Photographer: Scott Eells/Bloomberg

HFT Unfair Access Claims Said to Be Challenged by Indian Bourse

  • Letter to say NSE broke no rules and question earlier finding
  • Panel advising India's regulator recommended an investigation

The National Stock Exchange of India Ltd. will in the coming weeks submit a detailed report to its regulator to challenge claims that high-frequency traders gained unfair access at its venue, according to people with knowledge of the matter.

The NSE’s letter, a response to a regulatory committee’s conclusion that there may have been improper practices at the exchange, will argue that it broke no rules, the people said, asking not to be identified as discussions are private. NSE will contend that the technical advisory committee appointed by the Securities and Exchange Board of India simply repeated allegations made by an unidentified whistle-blower without doing a thorough investigation, the people said.

QuickTake Trading on Speed

Claims of unequal market access in India, the biggest emerging market for computerized trades, has put the focus on the country’s largest exchange operator, the NSE. But the company plans a robust defense, said the people. It will explain how technology has rapidly evolved in India’s markets and that NSE has improved its rules to address any blind spots that may have existed, the people said.

The exchange firm’s response is still being drafted and its contents may change, said the people.

Fair Access

The NSE violated norms of fair access, according to a copy of the panel’s internal report seen by Bloomberg News. 

The committee recommended a probe into whether NSE officials worked with OPG Securities Pvt. to give the New Delhi-based trading firm preferential access. It also called for an investigation into whether Bengaluru-based Way2Wealth Brokers Pvt. benefited from a dedicated fiber-optic line between the NSE and BSE, India’s second-biggest bourse. NSE’s response may also say that this line was beyond its purview, according to the people.

An NSE spokesman didn’t respond to an e-mail seeking comment. OPG last week denied any wrongdoing and said it hasn’t been contacted by regulators. Way2Wealth didn’t immediately respond to e-mails and a phone call seeking comment. SEBI didn’t reply to an e-mailed query about NSE’s planned response.

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