Sebi action in rs60000 cr nse colo scandal is eyewash startling revelations in cbi complaint

SEBI’S ACTION ON NSE IS AN EYEWASH
We are a group of people working with Exchanges and Regulators in the Indian
Financial system. In our endeavor to clean up the financial system of our country,
we hereby wish to bring to your notice certain startling facts about the over Rs.
60,000 crore NSE co-location scandal which is a fraud on the nation.
The somnolent SEBI’s ostensible action on NSE and its former top executives is
nothing but mere eyewash as it has been hastily announced in the wake of a PIL
filed in the Delhi High Court in relation to the NSE co-location scandal, to cover up
the deep rooted horrendous fraud on nation and bury sins under the carpet to
avoid further investigation into the matter.
The perfect analogy to describe the measly fine imposed on NSE is that of the
most-dreaded terrorist Osama Bin Laden being only penalized for jumping a
yellow traffic signal.
We have obtained copy of the complaint with CBI which is available in public
domain, and it exposes the real culprits, their modus operandi and magnitude of
the scandal. We strongly believe that institutions such as NSE should be saved and
all perpetrators and the main mastermind of the scam who still controls the
financial ecosystem must be severely punished and charged with sedition. In order
to justify our salary, we are committed to bringing out more such startling truths
and revelations backed by documentary evidence, server logs and pay-in and pay-
out logs of clearing corporation available with regulator and exchange, which have
been suppressed so far.
………………………………………………………………………………………………………………………………..
A PIL has implicated P Chidambaram, KP Krishnan, Ajay Shah, CB Bhave,
Ravi Narain, Chitra Ramakrishna, Suprabhat Lala and six others in the
over Rs 60,000 crore NSE Co-location scandal.
The PIL, heard by the Hon. Delhi High Court on April 30, 2019, is based
on a complaint filed with the CBI, and attached herewith. The High
Court has asked the CBI to submit a status report on the matter on May
22, 2019.

The Gang of NSE Co-Location Scam
P Chidambaram
Former Finance Minister
K P Krishnan
The Then Joint Secretory, Capital Market Division,
Ministry of Finance
Ajay Shah
Professor, NIPFP
C B Bhave
Former SEBI Chairman
Ravi Narain
Former MD & CEO, National Stock Exchange
Chitra Ramakrishna
Former MD & CEO, National Stock Exchange

Blowing the Whistle on Manipulation in NSE
Sucheta Dalal
19 June 2015
We are crowd-sourcing investigation on a whistleblower account detailing how NSE’s
system has been exploited. Please use the comment section to share your information
High-frequency trading using colocation that give traders advantages by a few milliseconds
have come to occupy the centerstage of equity markets all over the world. Such automated
trading, which executes pre-programmed instructions, generating thousands to millions of
trades every trading day come out of black boxes designed by whiz kids in the secret
corners of trading firms. If deployed unfairly, a tiny unfair advantage can translate into
crores of rupees of illegal profit.
Moneylife has repeatedly argued that India has no system of monitoring complex
automated systems, leave along trading transaction. Consequently, organisations that
operate such technology have become a law unto themselves, supervised by nobody. Even
when there is a major glitch or a fat finger trade, no report is put into the public domain.
So, if HFT trades are done illegally, they fly below radar and very few people about them.
Fortunately, we have in our possession a detailed document that blows the whistle on
what’s possibly going on in NSE. The document below was came by snail mail from
Singapore and addressed to Mr B K Gupta, DGM Securities and Exchange Board of India
(SEBI). It is dated 14th January 2015 with a copy to Sucheta Dalal. It is not clear what SEBI
has done with it in all these months.
Moneylife has written to the SEBI Chairman, the chairman of National Stock Exchange, Ravi
Narain, and managing director of NSE, Ms. Chitra Ramakrishnan, asking whether they have
acted on this document. Our letters and text messages have been met with complete
silence. In trying to get to the bottom of this over the last two months, we have shared this

document with the exchanges, regulators, government agencies and key traders. We
realised that the only people who can throw light on it are actual HFT players who
understand how this game is played.
Hence we are putting out this long document to crowd source informed opinion and facts
on this. Hopefully, your information will stir the investigative agencies into looking deeper
into it. After reading this document, post your facts and information below. You need not
use your actual identify. Your data is secure with us. If you want to write with specifics,
please write to sucheta@moneylife.in or editor@moneylife.in

NSE drags Moneylife to HC for
algo reports, seeks Rs 100cr
In a recent report, Moneylife had claimed that certain institutions registered for algo trading
were allowed to profit illegally by the NSE
BS Reporter & PTI | Mumbai Last Updated at July 22, 2015 00:52 IST
The National Stock Exchange (NSE) on Tuesday said it has filed a Rs 100-crore
defamation suit in the Bombay High Court against online news portal Moneylife
for allegedly publishing false reports on algorithm (algo) trading mechanism on
its platform.
The exchange said it had sought withdrawal of the reports and had made a claim
of Rs 100 crore (which can be revised upwards) from Moneylife for the
defamation.
“We have filed a defamation suit against Moneylife and its representatives who
published unsubstantiated and misleading reports against the exchange,” NSE
said in a statement.
According to NSE, the reports filed by Moneylife refer to algo trading mechanism.
“Since inception, the NSE has been maintaining a high degree of surveillance
and integrity in its daily operations and strictly adheres to the rules, regulations
and guidelines issued by the regulators from time to time,” the stock exchange
said.
In one of its reports recently, Moneylife had claimed that certain institutions
registered for algo trading were allowed to profit illegally by the NSE. When
contacted, Sucheta Dalal, managing editor, Moneylife, said, “NSE has sent us a
legal notice. We have replied to it.”

22 July 2015
LIVE MINT
Moily panel seeks Sebi report on alleged
malpractices at NSE
NSE spokesperson says exchangeis not aware ofany regulatory probe and has not ‘received
any intimation till now’
The Parliamentary Standing Committee on Finance has directed the Securities and
Exchange Board of India (Sebi) to submit a report on alleged malpractices at the
National Stock Exchange of India Ltd (NSE) involving allotment of co-location servers
and sharing price-sensitive information.
Co-location refers to bourses allowing members to set up automated trading systems
on their premises to reduce the time required for orders to flow between the exchange
and the broker’s trading system.
At a meeting held last Thursday, the committee asked the capital market watchdog to
investigate the matter and submit a report within a couple of weeks, said a member of
the committee who spoke on condition of anonymity.
A report on website Indiasamvad on 16 July said that the committee headed by
member of Parliament M. Veerappa Moily had told Sebi chairman U.K. Sinha to look
into the matter.
An NSE spokesperson said the exchange is not aware of any regulatory probe and has
not “received any intimation till now”.
The issue was brought to the parliamentary committee’s notice after Moneylife, a
personal-finance-focused website, published a letter written by an official of a
Singapore-based hedge fund to Sebi.
“I wish to draw your attention to a sophisticated market manipulation done at NSE for
several years at NSE co-location. The most shocking aspect is that when the matter
came to the knowledge of NSE management team, they have chosen to hush up the
matter under the carpet rather than coming out in open against the same,” says the
letter addressed to B.K. Gupta, deputy general manager, Sebi.
“The market manipulation that I am referring to has been occurring by enabling certain
vested brokers to get market price information ahead of the rest of the market and thus
enabling them to front-run the rest of the market,” it adds.
The stock exchange has denied these charges.
“NSE has filed a defamation suit against an organisation and its representatives who
published unsubstantiated and misleading reports against the exchange,” said the
spokesperson for the exchange, without naming Moneylife. A separate press release
from the exchange said that a defamation suit with a claim of Rs.100 crore had been
filed in the Mumbai high court.

“As you know since inception, NSE has been maintaining a high degree of surveillance
and integrity in its day to day operations, strictly adheres to the rules, regulations and
guidelines issued by the regulators from time to time,” added the spokesperson in the
emailed response.
As per information available on its website, NSE launched co-location facilities in
January 2010 and currently charges up to Rs.12 lakh depending on the size of the
server with an initial setup charge of Rs.1 lakh.
As per Sebi data, the share of turnover originating from co-location facilities on the NSE
increased from 2.3% in April 2010 to 22.6% in December 2014. In June, co-location
trades accounted for nearly 25% of the total turnover on NSE, according to data
available on the exchange website.
“The increased complexities of algorithm coding and reduction in latency due to faster
communication platforms need focused monitoring, as they may pose risks in the form
of increased possibilities of error trades and market manipulation,” the Reserve Bank
of India said in its Financial Stability Report released in late June.
Two months ago, Sebi issued a circular directing exchanges to provide co-location
facility in a “fair, transparent and equitable manner” and that all participants should
get fair and equal access to data feeds. It also said that all entities availing of co-location
facilities should be provided “similar latency.” Latency is the technical term used to
describe the time lag between placing an order and executing a trade.
These were some of the issues that were highlighted in the letter written by the
Singapore-based hedge fund manager to Sebi in January.
Sebi did not respond to a mail seeking comments on the matter.
Market participants say the issue has led to doubts in the minds of many investors who
say they are losing out, not due to technology, but because of the undue benefits
enjoyed by a certain set of entities.
“It is not that investors have problem with technology but there should be
transparency in regulations. There should be a proper public discussion before the
rules are framed. We have copied the Western markets by allowing algo and co-
location here but the legal redressal systems are much better overseas. Right now,
investors have doubts regarding these systems due to lack of transparency and Sebi
and exchanges should address that,” said Sandeep Shah, member-core committee,
Investors’ Grievances Forum, a Sebi-registered investor association.

