The National Stock Exchange of India (NSE) Ltd. will in the coming weeks submit a comprehensive report to its regulator to challenge claims that high-frequency traders (HFT) obtained unfair accessibility at its place, according to individuals with knowledge of the matter.
A reply to a regulatory committee’s judgment that there may have been improper practices at the exchange, the NSE’s letter, will claim that it broke no rules, the individuals said, asking not to be identified as discussions are not public. NSE will claim that the technical advisory committee appointed by the Securities and Exchange Board of India (SEBI) only repeated allegations made by an anonymous whistleblower without doing a thorough investigation, the folks said.
Trading on Speed
The biggest emerging market for computerized trading, claims of unequal market access in India, has put the NSE, the focus on the state’s greatest exchange operator. But the company plans a defense that is robust, said the individuals. It is going to explain that its rules have improved to address any blind spots that may have existed and how technology has rapidly evolved in India’s marketplaces, the people said. The response to SEBI is still being drafted, said the sources.
The NSE violated norms of fair access, according to a copy of the panel’s internal report.
The committee urged a probe into whether NSE officials worked with OPG Securities Pvt. to give the New Delhi-based trading firm preferential access. Additionally, it called for an investigation into whether Bengaluru-based Way2Wealth Brokers Pvt. benefited from a dedicated fiber optic line between the NSE and Bengaluru Stock Exchange (BSE), India’s second-largest bourse. NSE refused to answer these questions about the dedicated line as it is beyond the scope of this.
This case has interesting consequences. For long, many politicians in India have claimed that some individuals have been misusing the Stock Market to pump and dump stocks as part of converting their Black Money into White, by using a financial instrument called the Participatory Note. While there are over 5000 stocks listed on India’s stock exchanges, only about 300 are actively traded every day.
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