Algo Trading Case: 8 firms, including the NSE and others, are fined Rs. 11 billion by SEBI
Ajay Shah was fined three crores by SEBI, Infotech Financial Services Ltd. was fined two crores, and the NSE, its previous leaders Chitra Ramkrishna and Ravi Narain, and the directors of IFSL, Sunita Thomas and Krishna Dagli, were each fined one crore.
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On June 30, the capital markets watchdog Securities and Exchange Board of India (SEBI) fined 8 firms, including the National Stock Exchange (NSE) and its previous presidents Chitra Ramkrishna and Ravi Narain, a total of 11 crore.
In a case involving software used in algorithmic trading, penalties were levied.
NSE, Ramkrishna, and Narain were each fined one crore by the SEBI. In addition, Suprabhat Lal, who was a representative of the NSE at the time of the infringement, was fined one crore by the regulator.
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Among others, SEBI fined Ajay Shah, who was on the board of NSSCL, a subsidiary of the NSE, 3 crore, and Infotech Financial Services Ltd., a corporation that created algorithmic software and sold it to market players. Each of the directors of the latter, Sunita Thomas and Krishna Dagli, has been fined Rs. 1 crore. The spouse of Suprabhat Lal and the sister-in-law of Ajay Shah is Sunita Thomas.
The dispute, according to SEBI, involves NSE’s refusal to provide its own specialised subsidiary, IISL, the contract for calculating the Liquidity Index (LIX). However, the fact that Infotech received the award shows that Ajay Shah and Infotech had improper help from the exchange.
Additionally, the conflicts of interest involving Ajay Shah, Sunita Thomas, Suprabhat Lala, and Infotech were not addressed by NSE or its then-officials Narain and Ramkrishna.
“Ajay Shah, Infotech, Sunita Thomas and Krishna Dagli have collusively worked to fulfil their commercial goals by fraudulently using the data that was obtained by them from NSE to develop algo trading software,” Sebi said in its 86-page order.
In its order, SEBI also claimed that Ajay Shah and Infotech, along with the company’s directors, had unfairly profited greatly from the development of algorithmic trading software at the expense of other investors who were denied access to such software because it was based on private information provided by NSE.
Additionally, SEBI accused Ajay Shah of using a device wherein the private and sensitive information provided by NSE for use in research for the LIX project was improperly used to create algo trading software for sale to market participants for dealing in the securities market in collusion with Infotech, its directors, and NSE and its officials.