¼ããÀ¦ããè¾ã ¹ãÆãä¦ã¼ãîãä¦ã ‚ããõÀ ãäÌããä¶ã½ã¾ã ºããñ¡Ã
Securities and Exchange Board of India
Page 1 of 3
CIRCULAR
CIR/MRD/DP/07/2015 May 13, 2015
To,
All Stock Exchanges.
Dear Sir / Madam,
Subject: Co-location / proximity hosting facility offered by stock exchanges
The facility of co-location or proximity hosting (or by whatever name
called) is offered by the stock exchanges to stock brokers and data vendors
whereby their trading or data-vending systems are allowed to be located within or
at close proximity to the premises of the stock exchanges, and are allowed to
connect to the trading platform of stock exchanges through direct and private
network.
2. Based on the recommendations of SEBI’s Technical Advisory Committee
(TAC), it has been decided that stock exchanges while facilitating co-location /
proximity hosting shall follow the guidelines given below.
3. In order to ensure fair and equitable access to the co-location facility, stock
exchanges shall:
3.1. provide co-location / proximity hosting in a fair, transparent and
equitable manner.
3.2. ensure that all participants who avail co-location / proximity hosting
facility have fair and equal access to facilities and data feeds provided by
the stock exchange.
3.3. ensure that all stock brokers and data vendors using co-location /
proximity hosting experience similar latency with respect to exchange
provided infrastructure.
3.4. ensure that the size of the co-located / proximity hosting space is
sufficient to accommodate all the stock brokers and data vendors who are
desirous of availing the facility.
3.5. provide the flexibility to avail rack space in the co-location / proximity
hosting so as to meet the needs of all stock brokers desirous of availing
such facility.

Page 2 of 3
3.6. expeditiously decide on the request of the desirous stock brokers /
data vendors for availing co-location / proximity hosting and communicate
the decision within fifteen working days from the receipt of the request from
the stock brokers / data vendors. In case of a rejection, stock exchanges
shall also provide reasons in writing to the stock brokers / data vendors.
3.7. facilitate stock brokers to receive data feeds from other recognised
stock exchanges at the co-location facilities and allow routing of orders to
other recognised stock exchanges from the co-location facilities.
3.8. make available on their websites description of the co-location /
proximity hosting, including requirements to be fulfilled by stock brokers /
data vendors who avail the facility, details on fees / charges associated with
the facility, etc.
3.9. publish on their websites suitable quarterly reports on latencies
observed at the exchange.
3.10. be able to identify orders emanating from the co-located servers of
stock brokers and the resultant trades. Suitable statistics relating to such
orders and trades shall be disseminated by the stock exchanges
4. In order to ensure that the facility of co-location / proximity hosting does not
compromise integrity and security of the data and trading systems, stock
exchanges shall:
4.1. implement suitable mechanism to protect their systems and systems
of stock brokers and data vendors at co-location / proximity hosting from
unauthorized access.
4.2. frame guidelines on access and conduct of the personnel of stock
brokers / data vendors in the premises of the stock exchange, including in
the co-located space.
4.3. not provide access in any form to the personnel of stock brokers /
data vendors to the stock exchange’s trading platform and databases.
5. Stock exchanges are directed to:
5.1. take necessary steps to put in place systems for implementation of
the circular, including necessary amendments to the relevant bye-laws,
rules and regulations, within three months from the date of the circular.
5.2. bring the provisions of this circular to the notice of the stock brokers
and also disseminate the same on its website.

Page 3 of 3
5.3. communicate to SEBI the status of implementation of the provisions
of this circular.
6. This circular is being issued in exercise of powers conferred under Section
11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the
interests of investors in securities and to promote the development of, and to
regulate the securities market.
Yours faithfully,
Maninder Cheema
Deputy General Manager
email: maninderc@sebi.gov.in

Bombay High Court
National Stock Exchange Of India ... vs Moneywise Media Pvt Ltd And 2 Ors on 9 September, 2015
Bench: G.S. Patel
904-NMS-1220-15-F4.DOC
Atul
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION NO. 1220 OF 2015
IN
SUIT NO. 627 OF 2015
NATIONAL STOCK EXCHANGE OF
INDIA LIMITED,
a recognized Stock Exchange and a Company
incorporated under the Companies Act, 1956
and having its Registered Office at Exchange
Plaza, Bandra Kurla Complex, Bandra (East), ...Plaintiff
Mumbai - 400 051
Versus
1.
MONEYWISE MEDIA PRIVATE LIMITED, a company incorporated under the laws of India having
its Registered Office at Unit No. 315, 3rd Floor, Hind Services Industries, Off Veer Savarkar Marg,
Dadar (West), Mumbai - 400 028
2. MS. SUCHETA DALAL, the Managing Editor, Adult, Indian Inhabitant of Mumbai having her
office at Unit No. 315, 3rd Floor, Hind Services Industries, Off Veer Savarkar Marg, Dadar (West),
Indian Kanoon - http://indiankanoon.org/doc/197656447/ 1

2. On 14th January 2015 an anonymous letter in hard copy was sent to Mr. B.K. Gupta, the Deputy
General Manager of the Market Regulation Department of SEBI.1 This document was copied to Ms.
Dalal. It is a most technical eight page letter and it appears to detail at very considerable length what
it describes as the illegality or impropriety in "high-frequency trades" ("HFT") or algorithmic trades
("algo trades") facilitated by NSE's allowing co-location of its servers. I do not claim to be able to
understand every single one of the financial and technical details that are set out in this anonymous
letter, but I think that is of little moment at this interim stage. On 19th June 2015, several months
after the anonymous letter, appeared the article on moneylife.in of which the NSE now complains.
3. This article contained the following statements that the NSE says constitute defamation. These
are reproduced from paragraphs 11, 16 and 18 of the plaint.
"11(i) Finance Ministry nudges regulators in Mumbai to probe NSE's HFT scam.
Mumbai - 400 028
3. MR. DEBASHISH BASU, the Executive Editor, Adult, Indian Inhabitant of Mumbai having his
office at Unit No. 315, 3rd Floor, Hind Services Industries, Off Veer Savarkar Marg, Dadar (West),
Mumbai - 400 028 ...Defendants 1 of 30 904-NMS-1220-15-F4.DOC Dr. Veerendra V. Tulzapurkar,
Senior Advocate, with Mr. Viraag Tulzapurkar, Senior Advocate, Mr. Vikram Trivedi & Mr. Sachin
Chandarana, i/b Manilal Kher Ambalal & Co., for the Plaintiff.
Mr. Bapoo Malcolm, for Defendant No. 1.
Ms. Sucheta Dalal, Defendant No. 2, in person Mr. Debashish Basu, Defendant No. 3, in person.
CORAM: G.S. PATEL, J ig DATED: 9th September 2015 ORAL JUDGMENT:-
1. This is an application for injunction in a defamation action brought by the National Stock
Exchange ("NSE"), one of the two premier Stock Exchanges of this country. The NSE complains that
an article published on 19th June 2015 by Defendants Nos. 2 and 3, Ms. Sucheta Dalal and Mr.
Debashish Basu, on their online news and analysis journal or website moneylife.in, is per se
defamatory. Ms. Dalal is the Managing Editor of Moneylife; Mr. Basu is its Executive Editor. Their
article accuses the NSE of actively permitting, in circumstances that I will describe in somewhat
greater detail shortly, illicit trading advantages being afforded to a select few using high-end
technology. Much of what is alleged is very technical indeed, but the NSE's case as presented by Dr.
Tulzapurkar is that the assertions made by Ms. Dalal and Mr. Basu, even allowing for the fact that
they were based on an anonymous letter dated 14th January 2015 addressed to the Securities &
E x c h a n g e B o a r d o f I n d i a ( " S E B I " ) w i t h a c o p y t o M s . D a l a l , a r e i n 2 o f 3 0
904-NMS-1220-15-F4.DOC themselves reckless and defamatory of the NSE. The article clearly
alleges illegality and criminality in the actions of the NSE. It goes further and accuses the NSE of
being "like a fortress" and unwilling to part with any information or to provide any clarification.
2

(ii) ...certain institutions registered for HFT...were allowed to profit illegally by the
NSE's (National Stock Exchange) insiders..." immediately preceded by the Plaint,
Exhibit "A1", p. 44 3 of 30 904-NMS-1220-15-F4.DOC statement that "...multiple
agencies have woken up to the possible dangers of large-scale market manipulation
by large institutional traders who run high-frequence trading (HFT) programmes in
India." [Emphasis supplied]
(iii) "...NSE's insiders allowed some chosen traders to benefit through faster
connectivity, day after day...", followed by the statement that, "These high-frequency
trades contributed to the high froth of trading volumes on the Exchange." [Emphasis
supplied]
(iv) "Government sources also tell us that "NSE's management of HFT servers in the
initial years until 2013 (which are the subject of the whistleblower's letter) may need
a detailed review by SEBI or an investigation agency."" [Emphasis supplied]
(v) "... NSE operates like a fortress and outsiders had no details..." [Emphasis
supplied]
(vi) "Then, there is the issue of corruption. Clearly, people at the NSE and SEBI who
permitted the manipulation of algo trades and attempted to bury the scandal cannot
be in charge of this investigation." [Emphasis supplied] 16(i) "For several months, I
shared the letter with key market-players and investigators to find out more; but the
NSE operates like a fortress and outsiders had no details."
(ii) "Nobody we spoke to was surprised to know that the system was manipulated and
each one speculated about the likely beneficiaries; but no proof was forthcoming."
(iii) "The reason for this is best explained on the jacket of Michael Lewis's book Flash
Boys. It says" "Now, the world's money is traded by computer code, 4 of 30
904-NMS-1220-15-F4.DOC inside black boxes in heavily guarded buildings. Even the
experts entrusted with your money don't know what is happening and those who do
aren't about to tell - because they are making a killing."
(iv) These high-frequency trades contributed to the huge froth of trading volumes on
the Exchange. Since top management salaries at the NSE are linked to the turnover
and profit generated by the Exchange, there may have been a reluctance to upset the
applecart. The NSE is unique in having had the same senior management for the
entire 20+ years of its existence."
18(i) "... We expected the whistle-blower's letter to
(ii) trigger, at least, an investigation"...
3

