The Securities and Exchange Board of India (SEBI) has issued a show cause notice to National Stock Exchange (NSE) in a matter related to the country's largest exchange allegedly giving preferential access to some brokers via its co-location facilities.
The market regulator also plans to rope in forensic experts to aid the investigation, SEBI chairman Ajay Tyagi told reporters on Wednesday.
"We have issued a show cause notice to NSE and 14 key management personnel," he said.
The Central Bureau of Investigation is also looking at whether there was connivance between NSE employees and brokers in order to make unfair gains, he added.
NSE has been under regulatory scanner with regard to its high-speed algorithmic trading practises.
An independent audit by Deloitte last year found the exchange's algo-trading practises were prone to manipulations and it had also indicated that some brokers may have received preferential access to NSE servers via co-location facilities, which can allow traders access to exchange data split second faster.
NSE, which has planned to go public, had admitted to the lapses in its draft red herring prospectus last year.
One particular stock broker almost consistently connected first to the secondary server during the period from December 10 2012 to May 30 2014 and this may not have been possible without the knowledge of certain employees identified in the report, it had said.
