SEBI will start hearing in the NSE-related algo trading scam from the middle of December, sources following the matter told BusinessLine . Whole-time Member G Mahalingam and Ananta Barua will conduct the hearings, the sources said. Nearly 28 entities, including exchange and brokerage house officials, have been served show-cause notices by SEBI for misuse of exchange trading systems.

SEBI has nailed Delhi-based broker OPG Securities for securing unfair access to NSE’s co-location facility. The regulator said the preferential treatment resulting in OPG’s unfair access could not have been possible without the active connivance of staff at the bourse.

Even while SEBI is hearing the matter, accurate amount of gains made by brokers who gained preferential access to the exchange systems would have to be assessed, legal experts dealing with the matter said. Another expert pointed out that SEBI’s case against the brokers hinges on the fact that they were able to login earlier than others, which gave them substantial gains. Also, SEBI is yet to decide on the fate of the consent applications filed by the NSE and its officials for settlement of the case. SEBI’s new consent terms say that cases with market-wide impact cannot be settled and the algo matter could become a test case.

In show-cause notices issued to brokers, and the NSE’s current and former employees, on July 3, SEBI gave details of how OPG got preferential access to trading systems, and managed to dictate terms at the exchange under former bosses Ravi Narain and Chitra Ramakrishna. The show-cause notice also highlights how another firm, Sampark Infotainment, which later handed over its infrastructure at the NSE to RCom, manipulated the ‘Dark Fiber’ connectivity at the NSE.

While Narain and Ramakrishna both claimed ignorance and pointed fingers at the technology team, SEBI confronted the duo with emails to show that OPG and Sampark were favoured during their tenures.

To a question from SEBI on what were the advantages of early login (in TCP/IP/TBT), NSE’s former technology chief Ravi Apte said, “Yes, there could be advantage of a few micro seconds.” SEBI has accused the exchange of providing this early access to brokers, mainly OPG Securities, into its trading systems. A few micro-seconds early access could make ‘millions worth of difference’ for algo traders in equity markets.

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