"...we published the letter on 19th June on our website."...
(iii) "Action started only after that. We now have information from credible sources
that the finance ministry has desired that, apart from SEBI, the Reserve Bank of
India (RBI) also take a detailed look at the implications of continuing HFT without
adequate safeguards. Government sources also tell us that NSE's management of
HFT servers in the initial years until 2013 (which are the subject of the
whistle-blower's letter) may need a detailed review by SEBI or an investigation
agency."
(iv) Soon, SEBI and RBI dutifully responded to the finance ministry's direction. The
Financial Stability Report (FSR) released in June suddenly identified algo trading as
an area of concern."
(v) "Immediately thereafter, the Business Standard and other papers reported that
SEBI was considering steps to slow down the pace of trading through measures such
as a minimum resting time for orders 5 of 30 904-NMS-1220-15-F4.DOC before
execution and rendomising the time priority of orders that an Exchange receives."
4. A second article followed on 8th July 2015.2 The combined effect of this, according to Dr.
Tulzapurkar, is that the articles tend to lead "the lay reader" to conclude to the detriment of the NSE
that firstly it is because of the articles that regulators such as the Reserve Bank of India ("RBI") and
SEBI have commenced investigations; second, that there are serious wrongdoings on the part of the
NSE; and third, that the NSE itself is complicit in permitting these illegal HFTs or algo trades.
5. Dr Tulzapurkar submits that these allegations are entirely false. He points to paragraph 18A of the
plaint, one that was added by an amendment permitted on 24th July 2015, after the suit was filed
and on the day the Notice of Motion was first moved for ad- interim reliefs.
6. To understand that paragraph and what it seeks to portray, I think some background to what is
being alleged is necessary. The case presented by the Defendants in their articles, at least as I
understand it, is thus. The NSE, as indeed many other bourses, both here and abroad, routinely
permit what is called co-location. Typically, a co-location centre (often called a 'colo') is a data centre
that rents equipment, space, and bandwidth to retail subscribers. This allows for leveraging
economies of scale, more advanced infrastructure, lower latency (lag times), upgraded system
security and so on. In the present variant, I understand the complaint in the anonymous letter to
mean that the NSE permitted, for a significant Plaint, pp. 52 to 54.
6 of 30 904-NMS-1220-15-F4.DOC rental, premium co-location access. This is allowed at a very
high premium to persons or entities engaged in high volume and high value transactions. It is, in my
understanding of it, intended to be nothing more than a convenience.3 Where the co-location server
is allowed to be installed at a subscriber's or renter's premises, this is, if I might be permitted a
parallel, more or less like arranging to have a dedicated branch of a bank in one's own building if
one is on a daily basis engaged in a large number of high value banking transactions. The system
4

allows the users at these locations quick and reasonably disruption-free access to the servers. This is
useful in an age when the trades are no longer done manually but are all done digitally and online.
7. Algo trades are the product of very high end mathematical modelling. These are models devised
specifically to anticipate the most microscopic changes in markets and to respond to those changes
in a matter of seconds. This is done not through any human intervention, an aspect that is totally
eliminated, but in a wholly automated fashion by computer-generated or triggered transactions. In
high value transactions the number of such transactions that can be put through is very considerable
indeed. A most rudimentary example might be this: an 'algo' is designed to detect the most minute
changes in stock prices and to respond accordingly. In anticipation of a rise in a particular stock's
value, say, with no manual intervention but by a computer program responding to the data input, a
series of purchases are triggered made at a lower value so that when the markets later reach the
higher level, a considerable profit is then, equally automatically, Co-location service offerings and
details are available on the NSE website.
7 of 30 904-NMS-1220-15-F4.DOC generated and booked. The same can also operate in reverse to
minimise a potential loss. Of course, these are utterly basic examples. I imagine the actual models
are far more sophisticated and complicated, for use in complex scenarios for highly evolved financial
and security transactions. The point is, however, that these trades are automatic and
computer-generated, and they happen at very high speed and in high volumes.
8. The anonymous letter sent to SEBI and Ms. Dalal is a lengthy dissertation on not only the
evolution of online trading at the NSE but also the very many pitfalls encountered in the last five
years or so. It points to the initial deployment of relatively low- bandwidth leased lines to multicast
price streams and this is said to have been done using a technology by then already deprecated so
that the information dissemination was sequential, thus allowing the person or persons who first
received the data to act on it well before others downstream received the data. In the intial days,
traders were allowed to deploy the NSE's application programming interfaces or APIs to write their
own programs. The system, so the anonymous letter seems to say, was not designed for high traffic
volumes; and, given the sequential (as opposed to simultaneous) dissemination of data (as might be
achieved using the User Datagram Protocol or UDP, for instance, as other exchanges even then did),
often meant that the last in line to be connected to the data stream was often well behind the person
who connected first. The NSE then apparently had limited servers with unbalanced loads, and this
in turn generated what is called a latency (the time required for transmission of data packets) for the
last user. At the time, this gave the first mover (or connector), who accessed a 8 of 30
904-NMS-1220-15-F4.DOC server then least loaded with traffic, the fastest access; those
downstream had to deal with increasingly burdened servers as more and more persons connected,
with a corresponding increase in latency. Switching on servers ahead of time allowed some to gain
an advantage and a priority. To mitigate this, the NSE took steps to balance its server loads and to
more evenly distribute them.
Technically, the letter suggests, this should have been enough. But (and this appears to be the nub of
it) some started connecting to backup real-time servers with nil traffic, even though these were to be
used only in emergencies, thus enabling quicker access to market data; and the NSE's co-location
5

services facilitated this early-bird data or information receipt.
9. It is in this scenario that we have to assess the concern that seems to have been expressed by the
Defendants in their articles. They say that entities permitted co-location access gained a small and
perhaps infinitesimal time advantage in receiving advance market information. This allowed a select
handful to, as the Defendants put it, 'front-run' the rest of the market. In other words, knowing that
a stock was likely to move, say, in a particular direction, algo trades would be triggered to take
advantage of that advance information long before other individual traders lacking the advantage of
co-location could capitalize or move on that information. The result is not as negligible, the
Defendants say, as might appear. There is, firstly, some question of whether these algo trades
worked to inject liquidity into the market or whether they created distortions in the real underlying
value of the stocks in question. The point, they seem to suggest, is that the select handful got a very
considerable advantage simply because they received 9 of 30 904-NMS-1220-15-F4.DOC
information even a few seconds or milliseconds ahead of the rest of the market.
10. This, the NSE now says, is entirely impossible. Paragraph 18A of the plaint reads thus:
"18A. The Plaintiff states that the allegation that some trading members got
advantage with connivance of the Plaintiff over others is false. It is impossible for any
trading member to ensure a particular position in a queue in the port since such a
position is automatically allocated by the network card and cannot be tweaked
manually. There are maximum 30 trading members per port. The time lag between
the first person and the last person (depending on the load) is maximum 50 micro
seconds (1 micro second = 1 millionth of a second) which by no stretch of imagination
can confer any advantage to any person."
11. This paragraph forms the centre of NSE's case in defamation. For, as Dr. Tulzapurkar puts it, if it
is just not possible that the time lag is sufficient for any person to give any such advantage, then
there is no question of there being the slightest element of truth in what the Defendants alleged.
There is also then no question that their articles are per se defamatory. To the extent that their
articles are contradicted by paragraph 18A of the plaint, the articles cannot be fair comment and no
qualified privilege attaches to them. Any such privilege, Dr. Tulzapurkar submits, must be "relevant
to the occasion". It cannot be absolute and there is no absolute privilege that attaches to any such
article.
10 of 30 904-NMS-1220-15-F4.DOC
12. To begin with, I believe this paragraph is yet another attempt at misdirection. Curiously, the
anonymous letter seems to presage or anticipate precisely such a response. The last paragraph on
page 4 of the letter4 deals exactly with these fractional time frames and in terms alleges that 50
micro-seconds are all it takes to effect the illicit trade. The question is also not of a person ensured a
particular position in a port queue; the issue is of certain entities being among the early-birds to
connect to the server at low-load and low-traffic times to ensure minimal latency and fastest data
inflow. The anonymous letter specifically mentions the advantages that paragraph 18A tries to deny,
6

possibly in the hope that the judicial mind can safely be presumed to be ignorant of all matters
technical and too easily overawed by an outpouring of technical jargon. The issue is also not about
ensuring a prior place but, as the letter says, whether it is possible to 'game the system' through a
variety of means, including continuous server-pinging to test when the server comes online, to gain
even a minute advantage. The issue is also not about an absolute advantage, but rather one of
degree, i.e., of gaining an advantage ahead of the rest of the market. Pages 5 and 6 of the letter deal
with an earlier point in time. Pages 6 and 7 however make a very direct reference to a new evolution
in the process of 'gaming the system', and that is by connecting to the backup servers, ones that had
zero load and much improved latency. I note that paragraph 18A does not even begin to address the
very many technical questions pointedly raised in the letter and to which Ms. Dalal drew the NSE's
attention. Instead, that paragraph cherry-picks one isolated facet that possibly relates to an earlier
point in the history of the NSE's systems automation and presents Motion paperbook, p. 84 11 of 30
904-NMS-1220-15-F4.DOC that as a 'complete' answer. Indeed it is not. And this is telling: for at
least now, after the suit was filed, the NSE had the undeniable opportunity to deal with the technical
aspects. It has chosen not to do so, and the reasons that suggest themselves are, in my estimation,
and I expect in the estimation of any rational-minded person who went through this carefully,
precisely those that Ms. Dalal outlined in her articles. It is certainly not insignificant that the letter
in question outlines a typical instance with figures of how these advantages can be obtained.
13. Mr. Tulzapurkar first relies on a very old decision of a Single Judge of this Court in Mitha
Rustomji Murzban v. Nusserwanji Nowroji Engineer.5 That was also an action in damages, partly in
libel and partly in slander. It related to an article in a weekly journal in Gujarati. Wadia J held that
even if there is criticism in the press it must be fair and while it may not be necessary to prove
malice by the defendant, the test must be this: whether any reasonable person, however prejudiced
or however strong of opinion, could say that the work in question was a fair comment. Even allowing
latitude for personal opinion and individual prejudice, the test must be that of a reasonable, and I
would suggest in this particular case, a knowledgeable person, in such matters. Mere boldness or
strength of expression, or even exaggeration does not per se make a comment unfair. If a reasonable
person would not have been moved to draw the conclusions or make the statements that the
Defendants have made, then the NSE must succeed. This test applies to every comment including an
imputation as to character, conduct or professional behaviour. Newspapers are no exception. They
have no AIR 1941 Bom 278 12 of 30 904-NMS-1220-15-F4.DOC special right or privilege in civil law,
and I am mindful of the fact that while the Defendants have attempted to place this in the context of
a fundamental right to freedom of expression and Constitutional guarantees, that is not my direct
remit in a civil suit, though Courts seem to have often juxtaposed the two concerns. If the
imputation or the conclusion remains unwarranted by the facts, it cannot be fair comment. The
Defendants must show, to claim a qualified privilege, that they had some duty public or private,
legal, moral or social to their intended audience. They must show they had a duty to convey the
information. They must also show that the information that they conveyed was published in the
context of this moral, social or other duty, public or private, and that it was relevant or pertinent to
that duty and not completely alien to it. If there is no discernible nexus between what is stated and
what is intended or what is now claimed to have been intended, the action must succeed. This is true
whether or not the target audience is a select niche audience or the public at large. Dr. Tulzapurkar
also refers to a Division Bench decision of the Calcutta High Court in Tushar Kanti Ghose v Bina
7

