In a relief to Ravi Narain and Chitra Ramkrishna, the two former longest serving bosses of the National Stock Exchange (NSE), market regulator SEBI has dropped charges of fraud against them in the co-location scam case regarding tick-by-tick data system. In a fresh order, issued nearly two years after its final verdict in 2019, SEBI said it was dropping charges against the three including the NSE, Narain and Chitra under the stringent provisions of the Prevention of Unfair and Fraudulent Trade Act and charging them under the SCRA (Securities Contract Regulations Act) and SECC (Stock Exchanges and Clearing Corporations Act).

SEBI imposed a fine of ₹1 crore on the NSE and ₹25 lakh each on Narain and Chitra on Wednesday.

The Co-location, or the Algo trading, scandal was where brokers got preferential access to NSE’s master trading engine. Algo bots trade faster than humans. NSE’s speed trading platform had faulty design that was exploited by some.

“As the allegation of fraudulent and unfair trade practices levelled against Noticee No.1 (NSE) stands disproved, the same can no longer survive against Noticee No.2 (Narain) and 3 (Ramkrishna) as well,” SEBI adjudicating officer Amit Pradhan said in his 96-page order.

“Hence, I drop the allegations in the SCN (show cause notice) against noticee no.2 and 3 with respect to violation of the provisions of PFUTP Regulations. It is necessary for me to ascertain the liability of Noticee No. 2 and 3 under the provisions of the SCRA read with the applicable provisions of SECC Regulations,” the officer said.

SEBI’s earlier two orders against NSE and its senior officials that were issued in 2019 were signed by whole time members G Mahalingam and S K Mohanty. Then, the NSE was charged with fraud in the exchange was charged with fraud in the matter involving laying of dark fibre cables that are used for sending order messages

“I find that while implementing TBT dissemination architecture at NSE, the essence of fair and equitable access was not attempted to be imbibed into the various stages of implementation of the technology and only safety and reliability was taken into account. While a stock exchange with a commercial focus can introduce technological innovations for enhancing the overall efficiency of the platform, it ought to have also reinforced the mandates laid down in the law, with respect to equal and fair access to trading members, in the interests of the market participants and the investors in the market,” SEBI’s Wednesday order said.