Almost five months since he was appointed, Vikram Limaye formally took charge as the MD and CEO of the National Stock Exchange on Monday. He is the first CEO and MD from outside the founding members of the exchange and joins at a time it is grappling with several issues, including a probe by Securities and Exchange Board of India (SEBI) into alleged lapses in high-frequency trading and preferential access given to some brokers through co-location facilities.
NSE, India's largest stock exchange, has been functioning without a full-time CEO, since Chitra Ramakrishna unexpectedly quit in December 2016.
Limaye's clearance for the post was delayed by SEBI since he was also on the committee of administrators of the Board of Control for Cricket in India. His appointment was finally cleared by the market regulator on condition that he will be relieved from the committee.
His resignation from the committee running India's cricket board was accepted by the Supreme Court last week, paving the way for Limaye to take charge at NSE.
Limaye taking charge is crucial for NSE, which has seen a spate of senior management exits over the past few months, amid a SEBI probe and he seems to have set his priorities straight.
Speaking with reporters on Monday, Limaye, who had earlier served as MD and CEO of infrastructure lender Infrastructure Development Finance Company (IDFC), said the immediate priority at NSE would be to sort out the regulatory issues.
“My immediate priorities will be to focus on some of the regulatory issues that the NSE is facing, nad have it sorted out. That, obviously, is the priority,” Limaye said.
NSE had also filed an application last December to hit the capital market with its initial public offering (IPO). While, it still remains a key priority, it will only happen once the regulatory issues are addressed, Limaye added.
The NSE IPO could raise as much as $1 billion, but is yet to get the green light from SEBI. Ajay Tyagi, the chairman of SEBI, had said recently that the exchange may need to refile its application for an IPO amid the ongoing probe.
“It is important to make sure that all stakeholder relationships are better than what we have been in the past,” Limaye further said.
NSE has been mired in controversies, which were disclosed by a whistle-blower through a letter to SEBI in 2015, highlighting issues at NSE's co-location facilities.
Co-location services, which were launched by NSE in 2010, help in faster data movement as the server of the particular broker is located within the premises where the exchange's data centre is situated, for a fee.
NSE hired Deloitte last year to conduct an independent audit in the matter. The accounting firm found several lapses, which were acknowledged by the exchange, in its draft red herring prospectus, which was issued last year, in connection with the proposed IPO.
“The system architecture of the company’s TCP-IP based TBT (tick by tick) system was prone to manipulation. The independent agency’s analysis highlighted trends for certain periods where a few stock brokers appear to be the first to connect to specific servers significantly more often than others,” NSE had disclosed in the IPO draft red herring prospectus.
Deloitte's review had also pointed out potential preferential treatment given out to a few members. One particular stock broker almost consistently connected first to the fall back or 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, who did not take any action despite consistent connections to the fall back servers against protocol, the audit had found.
“It seems to be a larger system-wide problem issue here, where several employees of the exchange knew it and no action was taken...,” Shriram Subramanian, managing director of proxy advisory firm InGovern, told THE WEEK.
While Deloitte's probe has already highlighted lapses, separately, another consulting firm Ernst & Young has been conducting an audit of trading in currency and cash equity segments.
The regulator recently issued show cause notices to the exchange and some of its senior executives in the co-location issue.
Chitra Ramakrishna, the former MD and CEO of the exchange, and Ravi Narayan, who recently quit as the vice-chairman, were among the 14 officials, who were issued show cause notices.
Limaye, a commerce graduate, did his MBA in Finance and Multinational Management from Wharton School of the University of Pennsylvania. He began his career with Arthur Andersen in 1987 and has worked at organisations including Ernst & Young, Citibank and Credit Suisse First Boston.
Experts say Limaye's key challenge would be to restore the integrity and image of the country's stock exchange in the wake of SEBI's investigation and the resignation of several top executives in the past few months.
“Getting the trust of the board and the shareholders, because that itself has been one of the lacunae... (He should) try to restore the integrity of the market place. At the end of the day this co-location issue has happened is a loss of integrity of the market place,” Subramanian of InGovern said.
He was also of the view that the IPO should be postponed before the regulatory concerns and what steps the exchange had taken to resolve the lacunae were addressed.