15. Ms. Dalal and Mr. Basu appeared in person. They have each presented their written submissions.
I have taken these on record and permitted them to read them in Court. They contain much that is,
perhaps understandably, generalized and not strictly speaking in the nature of legal submissions. I
will refer to only such portions as are necessary for our purposes.
16. The single most important factor that strikes me in this particular case, quite apart from the
technical aspects of it, is the enormous time gap between the receipt of the anonymous letter in 14 of
30 904-NMS-1220-15-F4.DOC January 2015 and the publication of the first article on 19th June
2015. What is it that Ms. Dalal and Mr. Basu did in that time? Did they merely sit silent for all those
months and come out with the article without any further acts? The plaint is curiously silent, though
it could not possibly have been. Ms. Dalal in her note and in her Affidavit in Reply points out that
after she received the anonymous letter she did make enquiries with various regulators, Stock
Exchanges, and traders. She does not provide details of these. Dr. Tulzapurkar says that this is the
information that ought to have been disclosed. Maybe so. However, there is other material that Ms.
Dalal has disclosed but the Plaintiffs have not though, in my view, they were obliged to do so. This is
the fact that on 11th June 2015, well before the article appeared, Ms. Dalal emailed the Chairman of
SEBI with a copy to the two persons at the helm of the NSE's affairs, Mr. Ravi Narayan and Ms.
Chitra Ramakrishan, persons who have been in those positions for a very long time indeed and who
can reasonably be supposed to be au courant with the NSE's dealings, processes and affairs, seeking
their response to the anonymous letter, with a copy of it. 9 There was no answer. Nothing in the
nature of what is stated now in paragraph 18A was returned to Ms. Dalal. She sent a reminder a few
days later on 15th June 2015.10 This too met with silence. The next day she sent an SMS to Mr. Ravi
Narayan and Ms. Chitra Ramakrishan asking specifically whether the NSE had anything to say on
Bhowmick6 to much the same effect and most importantly saying that fair comment is not the
private preserve of newspapers but is a right of other citizens and persons in the country.
14. In Shree Maheshwar Hydel Power Corporation Ltd. v Chitroopa Palit & Anr.,7 a learned Single
Judge of this Court 8 was concerned with an expression said to be defamatory and contained in a
press note issued in some newspapers. This related to the Narmada River 57 CWN 378 2004 Vol.
106(1) Bom.L.R. 186 S. Radhakrishnan J, as he then was 13 of 30 904-NMS-1220-15-F4.DOC Valley
Project. The relevant statement is set out in paragraph 5 of the report. The Court accepted the
argument that unlike English law on the subject, where a mere plea of justification would be
sufficient to dislodge the interim application, in India, the defendants must also produce sufficient
material supporting their contentions and the Court is certainly entitled to scrutinize these.
Should substance be found in this material then the plea of justification in defence is proper. Much
case law was cited in this regard before the Court, which held that the article complained of may be
justified in the public interest if it be shown that the defendants had taken every reasonable
precaution of ascertaining the truth. The defendants must therefore show on material available that
a reasonable person could come to the conclusion that the comments made and complained of were
not mala fide. I am not here concerned of course with the tone of the comments but only with an
examination of whether the comments made by the Defendants before me today can be said to be
defematory as Dr. Tulzapurkar insists they are.
8

these emails. 11 Again: no response. There are, thus, three distinct communications from Ms. Dalal
to the two persons at the NSE best placed to answer the questions she raised. There is not even a
whisper of these Motion paperbook, p. 89 Motion paperbook, p. 90 Motion paperbook, p. 91 15 of
30 904-NMS-1220-15-F4.DOC communications in the plaint. Even today, despite the amendment,
there is no explanation as to why these two persons chose not to respond to Ms. Dalal. What is
stated in paragraph 18A of the plaint cannot be new. It was then known to the NSE. If it is indeed a
complete answer, it ought to have been provided. It was not; and we are left to speculate as to why
the NSE did not think it necessary to provide the response when it was sought.
17. If the answer to this is that the NSE is not bound to respond to any and every person who writes
to it, then that is not one that I am prepared to accept in this particular case. The reason suggests
itself. It certainly stares one in the face when one considers the Affidavit in Reply and Ms. Dalal's
undoubted and well documented track record in financial matters. She is a much-decorated and
highly regarded journalist in financial sectors with nearly three decades of experience in the field.
Her work and she have received recognition and are renowned. She is not, despite the quite petty-
minded and churlish statements in the Affidavit in Rejoinder, somebody who can be said to be even
remotely irresponsible, scare- mongering, populist or given to hyperbole. To the contrary. It is to her
credit that in April 1992, 23 years ago this year, it was she who was primarily responsible for
exposing what came to be known as the Harshad Mehta scam, one that can, I think, safely be said to
have directly led to the introduction of a series of regulatory measures and protective standards that
govern, interestingly enough, the NSE itself. She has also been a columnist of various newspapers
and the business editor of leading financial newspapers. She is known to have worked closely with at
least one former chairman of SEBI. All of this is in the public domain. It acquires 16 of 30
904-NMS-1220-15-F4.DOC significance only for this limited purpose: Ms. Dalal's query to Mr. Ravi
Narayan and Ms. Chitra Ramakrishan was no idle accusation.
She had then not gone to press with her article. She took the trouble firstly to make her own
investigations, and then specifically to solicit the views of the two persons who manage and run the
NSE. I do not believe she was duty-bound to do more. She had with her a damning letter, albeit
anonymous, but one that contained a welter of detail that could not be denied and that, on my
reading of it, certainly calls for a response, irrespective of the source. To decry this as the handiwork
of a disgruntled individual or to belittle the anonymous author is, I think, in this day and age of the
statutory recognition of what are called 'whistleblowers', to attempt to deny the undeniable. To say
that there must be material from which a person may draw a conclusion is only half the story. Very
often, as in such cases, while silence might not quite be 'consent' as Mr. Malcolm for the 1st
Defendant would have it, it might certainly be enough to lead one to a conclusion that the
addressees of this letter had nothing in fact to say in response at all. The only alternative to that view
is again a point that Ms. Dalal makes in her articles, viz., that the persons in charge at the NSE felt it
beneath them to deign to respond to what is indubitably a very serious case made manifestly in the
public interest. The question of paragraph 18A of the plaint not having received a reply on affidavit,
is, I think, somewhat misplaced. That is not the issue. The question is why was this so-called answer
not provided at a time when the NSE had a opportunity to provide it? Had that been done, and had
that answer not been further investigated or controverted and had the present offending article then
9

18. I do not think it necessary to examine NSE's past record in any great detail. This is not because
Dr. Tulzapurkar claims it to be entirely irrelevant, though he may be right to some extent, but
because it is a needless distraction at this stage. What is not, however, irrelevant is a point that Mr.
Basu makes in his written submissions, that even following the report complained of, apart from the
NSE itself there has been a very considerable amount of material in the public domain that indicates
that these matters at the NSE, i.e., specifically algo or HFT trades are being investigated, and this is
being done at the highest possible level, including the chairman of SEBI. Some of this material is
appended 18 of 30 904-NMS-1220-15-F4.DOC to the note and to the Affidavit in Reply filed by
Defendants Nos. 2 and 3.12
19. What of the "duty" that Wadia J alluded to, and what of the material that is required to be placed
to substantiate justification? As a responsible journalist, one who is not some sensationalist
muck-raker, Ms. Dalal certainly had and has a duty to the common investor, the everyday trader.
That is her social and moral duty. But she also has a perhaps more profound ethical duty, and that is
to take all possible steps to ascertain her position before she goes to press. Had she not sought the
NSE's views, and merely accepted as gospel what the anonymous communication to her said,
matters might be very different indeed. But she did abide by that ethical standard. She did her
investigations, and she did first solicit the NSE's response. Had there been a response, of the nature
now suggested, or something in that vein, I imagine she would have followed this up with further
investigations and correspondence before committing herself. I do not see how it can possibly be
open to the NSE to accuse her of a lapse in ethical and journalistic standards when, despite the
opportunity, it chose not to respond.
Was Ms. Dalal supposed to imagine and speculate what that response might be? I find it exceedingly
odd, too, that despite having received these communications, the NSE does not even mention them
in the plaint. It gives instead the impression that Ms. Dalal acted immediately and solely on the
anonymous letter and rushed to print. Nothing could be further from the truth. The elision of that
correspondence from the plaint is neither irrelevant nor minor. Today, once the Affidavits in Reply
are in, the plaint Exhibits "J" and "K" to Mr. Basu's compilation.
been published as if there was no such answer, the NSE might then have had a case to make. I do
not 17 of 30 904-NMS-1220-15-F4.DOC think that it is at all possible for the NSE to try and retrofit
answers in this fashion. Even assuming that the contents of paragraph 18A of the plaint are correct,
I do not see how Ms. Dalal's articles could be said to be defamatory on account of an answer that
came after those articles rather than being given before them when an answer was indeed sought.
This is putting the cart very firmly before the horse. What paragraph 18A says is hardly
public-domain material. What the NSE seems to be saying to Ms. Dalal is something like this: "your
articles are per se defamatory because they are contrary to the information we now provide in our
plaint but which we did not provide before you wrote your articles, though you did seek our
response." There is certainly something of the cum hoc ergo propter hoc fallacy in this formulation
and possibly even the post hoc fallacy, for temporal sequencing is integral to causality in defamation
actions. The Plaintiffs' answer in paragraph 18A of the plaint is therefore far too little far too late.
10

