SAT stays SEBI ban imposed on academic Ajay Shah, Infotech Financials

NSE logo displayed outside the headquarter, in Mumbai. Photo: PTI
The Securities Appellate Tribunal (SAT) has stayed the ban imposed by market regulator Securities and Exchange Board of India (Sebi) on academic Ajay Shah, National Stock Exchange (NSE) vice president Suprabhat Lala and algo software developer Infotech Financials and its two directors Sunita Thomas and Krishna Dagli.  

In an order passed on April 30, Sebi charged these individuals and Infotech (the five appellants) for misuse of exchange data for commercial gains.

“Prima-facie, at this stage, we are of the opinion that the alleged violation, if any, was in the year 2009. More than 10 years have elapsed and the appellants were associated with the market during this period and no compliant on any other score has been found against them. We also find that the data which is alleged to have been used by the appellants for preparation of algo trading software was explained by NSE to be in the public domain in related proceedings made against NSE,” SAT said in an order uploaded on its website.  

The tribunal has given Sebi six weeks to respond, following which the appellants will be given three weeks to submit their rejoinders. SAT will next hear the matter on July 22.

In the April 30 order, Sebi alleged that the five appellants while developing the so-called Liquidity Index (LIX) obtained confidential data from NSE which they deployed for preparing an algo trading software and used it for programming trading strategies. Sebi said the confidential data was meant only for developing the Lix index.

Senior counsels Janak Dwarkadas and Shyam Mehta, who represented the appellants, argued before SAT that the “data provided by NSE was only a historical data which had no relevance for future trading.” They also said the data was not confidential as it was already in public domain. The counsels also argued that even though the data was used for developing the algo trading software, no confidentiality clause was violated as the data was in the public domain and accessible to all.

The counsels also argued that if the Sebi order is allowed to stand during the pendency of the appeal, “it will put an irreparable loss and harm to the appellant’s business.”

Earlier, SAT had granted similar interim relief to three senior NSE officials and broker OPG Securities charged in the co-location case.

Meanwhile, Ravi Narain, former managing director, and CEO, NSE too moved SAT against the Sebi order that bars him from associating with any listed company or market intermediary for five years.  SAT is likely to hear the matter on May 14.

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