panel addresses NSE trading violations
The Securities and Exchange Board of India's technical advisory committee asked NSE's officials in July to address the allegations on flouting trading norms at a meeting with SEBI. The issue is highly complex in nature, as it deals with high levels of technology and massive volumes of trade. SEBI's report highlighted the imperative need to raise technology amongst large exchanges to curb risks.
SEBI panel's findings
After delving into the allegations, a study by SEBI found that NSE did not have technology which included load balancers or randomizers, solutions that can prevent brokers from gaining unfair advantages.
SEBI asks NSE to appoint auditor to investigate allegations
The Securities and Exchange Board of India has directed the National Stock Exchange to probe allegations of violating trading access norms. SEBI asked NSE to appoint an external auditor and submit a report on the findings to SEBI within three months. The request from SEBI to NSE to investigate itself seems unusual, because the external auditor would report not to SEBI, but NSE.
