New Delhi, Feb 11 (PTI) Capital markets watchdog Sebi on Thursday imposed a penalty of over Rs 5 crore on OPG Securities and three others in the NSE's co-location case.

Apart from OPG Securities, those facing penalty are -- Sanjay Gupta, Sangeeta Gupta and Om Prakash Gupta. 

These individuals were directors of OPG Securities during the relevant time period.

Alleged lapses in high-frequency trading offered through NSE's co-location facility came under the scanner of the watchdog after a complaint was filed in 2015.

The National Stock Exchange of India (NSE) co-location facility allows stock brokers to take on rent specific racks and co-locate their servers and systems within the exchange premises. 

The primary objective of co-location services of the NSE is to reduce latency for connectivity to the exchange's trading systems for Direct Market Access (DMA), algo trading and Smart Order Routing (SOR).

In its 77-page order, Sebi said OPG Securities, a trading member of NSE, used the bourse' system to its advantage.

OPG Securities repeatedly connected to the secondary server almost on a daily basis without valid reasons and ignored NSE's warning or advisories, for the purpose of gaining an unfair advantage over other trading members, Sebi said.

The stock broker can be stated to have indulged in 'unfair trade practice' in securities which is prohibited under the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, it added.

"The conduct of the noticee is blameworthy being in defiance of the obligations to exercise due skill, care and diligence in the conduct of its business and compliance with statutory requirements apart from indulging in 'unfair trade practice' in securities which is prohibited under the PFUTP Regulations and due to which they made unlawful gains," Sebi noted.

Further, the regulator said the directors of OPG Securities were vicariously liable for the acts of omissions or commissions of the trading member.

Accordingly, the regulator levied a fine totalling Rs 5 crore on the four entities. Besides, Rs 10 lakh penalty each has been imposed on OPG Securities and Sanjay Gupta.

In April 2019, Sebi had barred OPG Securities and its three directors from accessing the securities market for five years and had asked them to disgorge illegal gains of more than Rs 15 crore in the NSE co-location facility case.

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