NSE withdraws show-cause notice against OPG Securities

The National Stock Exchange (NSE) has withdrawn the show-cause notice against OPG Securities, one of the key entities named in the co-location case, on grounds that SEBI has already passed an order against the company.

In February 2017, NSE accused OPG of connecting to the “fall back servers” of exchange to gain faster market access, despite warnings to disconnect. “Fall back servers” are reserved trading systems that are kept as back-up. There is no traffic on these servers, hence those connecting via these servers have faster access to market.

In its earlier show-cause notice, NSE had sought action against OPG for connecting via “fall back servers.” OPG told NSE that even few other brokers connected to these “servers” and it had requested the exchange to allow it to connect to these secondary servers in view of problems in primary servers.

Closing its case against OPG, NSE — in its recent communication dated September 12 — said that it found legal difficulties would arise in disposal of the matter on merits as there was a SEBI investigation against other brokers, too, and its earlier order against OPG was only in specific segments.

“The committee (appointed by NSE to look into the case) observed, noticee is one among said 28 stock brokers. The committee also noted that investigation by SEBI against 28 stock brokers is in relation to connection to “secondary server” for all the segments on the exchange, whereas the order of the then (NSE) committee was only with respect to futures and options segment. The committee finds from the developments belatedly brought to its notice indicates for the first time ‘the prudent and legal difficulties’ that would arise in the event of a ‘de novo’ (starting from beginning) disposal of the matter on merits,” the NSE said in a communication seen by BusinessLine.

OPG’s argument to NSE was that the exchange had no law or provision to deal with monitoring of connections to secondary servers and disciplinary proceedings can be initiated only if there is a legal provision. “Whereas the warnings given by the exchange were not basis a legal provision,” OPG argued.

NSE says its committee was also apprised by OPG of an order by the Securities and Appellate Tribunal giving an interim stay on SEBI order, which held OPG responsible for connecting to secondary servers. SEBI had imposed dislodgement of illegal gains of ₹15.57 crore on OPG and barred it from accessing markets for five years. NSE committee was led by Dharmistha Raval, Naved Masood, Vikram Limaye and J Ranganayakulu.

COMMENT NOW