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Ravi Narain quits NSE board amid Sebi probe

LiveMint logoLiveMint 02-06-2017 Jayshree P. Upadhyay

Mumbai: Ravi Narain, vice-chairman of National Stock Exchange of India (NSE), on Thursday evening tendered his resignation from the board of the exchange, amid a probe by capital market regulator Securities and Exchange Board of India (Sebi) on allegations of unfair access to certain brokers on its algorithmic trading platform, said two people with direct knowledge of the matter.

“Mr Narain on Thursday evening tendered his resignation to the board as he did not want the fact finding exercise in the current probe by the regulator and the exchange to be hampered in any way,” said the first person, on the condition of anonymity.

Sebi last month had sent show cause notice to 14 NSE officials, including Ravi Narain, who was serving as chief executive officer and managing director at the exchange during 2010-2014 when the alleged violations took place.

This is the second high-profile exit from NSE within a span of six months. On 2 December, Chitra Ramakrishna stepped down as the chief executive officer and managing director of NSE.

She was appointed as the head in April 2013 for a period of five years, replacing then chief Ravi Narain. This also marks the end of the era of the founding members—both Ramkrishna and Narain were part of the team that set up the exchange in the early 1990s.

“This is in-line the best corporate governance practices to have an independent probe without conflict of interest,” said a board member, who did not want to be named.

The market regulator had raised concerns that Narain was on the board of the exchange, which was to examine the role of NSE officials in the unfair access allegations parallel to the Sebi probe.

The exchange has formed a committee to look into allegations that some brokers received unfair access to its algorithmic trading facility and the panel has sought responses from 14 officials who have received show-cause notices, including Narain.

The matter pertains to allegations by a whistleblower that certain brokers were able to log into NSE systems with better hardware specifications, allowing them unfair access and advantage. The issue was first highlighted by Sebi’s Technical Advisory Committee, which had recommended a probe against the exchange in April last year.

Following this, the regulator in September 2016 asked the exchange to conduct a forensic audit and deposit the revenues being generated out of the co-location facility in an escrow account.

NSE, in its share sale document on 28 December, disclosed that a forensic audit by Deloitte India showed that its algorithmic trading platform and co-location facility were “prone to manipulation” and allowed “potential preferential access” to some brokers.

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