Biggest India Bourse Expects HFT Probe Resolution, IPO by MarchBy and
Enquiry expected to be settled in six months: NSE’s Chawla
NSE has said it plans to refile prospectus for share sale
National Stock Exchange of India Ltd. expects a probe into its high-frequency trading system to be settled within six months, paving the way for an initial public offering by March, according to Chairman Ashok Chawla.
Billed last year as India’s biggest IPO in more than six years, NSE’s listing plans have been complicated by a regulatory investigation into whether the exchange gave some high-frequency traders unfair access to its trading system. A resolution will clear a major roadblock for the sale.
It “will go through a process of discussions and then through a formal process, where it goes to a settlement committee,” Chawla said in an interview in New Delhi on Friday. “It’s difficult to put a specific timeline. Now our expectation, and hope, is that it should get settled in a maximum timeframe of six months.”
India’s largest stock exchange filed an IPO draft prospectus in December to sell up to about 111.4 million shares, giving investors including Tiger Global Five Holdings and Temasek’s Aranda Investments (Mauritius) Ltd., an opportunity to exit their holdings. The bourse plans to refile its IPO papers, with the latest disclosures, to the regulator when the probe is concluded, Chief Executive Officer Vikram Limaye told Bloomberg News in July.
An auditor’s report into the HFT issue, outlined in the December prospectus, pointed out that NSE’s colocation system was prone to manipulation and allowed preferential access to some brokers. The markets regulator said in June that it would start its own forensic investigation into the possible connivance of NSE employees, brokers and unfair gains made.
Once the colocation issue, or the practice of placing a trader’s servers next to that of an exchange, is settled, the exchange will look at its public offering early next year, Chawla said.
The NSE last month filed an application with regulator Securities and Exchange Board of India for settlement of the probe under the consent process. The exchange will work with Sebi for an early resolution, it said at the time.
“We have proposed to Sebi and if Sebi accepts then that’s the route we will take,” Chawla said. The employees involved “are all replying to show cause notices and I believe the vast majority of them are also proposing to settle with Sebi in their individual capacities.”