20. Are the articles, or any part of them, irrelevant to the occasion or out of context? I do not think
so in the least. The "occasion" and the "context" are, in my understanding of the expressions,
references to the purpose and intent of the articles. Absent a timely response (and there was not
even a holding reply to Ms. Dalal's queries), both occasion and context presented themselves; and
what followed can only be called, I think, fair comment precisely for want of that very response that
Dr. Tulzapurkar now extols. Indeed, I would venture to suggest that the so-called response in
paragraph 18A of the plaint is itself out of context and now irrelevant to the occasion, which is the
present suit. In the plaint itself, a very curious picture is attempted to be portrayed of the NSE as an
organization that is, by its own telling of it, incapable of any mistake or any wrongdoing. There are
suggestions, for example, that algorithmic trading is regulated by circulars, that there are
recommendations of technical advisory committees, that the financial stability report of the RBI is
sufficient control over the operations of the NSE and that, there is, therefore, never a question that
can be raised against the NSE. This is the distinct impression that one gets from a reading of the
plaint and it seems strangely like a claim to the kind of infallibility best left to divinities not mortal
institutions; and, as our mythology tells us, even our divinities have their foibles and failings. The
NSE expects respect. That is to be earned. It is not to be torn out of the throats of public the NSE is
meant to serve. The NSE is after all a public institution and it is in some sense or the other a
custodian if not of 20 of 30 904-NMS-1220-15-F4.DOC public funds then at least of an undeniable
public trust. This demands, I think, the most complete transparency, accountability and openness in
its actions, dealing and operations. I include in this its duty to respond in a measured fashion to a
question that has been placed in a measured fashion. It has no duty to respond to a wild or reckless
allegation. But when a person, having made some enquiries, and herself having something of an
established track record, makes a politely worded and pointed enquiry, not to respond to it seems to
me either to be an example of the most egregious hubris and arrogance or, alternatively, an
admission that there is an element of truth in what was being said. There is no third alternative.
21. In his written submissions, Mr. Basu makes this telling point: that despite the articles of which it
complains, the NSE has suffered no loss or damage at all. He produces some documents that prima
facie so indicate.13 It is one thing to contend that damage must be presumed if defamation be
shown; but where it is affirmatively shown that no damage has resulted, then I do not see how any
case in 'defamation' can be said to have been made out.
After all, at the heart of defamation lies denigration, the lowering of the plaintiff in the public
estimation.
22. Mr. Basu has also done some quite formidable legal research.
The point he makes is this: that there is a material difference when the complainant plaintiff is a
public persona or figure or institution, as the NSE undoubtedly is, as opposed to a private citizen.
He cites, of course, the classic decision in New York Times Co. v Exhibits "A" and "A-1" to Mr. Basu's
compilation.
19 of 30 904-NMS-1220-15-F4.DOC seems strangely like a government statistic: what it tells us is
merely interesting; what it conceals is vital.
11

1. The seriousness of the allegation. The more serious the charge, the more the public
is misinformed and the individual harmed, if the allegation is not true.
2. The nature of the information, and the extent to which the subject-matter is a
matter of public concern.
3. The source of the information. Some informants have no direct knowledge of the
events. Some have their own axes to grind, or are being paid for their stories.
4. The steps taken to verify the information.
5. The status of the information. The allegation may have already been the subject of
an investigation which commands respect.
21 of 30 904-NMS-1220-15-F4.DOC Sullivan,14 for its proposition that a public official cannot
recover damages in a defamation action unless he proves with convincing clarity that the statement
was made with knowledge of its falsity or with reckless disregard of whether or not it was false. This
standard has been generally applied to public figures, but I will for the present, set this to one side
since Sullivan seems to me to be closely hinged on the First and Fourteenth Amendments to the US
Constitution. Mr. Basu's reliance on Reynolds v Times Newspapers Ltd & Ors.15 may be more
appropriate. That seems to me to be a case closer to our conception of the law in the field, though
the law it states is somewhat different, as Radhakrishnan J noticed, from our own standard. I do not
think this distinction is material, given the facts of this case. The House of Lords in Reynolds inter
alia reviewed the law from other jurisdictions, including ours: it referenced the Supreme Court
decision in Rajagopal v State of Tamil Nadu,16 to much the same effect as Sullivan in relation to
public officials. Now if there is no doubt, and I do not think there can be any doubt, that the NSE is
very much a public body, then this standard must apply. In that situation, a demonstration that the
defendant acted after a reasonable verification of the facts is sufficient to dislodge a claim for an
injunction and a charge of malice. In dismissing the appeal, Nicholls LJ, upholding the decision of
Bingham LJ of the court below, 17 did not accept that there should be a shift in the burden of proof,
i.e., that the burden should be on the plaintiff for that would turn the law of qualified privilege on its
head. It is for he who asserts privilege to prove it.
376 US 254 [2001] 2 AC 127 : [1999] 4 All ER 609 (1994) 6 SCC 632 Hope LJ dissenting.
22 of 30 904-NMS-1220-15-F4.DOC But where there is a factual demonstration of sufficient steps
being taken to ascertain the 'other side of the story' and this opportunity, when presented, has been
ignored, no more can be expected if it is also shown that the article when published was not
unreasonable in its content, tone and tenor. This decision gave us the 'Reynolds defence', one that
can be raised where it is established that the journalist in question had a duty to pubish an
allegation even if it ultimately turned out to be wrong. The fact that this has now been abolished by a
subsequent statute in England is I think immaterial to this discussion.18 Nicholls LJ set out ten
criteria against which attempts to use the Reynolds defence might be assessed. This list, reproduced
below, was even then said to be not exhaustive and very largely fact-dependent:
12

6. The urgency of the matter. News is often a perishable commodity.
The Defamation Act, 2013 23 of 30 904-NMS-1220-15-F4.DOC
7. Whether comment was sought from the plaintiff. He may have information others
do not possess or have not disclosed. An approach to the plaintiff will not always be
necessary.
8. Whether the article contained the gist of the plaintiff's side of the story.
9. The tone of the article. A newspaper can raise queries or call for an investigation. It
need not adopt allegations as statements of fact.
10. The circumstances of the publication, including the timing.
It matters little, I think, whether or not this is taken as a lodestar for assessment in such cases. What
is relevant is that these observations, a little over a decade and a half ago, seem oddly prescient
today. Consider items 2, 4, 5, 6, 7 and 9. Each of these seems to have an echo in the case before me.
That must surely be enough. Even if we do not adopt the Reynolds defence as an absolute standard,
the decision nonetheless contains valuable guides to a judicial assessment in a case such as this.
23. With that, I return to the tests in Wadia J's decision in Mitha Rustomji Murzban. What would a
reasonable person used to dealing in financial markets make of the fact that Ms. Dalal had sent this
query and this letter to the NSE and sought its responses not once but three times and received no
response? I believe the response of any such person might be substantially along the lines of what
the Defendants said, though perhaps others may not have put it quite in the same fashion. That does
not make the article complained of defamatory per se. I am unable to understand how it can be
possibly 24 of 30 904-NMS-1220-15-F4.DOC said in these situations that the refusal to answer a
legitimate query, one raised in the public interest where a large body of investors is concerned can
be said to be defamatory.
24. As I said earlier, this is not directly a question of freedom of press or free speech. At the same
time I do not believe that a defamation action should be allowed to be used to negate or stifle
genuine criticism, even pointed criticism or criticism that is harshly worded; nor should it be
allowed to choke a fair warning to the public if its interest stands threatened in some way. It is to me
a matter of very great dismay that the NSE should have attempted this action at all. Except where it
is shown that the article complained of is facially defamatory, that is to say, it is prima facie intended
to defame or libel, an injunction will not readily be granted. Every criticism is not defamation. Every
person criticized is not defamed.
25. Defamation law is not to be used to gag, to silence, to suppress, to subjugate. Ms. Dalal and Mr.
Basu are I think correct generally when they say that of all the freedoms guaranteed by Article 19 of
the Constitution, the freedom of speech and expression is arguably the most volatile, the most
sensitive to assault, and the most precious. Its restrictions, and defamation law is indeed such a
13

restriction, are to be narrowly construed. 19 Defamation is a very thin red line. It must not be
crossed, but it is not actionable only because it is approached, however closely. It is indeed protected
fair comment when questions are raised in the public interest after due care is shown to have been
taken to elicit a Devidas Ramachandra Tuljapurkar v State of Maharashtra, (2015) 6 SCC 1; Shreya
Singhal v Union of India, 2015 5 SCC 1 25 of 30 904-NMS-1220-15-F4.DOC response. It is no
answer at all to then say that no question of muzzling free speech arises, or to simply allege that
there might indeed yet be an answer, and it matters not that that answer, or what passes for it, was
not provided when an opportunity presented itself, and the fact of that answer being sought is so
wholly concealed. More and more, in the name of security or reputation, we are increasingly too
eager to surrender this, and its sister, freedoms. When we do so we forget: we forget that these
freedoms are vital to our survival and our existence as a nation, as a people.
We forget that these freedoms have not come easily. They have not come cheap. They were hard won
after years of sacrifice and toil and struggle. They have not been given. They have been forged. We
surrender them at our peril. To suggest, as the Plaintiffs do, that because they are a much-vaunted
public body, they are, only for that reason, immune from all error and wrongdoing is, I think, a
grotesque over-simplification. It is fashionable these days to deride every section of the media as
mere papparazzi, chasing the salacious and steamy. We forget again. None of the scams and the
leaks of the past two decades would have been possible without journalists, editors, newspapers and
television news anchors. We have grown accustomed to mocking them. We deride their manner,
describing them as loud, brash, obnoxious, abrasive and opinionated. We forget. We forget that but
for them the many uncomfortable questions that must be asked of those in authority and those with
the sheer muscle power of money would forever go unasked and unanswered. We forget that it is
these persons we are so wont to mock who are, truly, the watchdogs of our body politic, the voice of
our collective conscience, the sentinels on our ramparts. They may annoy. They may irritate. They
certainly 26 of 30 904-NMS-1220-15-F4.DOC distress and cause discomfort. That is not only their
job. It is their burden. Watchdogs respond to whistles and whistles need whistleblowers; and
between them if they can ask what others have not dared, if they can, if I may be permitted this,
boldly go where none have gone before; if they can, as they say, rattle a few cages, then that is all to
the good. Neither of our principal stock exchanges are strangers to scandal; no matter what the NSE
may think of itself, and even if Dr. Tulzapurkar insists that the past is the past and irrelevant today,
public memory is not that short. The scams that beleaguered our exchanges in the past, and those
that continue to occupy the time of this Court have at least in part come to light because of persons
like Ms. Dalal and her fellow travellers. If regulatory agencies have been compelled to make changes,
and if our own Supreme Court has felt it necessary to step in with drastic orders, it is because every
oversight process has either failed or been subverted. The Plaintiffs are in error when they describe
Ms. Dalal as some out-of-control lone wolf. The nation may or may not want to know; Ms. Dalal
does. So do her readers. And, as it happens, so do I. She is certainly entitled to ask, to question, to
doubt and to draw legitimate conclusions.
26. Today, all our institutions face the crisis of dwindling public confidence. Neither the NSE nor the
judiciary are exceptions to this. It presents a very real dilemma, for the existence of our institutions
is posited on that very public confidence and faith and its continuance. The challenge is, I think, in
finding legitimate methods of restoring that public trust, that balance. Hence the cries for

