sebi:WTM/PS/09/DNPD/APRIL/2012
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Facts / Headnote
Warning issued to National Stock Exchange of India Limited
Provisions invoked
- s. 12A
Parties
- National Stock Exchange of India Limited
Holding
SEBI warned the National Stock Exchange of India Limited for negligence in discharging its regulatory duties, specifically for failing to detect and curb the increasing trend of client code modifications in March 2010 and for failing to put in place a mechanism to identify and penalize repeat offenders.
Full text
Page 2 of 19 3. On an analysis of the data obtained from NSE, it was found that the volume of transactions wherein modifications were done, exceeded 55,000 crores in terms of value, during the month of March, 2010. It was also seen that certain brokers carried out a very large number of modifications in the month.
Page 3 of 19 this date, Mr. J. Ravichandran, Director, NSE, Mr. Ravi Varanasi, Senior Vice President, NSE and Mr. Somasekhar Sundaresan, Advocate appeared before me and made submissions on behalf of NSE. They also sought further time of 10 days to file their written submissions. I note that during the personal hearing, NSE was asked to provide the data of orders entered by the brokers on behalf of non-institutional clients in terms of value. The written
Page 4 of 19 c. Modification of client codes is automatically recorded in the system and penalty framework is implemented where the incidence of modification of client codes is in excess of the specified daily tolerance limits. Significant percentage trade value client code modifications are considered as actionable and attract disciplinary action proceedings. The percentage modification by the brokers are scrutinized and examined vis-à-vis the total trading activity of such broker over a given period, besides imposing penalty on a graded basis during excessive modification, in such post facto analysis,. Thereafter, the views of the brokers are sought and an explanation is called for. During the period of January, 2010 - January, 2011, notices have been issued to 82 members, in addition to asking the brokers to review their operations and monitor client code modifications. Large client code modification has been one of the areas on which there has been focus during the inspections.
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Source: SecMarx — sebi:WTM/PS/09/DNPD/APRIL/2012. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.