Weeks before its blockbuster IPO, NSE faces heat from SEBI

Just few weeks before NSE to go public with its blockbuster IPO, seems its trouble are not getting over on the controversial dark-fibre issue. The long shadows of the issue has been chasing NSE since over last one year and now turned murkier. If certain media reports of recent times are to be believed, SEBI, the quasi-judicial body and market watchdog has now come down on the Exchange heavily asking it to name the people involved in the alleged scam.


The country’s securities markets watchdog SEBI in a hard-hitting rebuttal to the NSE’s report has asked the exchange to fix responsibility for the systems breach on its trading servers that had happened for 18 months starting December 2012.

Along with naming of individuals involved in this shady dealing, SEBI also wants NSE to name the brokers who substantially benefited illegal via preferential treatment on NSE’s servers.

The regulator also wants NSE to reveal all ill-gotten profits from those brokers and take remedial measures against the same.

An audit conducted by Deloitte has found that the National Stock Exchange systems were prone to manipulation. The exchange disclosed this piece of information in its recently filed DRHP with the SEBI. However, a matter of great concern to the regulator is that the system breach continued for a long time which could have been a systematic disaster and cause market participants lose faith in the exchange and capital markets as a whole.

NSE in its DRHP has admitted that its system was prone to manipulation and the audit had found "trends for certain periods where a few stock brokers appear to be the first to connect to specific servers significantly more often than others".

Going ahead, NSE will have to come out clean from this mess by fixing responsibilities and fairly disclosing all the requisite information to the SEBI and public at large to restore credibility and faith.