27. As a result, there is no prima facie case made here at all, nor is there any question of balance of
convenience or any sort of prejudice being caused to the Plaintiffs if the injunction sought is
declined. I will not grant the injunction sought. The Notice of Motion is dismissed. The previous
ad-interim order is vacated.
28. There remains the question of costs. Looking to the material that has been published, and the
manner in which this action has been brought, I have very little doubt in my mind that this is a
matter that cries out for the award of costs. Not only is this 28 of 30 904-NMS-1220-15-F4.DOC
necessary because the NSE is what it says it is, but if it is truly an organization or an institution that
acts in the public interest then this must be demonstrated. The suit and the NSE's conduct seem to
me attempts at deflection and evasion. I also believe this entire action to be a gross abuse of the
process of this Court. The NSE seems to have taken it more or less for granted that our Courts are
too easily cowed by self-congratulatory assertions and overblown claims of rectitude to even
consider refusing their claim. This is an approach that must be deprecated, and there is only one
way to do that when dealing with an institution like the NSE. I intend to award costs in two parts. I
am aware that as a matter of law, the second of these is one that is normally not done and is perhaps
even frowned on. There are, however, in my view exceptional circumstances in which an action that
is entirely and deliberately mala fide in its intent ought to receive an award of costs, if nothing else
then at least as a matter of conveying to such a Plaintiff that Courts do not view these matters
lightly. To any protest that an award of costs is unjustified because these costs represent 'public
funds', the answer is simply that so do the considerable legal costs and court fees incurred by the
NSE. Our Courts are not to be treated as playgrounds for imagined and imaginary slights for those
who command considerable resources.
29. There will be an order of costs in the amount of Rs. 1.5 lakhs each in favour of Ms. Dalal and Ms.
Basu separately. In addition, the Plaintiff will pay an amount of Rs. 47 lakhs in punitive and
exemplary costs payable not to the Defendants but to public causes, viz., in equal parts to the Tata
Memorial Hospital and the Masina Hospital, it being made clear that these amounts are to be used
only 29 of 30 904-NMS-1220-15-F4.DOC for the free treatment of the indigent. These amounts will
transparency and accountability everywhere; and I see no reason why the NSE should be any
exception to this. Quelling dissent and 27 of 30 904-NMS-1220-15-F4.DOC doubt by strong-arming
seems to me a decidedly odd way of going about restoring that public faith. It is not a move that,
from a public institution, readily commends itself. For public bodies and figures, I would suggest
that the legal standard is set higher to demonstrated actual malice and a wanton and reckless
embracing of falsehood though countered at the first available opportunity. I do not think it is
reasonable to propose a legal standard of utter faultlessness in reportage or public comment in
relation to such bodies or persons. If there is indeed a factual error, can it be said to have been made
in good faith, and in a reasonable belief that it was true? The 'actual malice' standard seems to me to
suggest that one or both of these must be shown: intentional falsehood, or a reckless failure to
attempt the verification that a reasonable person would. In this case, I do not think that the
Plaintiffs have met that standard, or demonstrated either intentional falsehood or a failure to
attempt a verification. The burden of proof in claiming the qualified privilege that attaches to fair
comment can safely be said to have been discharged.

be paid within a period of two weeks from today.
30. The application for stay is refused.
(G. S. PATEL, J.) CERTIFICATE "Certified to be a true and correct copy of the original signed
Judgment/Order."
30 of 30
16

of 4
Chief General Manager
Market Regulation Department-Division of Policy
E-mail: mdrao@sebi.gov.in
MRD/ DoP/SE/Cir- 7 /2008
April 03, 2008
The Managing Director and CEO
Bombay Stock Exchange
Phiroze Jeejeebhoy Towers
Dalal Street
Mumbai 400001
The Managing Director
National Stock Exchange of India Ltd.,
Exchange Plaza
Bandra Kurla Complex
Bandra (E)
Mumbai- 400 051.
Dear Sir,
Sub:- Introduction of Direct Market Access facility
Direct Market Access (DMA) is a facility which allows brokers to offer clients direct
access to the exchange trading system through the broker’s infrastructure without
manual intervention by the broker. Some of the advantages offered by DMA are direct
control of clients over orders, faster execution of client orders, reduced risk of errors
associated with manual order entry, greater transparency, increased liquidity, lower
impact costs for large orders, better audit trails and better use of hedging and arbitrage
opportunities through the use of decision support tools / algorithms for trading.
While ensuring conformity with the provisions of the Securities Contract (Regulations)
Act, 1956 (42 of 1956), Stock Exchanges may facilitate Direct Market Access for
investors subject to the following conditions:
1. Application for Direct Market Access (DMA) facility
Brokers interested to offer DMA facility shall apply to the respective stock exchanges
giving details of the software and systems proposed to be used, which shall be duly
certified by a Security Auditor as reliable.
The stock exchange should grant approval or reject the application as the case may be,
and communicate its decision to the member within 30 calendar days of the date of
completed application submitted to the exchange.
The stock exchange, before giving permission to brokers to offer DMA facility shall
ensure the fulfillment of the conditions specified in this circular.

of 4
2. Operational specifications
All DMA orders shall be routed to the exchange trading system through the broker’s
trading system. The broker’s server routing DMA orders to the exchange trading system
shall be located in India.
The broker should ensure sound audit trail for all DMA orders and trades, and be able to
provide identification of actual user-id for all such orders and trades. The audit trail data
should available for at least 5 years.
Exchanges should be able to identify and distinguish DMA orders and trades from other
orders and trades. Exchanges shall maintain statistical data on DMA trades and provide
information on the same to SEBI on a need basis.
The DMA system shall have sufficient security features including password protection for
the user ID, automatic expiry of passwords at the end of a reasonable duration, and
reinitialisation of access on entering fresh passwords.
Brokers should follow the similar logic/priorities used by the Exchange to treat DMA
client orders. Brokers should maintain all activities/ alerts log with audit trail facility. The
DMA Server should have internally generated unique numbering for all such client
order/trades.
A systems audit of the DMA systems and software shall be periodically carried out by
the broker as may be specified by the exchange and certificate in this regard shall be
submitted to the exchange.
The exchanges and brokers should provide for adequate systems and procedures to
handle the DMA trades.
3. Client Authorization and Broker – Client agreement
Exchanges shall specify from time to time the categories of investors to whom the
DMA facility can be extended. Initially, the permission is restricted to institutional
clients.
Brokers shall specifically authorize clients for providing DMA facility after fulfilling Know
Your Client requirements and carrying out due diligence regarding clients’ credit
worthiness, risk taking ability, track record of compliance and financial soundness.
Brokers shall ensure that only those clients who are deemed fit and proper for this facility
are allowed access to the DMA facility. Brokers shall maintain proper records of such
due diligence. Individual users at the client end shall also be authorized by the broker
based on minimum criteria. The records of user details, user-id and such authorization
shall be maintained by the broker. Details of all user-ids activated for DMA shall be
provided by the broker to the exchange.

of 4
The broker shall enter into a specific agreement with the clients for whom they permit
DMA facility. This agreement will include the following safeguards:
(a) The client shall use the DMA facility only to execute his own trades and shall
not use it for transactions on behalf of any other person / entity.
(b) Electronic/Automated Risk management at the broker’s level before release of
order to the Exchange system. The client shall agree to be bound by the various
limits that the broker shall impose for usage of the DMA facility.
(c) Right to withdraw DMA facility if the limits set up are breached or for any other
such concerns
(d) Withdrawal of DMA facility on account of any misuse or on instructions from
SEBI/Exchange.
Exchanges shall prepare a model agreement for this purpose. The broker’s agreement
with clients should not have any clause that is less stringent/contrary to the conditions
stipulated in the model agreement
4. Risk Management
The broker shall ensure that trading limits/ exposure limits/ position limits are set for all
DMA clients based on risk assessment, credit quality and available margins of the client.
The broker system shall have appropriate authority levels to ensure that the limits can be
set up only by persons authorized by the risk / compliance manager.
The broker shall ensure that all DMA orders are routed through electronic/automated risk
management systems of the broker to carry out appropriate validations of all risk
parameters including Quantity Limits, Price Range Checks, Order Value, and Credit
Checks before the orders are released to the Exchange.
All DMA orders shall be subjected to the following limits:
(a) Order quantity / order value limit in terms of price and quantity specified
for the client.
(b) All the position limits which are specified in the derivatives segment as
applicable.
(c) Net position that can be outstanding so as to fully cover the risk
emanating from the trades with the available margins of the specific
client.
(d) Appropriate limits for securities which are subject to FII limits as specified
by RBI.
The broker may provide for additional risk management parameters as they may
consider appropriate.

of 4
5. Broker to be liable for DMA trades
The broker shall be fully responsible and liable for all orders emanating through their
DMA systems. It shall be the responsibility of the broker to ensure that only clients who
fulfill the eligibility criteria are permitted to use the DMA facility
6. Cross Trades
Brokers using DMA facility for routing client orders shall not be allowed to cross trades of
their clients with each other. All orders must be offered to the market for matching.
7. Other legal provisions
In addition to the requirements mentioned above, all existing obligations of the broker as
per current regulations and circulars will continue without change. Exchanges may also
like to specify additional safeguards / conditions as they may deem fit for allowing DMA
facilities to their brokers.
8. The Stock Exchanges are advised to:
• make necessary amendments to the relevant bye-laws, rules and regulations for
the implementation of the above
• bring the provisions of this circular to the notice of the member brokers/clearing
members and also disseminate the same on their website.
• communicate to SEBI, the status of the implementation of the provisions of this
circular in the Monthly Development Report.
9. A review of the working of this facility shall be undertaken after six months from its
introduction.
10. This circular is being issued in exercise of powers conferred under Section 11 of the
Securities and Exchange Board of India Act, 1992 to protect the interests of investors
in securities and to promote the development of, and to regulate the securities
market.
Yours faithfully,
S V Murali Dhar Rao

