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NSE Clearing Pays Rs27 Crore To Settle Interoperability Pact Violation Case with SEBI
Moneylife Digital Team 31 October 2024
Investor Interest
NSE Clearing Corporation Ltd (NCL) paid Rs27.13 crore to settle a case related to alleged non-compliance with the provisions of the interoperability agreement with markets regulator Securities & Exchange Board of India (SEBI). NCL is a wholly-owned subsidiary of the National Stock Exchange (NSE) responsible for clearing and settlement of all trades executed on the stock exchange and deposit and collateral management and risk management functions.
 
Dr Anitha Anoop, chief general manager (CGM) of SEBI, passed the settlement order stating that the market regulator will not initiate any other enforcement action against NCL for these violations.
 
SEBI conducted an examination to check whether, under the interoperability framework, NCL is a wholly-owned subsidiary of regulatory norms and the provisions of the interoperability agreement. It found that NCL failed to maintain sufficient inter-clearing corporations (Inter-CCP) collateral from Indian Clearing Corporation Ltd (ICCL). NCL also was unable to ensure compliance with the provisions of the Inter-CCP agreement.
 
The market regulator then issued a show-cause notice (SCN) to NCL. However, on 12 February 2024, NCL submitted a settlement application to SEBI for a settlement order 'without admitting or denying the findings of fact and conclusions of law'.
 
On 29 February 2024, 13 June 2024 and 15 July 2024, the authorised representatives of NCL met with SEBI's internal committee (IC). The IC recommended Rs27.13 crore as the indicative settlement amount, along with a report on the subsequent corrective measures undertaken by the applicant. 
 
In two letters on 19 March 2024 and 5 August 2024, NCL proposed revised settlement terms and agreed to pay Rs27.13 crore as recommended by the IC as the settlement amount, along with remedial measures taken by it.
 
The high-powered advisory committee (HPAC), in its meeting held on 14 August 2024, considered and recommended the settlement terms.  
 
The recommendation of the HPAC was approved by the panel of whole-time members (WTMs) of SEBI. On 14 October 2024, NCL informed SEBI about the remittance of Rs27.13 crore.
 
Earlier this month, NSE paid Rs643 crore for itself and on behalf of nine others, including its former managing director and chief executive officer (MD&CEO) Vikram Limaye, to settle a case related to bypassing the trading access point (TAP) system. SEBI also directed seven, excluding NSE and GM Shenoy, to undertake pro bono community service of at least 14 days during the current financial year.
 
SEBI's investigation into the TAP architecture and network connectivity revealed that NSE did not take remedial measures to prevent or discourage any possible bypass of TAP. TAP was a software application deployed by NSE in 2008 on the servers of trading members (TMs) for managing connections and messages for orders and trades. TMs, registered with NSE, connected to TAP to establish communication with the NSE trading system. While NSE introduced 'trimmed TAP' in December 2013 and 'direct connect' in February 2016 as an alternative to TAP, it continued with TAP until September 2019 in the equity segment and until November 2020 in the securities lending and borrowing segment. (Read: NSE Pays Rs643 Crore To Settle TAP Case against Ex-chief Vikram Limaye, 8 Other KMPs)
 
Comments
parimalshah1
1 month ago
Lagata hai puri choron ki baaraat hai
Reply
hari.bansal55
1 month ago
How far it is appropriate to settle in the interest of traders/investors. This was a case requiring criminal proceedings instead of disposing off by imposing fine, though huge amount. Punishment should be demonstrative and deterrent so to send a message to all engaged in such punishable acts, corrupting, and adopting malpractices in capital market.
Reply
parimalshah1
1 month ago
What happens to the fine imposed by SEBI. Where does the money goes? Who can spend it and for what objective?
Reply
akyronad
1 month ago
It is a clear case of malfeasance and making pecuniary benefits. What happens to the people involved in the arrangement and how the so called "penalty" will compensate for the consequential damage/loss
Reply
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