NSE co-location case: Enforcement action initiated against entities, says SEBI chairman

The Securities and Exchange Board of India has started enforcement action against entities following a probe into alleged lapses in preferential access given to a few stock brokers and traders through National Stock Exchange's co-location facilities. Ajay Tyagi, the chairman of SEBI said on Thursday that the regulator had received the investigation report in the case and enforcement action was being initiated. “We have received NSE investigation report. We have completed the examination of the investigation report and we have initiated enforcement actions,” he told reporters. Tyagi added that in the “coming few days” the enforcement action is likely to be completed against various entities, which are involved. SEBI has been investigating complaints related to NSE's co-location facilities. Several former top executives of the exchange had been issued show cause notices earlier in the matter. In 2015, a whistle-blower wrote a letter to SEBI highlighting issues at NSE's co-location facilities. It was alleged that certain stock brokers seemed to be getting early access to NSE's servers. The exchange hired consulting firm Deloitte for an independent audit and lapses were found. In a red herring prospectus filed in late 2016 in relation to a proposed initial public offering, NSE disclosed that the the independent probe highlighted trends for certain periods where a few stock brokers appeared to be the first to connect to specific servers significantly more often than others. This helps in faster data movement. NSE launched co-location services in 2010. The country's largest stock exchange had filed a plea with SEBI last year to settle the issue under the consent process. The market regulator, had however, in March 2018 returned the consent application. Meanwhile, SEBI on Thursday announced various measures in regards to initial public offerings (IPOs) and share buybacks. The timeline for announcement of the price band for an IPO, for instance, has been reduced to two days from the earlier five days. Also in case of public issues or rights issues, financial disclosures will have to be made for three years instead of the present duration of five years. Restated and audited financial disclosures in the offer document will now have to be made on a consolidated basis only. In case of rights issues, the threshold for submission of draft letter of offer to SEBI has been increased to Rs 100000000 from Rs 5000000 earlier. In the case of IPOs of small and medium enterprises, minimum anchor investment size has been reduced to Rs 20000000 from Rs 100000000. SEBI had on March 28, 2018 issued a discussion paper soliciting public comments for reviewing its buyback of securities regulations. “Under the new regulations, the buy back period has been defined as the period between board of directors resolution/date of declaration of results for special resolution authorising the buyback of shares and the date on which payment consideration is made to the shareholders,” it said in a statement. The SEBI board also took note of the recommendations of the committee set up to review regulations pertaining to market infrastructure institutions. Domestic and foreign entities may now be permitted to hold up to 15% shareholding in case of depositories and clearing corporations. Additionally, multilateral and bilateral institutions have also been recommended to hold up to 15% in a market infrastructure institution.