MEMBERSHIP DEPARTMENT
Circular No. 693
Ref. No: NSE/MEM/12985 August 31, 2009
Dear Members,
Sub: Co location services at NSEIL premises
As you are aware the Exchange permits DMA and ALGO trading and many members have
already opted for the same. Some of these members have been representing that a co-
location facility would help them make better user of DMA and ALGO trading.
In keeping up with the global trends, member representation and in continuation of service
excellence the Exchange is providing our members a co-location facility for their DMA
and ALGO IT infrastructure at NSEIL premises in BKC shortly.
In this regard Trading Members may please note the following:
• In view of limited availability, racks will be allotted on first come first basis based on
the receipt of complete application along with the payment. However, if there is more
demand than the availability, request for more than 1 rack would be rationed.
• The minimum period for which the racks are allotted will be one year and any renewal
would require an advance notice of 45 days.
• Co-location facility is a paid facility and the list of charges for the same is enclosed as
Annexure-1.
• Format of the Application form for applying for usage of Co-location facility is
enclosed Annexure -2. The Application form has to be accompanied by requisite
Payment which has to be made by way of cheque / demand draft drawn in favour of
National Stock Exchange of India Limited payable in Mumbai.
• The racks will be allotted on 1 rack basis. No partial rack would be allotted.
• The co-location facility shall be used only for DMA and Algo trading on NSE.
• Members may take one or more leased line to the co location facility from MTNL,
TATA, Bharti or Reliance for the purpose of setting up or modifying parameters,
trading related activities and hardware, software, network related access, software
download / upload and monitoring and data downloads.
• Basic IT services namely Help Desk (24*7), Hardware Checks, Incident Management
(Level 1), On-site coordination, Daily reports, Named resource (SPOC) for the account
and Power ON/OFF / Boot on request will be provided.

• Due to security reasons, Physical access to co-location data centre will be restricted
only to the initial set up and access for periodic or urgent maintenance if any would be
only with prior permission from NSE and that such permission will be allowed only
after Exchange trading hours.
• The Exchange would not be responsible for insuring the member assets at the co-
location premises.
• The co location would have the following features:
o Facilities with dual UPS power source and 100% DG capacity which ensures
uninterrupted power.
o Multiple Precision air conditioning units, with N+1 redundancy ensuring
optimal temperature at all times.
o Standard 42 U Rack with 6KVA power.
o Order Connectivity and market data connectivity will be provided on 1Gbps
network port.
• The Exchange will provide co-location facility on best efforts basis and it will not be
responsible for any direct / indirect / consequential, harm / loss / damage of any kind
for whatsoever reason including but not limited to power failure, air conditioning
failure, system failure and loss of connectivity. Further, the Exchange shall not be liable
for any stoppage in co-location facility owing to legal or regulatory requirement.
For further technical clarification and queries kindly contact Mr. Mahesh Soparkar on
telephone number 022-26598136 and on email msoparkar@nse.co.in.
For clarification and queries in regard to application form kindly contact the Membership
Dept on telephone number 26598249 and on email minward@nse.co.in.
For National Stock Exchange of India Ltd
Sd/-
Rehana D’souza
Manager

Annexure -1
List of charges for services offered for co location
Sr.
No.
Particulars Charges
(Rs. in lakhs
per annum)
1 Charges Per Rack (from the date of allotment of rack) 22.50
2 Initial Setup Charges per Rack 1.00 (One time)
3 Order Connectivity @ 40 Messages/sec No charges for
1st
connectivity
4 Additional Order Connectivity @ 40 Messages/sec 1.00
5 Order Connectivity @100 Messages/sec 2.50
6 Order Connectivity @200 Messages/sec 5.00
7 Market Data Connectivity via Broadcast No charges for
1st
connectivity
8 Additional Market Data Connectivity 1.00
9 Basic IT services per rack (Help Desk (24*7), Hardware Checks,
Incident Management (Level 1), On site coordination, Daily
reports, Named resource (SPOC) for the account and Power
ON/OFF / Boot on request)
2.50
10 Back up restore up to 80 GB tape (per tape) 0.66
Note:
1. The Exchange reserves its right to revise the charges at its discretion.
2. The charges are based on fair usage. The Exchange may levy additional charges in
respect of usage which is not in accordance with fair usage, besides taking any other
action as it may deem fit.
3. Service tax and other taxes if any as applicable would be charged over the above
charges.

Annexure – 3
Application Form
(On the letterhead of the Trading Member.)
To
The Membership Dept.
National Stock Exchange of India Ltd
Exchange Plaza
Bandra-Kurla Complex
Bandra (East)
Mumbai – 400051
Dear Sir,
I / We M/s……………….(name of the trading member) hereby apply for co location of
Trading IT infrastructure at the Exchange premises at BKC, the details of which are given
below:
1. Address line 1
Address line 2
Address line 3
Pin Code
2. Contact Person Name
3. Contact Person Designation
4. Contact Person Telephone and FAX
5. Email ID
6. Required number of racks
7. No. of Servers
8. Network Device
9. Database
10. Operating System
11. Lease Line link speed
12. Leased Line Service Provider Name
13. Required Number of Order Connectivity @ 40 msgs/sec
16. Required Number of Market Data Connectivity
17. Estimated Power Consumption per Rack
18. WAN link Member office address

19. Tape Back up (optional)
We agree to comply with the terms and conditions as specified in Exchange Circular Ref.
No NSE/MEM/12985 dated August 31, 2009 as may be amended from time to time.
In this regard please find the payment as follows –
Sr.
No.
Particulars Total
Charges
(Rs. in
lakhs per
annum)
1 Charges Per Rack (from the date of allotment of rack) (Rs. 22.5. lakhs
* no. of racks)
2 Initial Setup Charges per Rack (Rs. 1 lakh * no. of racks) (one time
charge per rack)
3 Additional Order Connectivity @ 40 Messages/sec (Rs. 1 lakh * no.
of racks)
4 Order Connectivity @100 Messages/sec (Rs. 2.5 lakhs * no. of racks)
5 Order Connectivity @200 Messages/sec (Rs. 5 lakhs * no. of racks)
6 Additional Market Data Connectivity (Rs. 1 lakh * no. of racks)
7 Basic IT services per rack (Help Desk (24*7), Hardware Checks,
Incident Management (Level 1), On site coordination, Daily reports,
Named resource (SPOC) for the account and Power ON/OFF / Boot
on request) (Rs. 2.5 lakhs * no. of racks)
8 Back up restore up to 80 GB tape (Rs. 66,000/- per tape)
Cheque No. :-
Drawn on Bank:-
Cheque Date:-
Payable at: - Mumbai
Total Amount = Rs……………..
Date:
Place:


CIRCULAR
CIR/MRD/DP/ 20 /2012 August 02, 2012
The Managing Director and CEO The Managing Director
Bombay Stock Exchange Limited National Stock Exchange of India Ltd.
Phiroze Jeejeebhoy Towers Exchange Plaza, Bandra Kurla Complex
Dalal Street Bandra (E)
Mumbai - 400001 Mumbai - 400 051
Dear Sir,
Sub: Direct Market Access - Clarification
1. SEBI, vide circular no. MRD/DoP/SE/Cir-7/2008 dated April 03, 2008 introduced
Direct Market Access (hereinafter referred to as “DMA”). Further, SEBI vide
circular no. MRD/DoP/SE/Cir-03/2009 dated February 20, 2009 permitted
institutional investors to use DMA through the Investment Managers.
2. In light of the feedback received from the market participants and the several
measures prescribed by SEBI to simplify and rationalize the “Trading Account
Opening Process”, the abovementioned SEBI circulars on DMA stands modified to
the following extent:
a. The facility of DMA provided by the stock broker shall be used by the client or
an investment manager of the client. A SEBI registered entity shall be permitted
to act as an investment manager on behalf of institutional clients. In case the
facility of DMA is used by the client through an investment manager, the
investment manager may execute the necessary documents on behalf of the
client(s).
b. The point 3 on Client Authorization and Broker Client Agreement of the
SEBI circular no. MRD/DoP/SE/Cir-7/2008 dated April 03, 2008 shall be
deleted.


c. In order to bring uniformity on the requirement of documentation for trading
account opening process, in view of the SEBI circular no CIR/MIRSD/16/2011
dated August 22, 2011, the specific Broker – Client Agreement for the
purpose of DMA shall be replaced with the “Terms and Condition” document as
specified at Annexure I. The “Terms and Conditions” shall be provided to the
client or investment manager acting on behalf of a client (s) for availing the
DMA facility. In case the DMA facility provided by the stock broker is used by
the client the paragraphs one to eighteen of Part A of Annexure-I shall be
applicable. In case the DMA facility provided by the stock broker is used by the
client through an investment manager the paragraphs one to eighteen of Part B
of Annexure-I shall be applicable and additionally, the investment manager
shall provide to the stock broker the details as specified at Annexure-II.
d. Exchange shall specify from time to time the categories of investors to whom
the DMA facility can be extended. Currently, this facility is available for
institutional clients. Brokers shall specifically authorize clients or investment
managers acting on behalf of clients for providing DMA facility, after fulfilling
Know Your Client requirements and carrying out necessary due diligence. The
broker shall maintain proper records of such due diligence.
e. The para 2 (a) and 2 (b) of SEBI circular no MRD/DoP/SE/Cir-03/2009 dated
February 20, 2009 shall be deleted.
f. The other provision specified in SEBI circular no MRD/DoP/SE/Cir-7/2008
dated April 03, 2008 and SEBI circular no. MRD/DoP/SE/Cir-03/2009 dated
February 20, 2009 shall remain applicable.
3. Stock Exchanges are advised to:
.
a. take necessary steps and put in place necessary systems for implementation of
the above.
b. make necessary amendments to the relevant bye-laws, rules and regulations
for the implementation of the above decision.


c. bring the provisions of this circular to the notice of the member of the stock
exchange and also to disseminate the same on the website.
d. communicate to SEBI, the status of implementation of the provisions of this
circular in the Monthly Development Report.
4. This circular is being issued in exercise of powers conferred under Section 11 (1)
of the Securities and Exchange Board of India Act, 1992 to protect the interests of
investors in securities and to promote the development of, and to regulate the
securities market.
Yours faithfully,
Harini Balaji
Deputy General Manager
022-26449372
harinib@sebi.gov.in

Encl:
1) Annexure – I: Terms and Conditions
2) Annexure – II: Format for details of investment manager and client.


