SEBI recently send a show-cause notice to NSE based on the findings of a retired high court judge, who was appointed to probe the TAP manipulation
The Securities Exchange Board of India (SEBI) has issued a notice to the National Stock Exchange (NSE), seeking an explanation over the alleged misuse of software by some high-frequency traders to fire a barrage of orders without being noticed and crowing out rival brokerages.
According to a report by the Economic Times, the alleged misuse of the trading access point (TAP) software in 2013 was found four years later by the income tax (IT) department during an investigation into the co-location scam in which former CEO of NSE Chitra Ramkrishna and Ravi Narain are among the accused.
SEBI recently send a show-cause notice to the stock exchange based on the findings of a retired high court judge, who was appointed to probe the TAP manipulation, reported the Economic Times, citing sources.
NSE launched the TAP system in 2018 to check the number of orders that brokers send to the stock exchange so that it could charge them a transaction fee.
According to the ET report, traders manipulated the system by using special software and avoided paying the transaction fee to the NSE.
In 2017, the tax department came across the misuse during a raid on the brokers accused of the co-location scam. Authorities found emails related to the TAP manipulation.
Following the SEBI’s orders, NSE hired retired Kerala High Court Judge Arvind Sawant to examine the matter in 2021.
In its annual report for fiscal 2021-22, the NSE said that it had not got any show-cause notice from the SEBI over the TAP issue.
The stock exchange filed a plea with the market regulator to settle the matter under the SEBI Settlement Regulations. On 21 April 2022, SEBI denied the request citing a pending probe.