ANNEXURE I – TERMS AND CONDITIONS
PART – A: DMA FACILITY USED BY THE CLIENT
1. The client is expected to be fully aware of the risks associated with the market and
the financial instruments being traded on stock exchanges through DMA. The client
shall be responsible for complying with laws, rules, regulations, notifications etc
issued by regulatory authorities as may be applicable from time to time.
2. The client shall ensure that DMA facility provided by the Broker is used only to
execute the trades of the client and shall not be used for transactions on behalf of
any other person / entity.
3. The client shall be responsible for ensuring that, only persons authorized by it shall
access and use the DMA facility provided by the Broker. All orders originating from
such facility / system shall be deemed to be authorized by the client.
4. Where the client accesses or proposes to access the Broker’s DMA platform through
external applications, including but not restricted to services of third party service
provider(s), own application(s), etc., the client shall ensure that such applications
have adequate security features including but not limited to access controls,
password protection etc; and that appropriate agreement(s) with such third party
service provider(s) etc. for ensuring secured access and communication has been
executed and are in place.
5. The client shall ensure that no person authorized by them to place orders through
DMA facility provided by the broker has been / is involved in any adverse action by
any regulatory authorities in any jurisdiction.
6. The client shall provide the names of authorized individual users to the broker prior
to placing DMA orders.
7. The client shall not use or allow the use of DMA facility to engage in any form of
market misconduct including insider trading and market manipulation or conduct that
is otherwise in breach of applicable laws, rules and regulation.
8. The client is aware that Algorithmic trading i.e. generation of orders using automated
execution logic is governed by Algorithmic trading guidelines issued by SEBI and
Exchanges and requires prior approval of the exchanges. The client shall ensure
that new algorithms and changes to existing approved algorithms are not used
through the DMA facility without prior approval of concerned stock exchanges. The
client shall ensure that it has necessary checks and balances, in place to identify
and control dysfunctional algorithms and the Broker shall have the right to shut down
the DMA facility and remove any outstanding client orders in case of any suspected
dysfunctional algo.
9. The client is aware that authentication technologies and strict security measures are
required for routing orders through DMA facility and undertakes to ensure that the
password of the client and/or his representative are not revealed to any third party.


10.The client acknowledges that all DMA orders placed by them through the DMA
facility would be validated by the risk management system of the broker. The Broker
has the right to accept or reject any DMA order placed by the client at its sole
discretion.
11.The client shall be solely responsible for all acts or omissions of any person using a
DMA facility and shall be bound to accept and settle all transactions executed
through the DMA facility provided by the Broker notwithstanding that such order(s)
may have been submitted erroneously or by an unauthorized user, or that its data is
inaccurate or incomplete when submitted, or the client subsequently determines for
whatever reason that the order should not have been submitted.
12.The client shall notify the Broker in the event of DMA facility being compromised.
Upon receipt of this notice, client’s DMA facility shall be promptly disabled but the
client shall continue to be responsible for any misuse of the DMA facility or any
orders placed through the DMA facility as a result of the compromise of the DMA
facility at their end. The Broker shall not be liable for any loss, liability or cost
whatsoever arising as a result of any unauthorized use of DMA facility at the client’s
end.
13.In the event of winding-up or insolvency of the client or his otherwise becoming
incapable of settling their DMA obligation, broker may close out the transaction of
the client as permissible under bye-laws, rules, regulations of the exchanges. The
client shall continue to be liable for any losses, costs, damages arising thereof.
14.The client is fully aware of the risks of transmitting DMA orders to the Broker’s DMA
facility through vendor systems or service providers and the Broker is not
responsible for such risks.
15.The client should be aware of the fact that neither the DMA facility will be
uninterrupted nor error free nor the results that may be obtained from the use of the
service or as to the timeliness, sequence, accuracy, completeness, reliability or
content of any information, service or transaction provided through DMA. The DMA
service is provided on an "as is", "as available" basis without warranties of any kind,
either express or implied, including, but not limited to, those of information access,
order execution, merchantability and fitness for a particular purpose. The Broker
shall not be liable for any loss, damage or injury including but not limited to direct
lost profits or trading losses or any consequential, special, incidental, indirect, or
similar damages from the use or inability to use the service or any part thereof.
16.The Broker shall have the right to withdraw the DMA facility in case of:-
 Breach of the limits imposed by the broker or any regulatory authority.
 On account of any misuse of the DMA facility by the client or on instructions
from SEBI/Exchanges.
 Any other reason, at the discretion of the broker
Broker shall endeavor to give reasonable notice to the client in such instances.


17.The Broker shall not be liable or responsible for non-execution of the DMA orders of
the client due to any link/system failure at the client/ Broker/ exchange(s) end.
18.This document shall not be altered, amended and /or modified by the parties in a
manner that shall be in contravention of any other provisions of this document. Any
additional terms and conditions should not be in contravention with rules /
regulations /bye-laws/circulars, of the relevant authorities including applicable stock
exchanges as amended from time to time.
PART – B: DMA FACILITY USED BY THE CLIENT THROUGH AN INVESTMENT
MANAGER
1. The client shall be solely responsible for all acts or omissions of any person using
a DMA facility and shall be bound to accept and settle all transactions executed
through the DMA facility provided by the Broker to the investment manager acting on
behalf of the client, notwithstanding that such order(s) may have been submitted
erroneously or by an unauthorized user, or that its data is inaccurate or incomplete
when submitted, or the client subsequently determines for whatever reason that the
order should not have been submitted.
2. The investment manager is expected to be fully aware of the risks associated with
the market and the financial instruments being traded on stock exchanges through
DMA. The investment manager shall be responsible for complying with laws, rules,
regulations, notifications etc issued by regulatory authorities as may be applicable
from time to time.
3. Where the DMA facility provided by the Broker is used to execute trade on behalf
of one or more clients, by the investment manager, then it is represented and
warranted that, at each time an order is placed by such investment manager through
the DMA facility of the Broker -
a) The investment manager has due authority to deal on behalf of the client(s)
through the Broker, specifying the roles and responsibilities of the investment
manager in execution of transactions on behalf of the client(s).
b) The investment manager shall comply with any applicable laws, rules and
regulations affecting or relating to trading operations.
c) The investment manager and the client(s) are bound by the terms and
conditions hereof;
d) The investment manager using the DMA facility for routing client(s) orders shall
not cross trades of their client(s) with each other. Accordingly, all orders should
be offered in the market.
e) The stock exchange or SEBI may at any time call for any information from a
client(s) or an investment manager acting on behalf of the client(s) with respect
to any matter relating to the activity of the investment manager. The investment
manager shall also furnish any information specifying the roles and


responsibilities of the investment manager in execution of transactions on
behalf of the client(s), as and when required by the exchanges or SEBI.
4. The investment manager shall be responsible for ensuring that, only persons
authorized by it shall access and use the DMA facility provided by the Broker. All
orders originating from such facility / system shall be deemed to be authorized by
the client.
5. Where the investment manager accesses or proposes to access the Broker’s DMA
platform through external applications, including but not restricted to services of third
party service provider(s), own application(s), etc., the investment manager shall
ensure that such applications have adequate security features including but not
limited to access controls, password protection etc; and that appropriate
agreement(s) with such third party service provider(s) etc. for ensuring secured
access and communication has been executed and are in place.
6. The investment manager shall ensure that no person authorized by them to place
orders through DMA facility provided by the broker has been / is involved in any
adverse action by any regulatory authorities in any jurisdiction.
7. The investment manager shall provide the names of authorized individual users to
the broker prior to placing DMA orders.
8. The investment manager shall not use or allow the use of DMA facility to engage in
any form of market misconduct including insider trading and market manipulation or
conduct that is otherwise in breach of applicable laws, rules and regulation.
9. The investment manager is aware that Algorithmic trading i.e. generation of orders
using automated execution logic is governed by Algorithmic trading guidelines
issued by SEBI and Exchanges and requires prior approval of the exchanges. The
investment manager shall ensure that new algorithms and changes to existing
approved algorithms are not used through the DMA facility without prior approval of
concerned stock exchanges. The investment manager shall ensure that it has
necessary checks and balances, in place to identify and control dysfunctional
algorithms and the Broker shall have the right to shut down the DMA facility and
remove any outstanding client orders in case of any suspected dysfunctional algo.
10. The investment manager is aware that authentication technologies and strict
security measures are required for routing orders through DMA facility and
undertakes to ensure that the password of the investment manager and/or his
representative are not revealed to any third party.
11. The investment manager acknowledges that all DMA orders placed by them
through the DMA facility would be validated by the risk management system of the
broker. The Broker has the right to accept or reject any DMA order placed by the
investment manager at its sole discretion.
12. The investment manager shall notify the Broker in the event of DMA facility being
compromised. Upon receipt of this notice, client’s DMA facility shall be promptly
disabled but the client shall continue to be responsible for any misuse of the DMA
facility or any orders placed through the DMA facility as a result of the compromise

Sebi action in rs60000 cr nse colo scandal is eyewash startling revelations in cbi complaint

Sebi action in rs60000 cr nse colo scandal is eyewash startling revelations in cbi complaint

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Sebi action in rs60000 cr nse colo scandal is eyewash startling revelations in cbi complaint

Similar to Sebi action in rs60000 cr nse colo scandal is eyewash startling revelations in cbi complaint (20)

More from mrchavan143

More from mrchavan143 (20)

Recently uploaded

Recently uploaded (20)

Sebi action in rs60000 cr nse colo scandal is eyewash startling revelations in cbi complaint