Sebi has held that Shah—a senior academic with the government think-tank National Institute of Public Finance and Policy —along with his sister-in-law and an NSE official, “have collusively worked to fulfil their commercial goals by fraudulently using the data that was obtained by them from NSE to develop an algo trading software and products".This trading software was used for sale to market participants for dealing in the securities market. Some of these products were allegedly used by firms for unfair access to NSE’s systems.

The Sebi order said the NSE and its officials employed a device/scheme/artifice wherein the confidential and sensitive data provided by the NSE to be used in research for the LIX project, was misused for making algorithmic trading software for sale to market participants for dealing in the securities market.

The NSE had engaged the services of Infotech Finan-cial Services Pvt Ltd to build a liquidity index. This project involved inhe-rent conflict of interest as one of the directors at Info-tech was Sunita Thomas, Shah’s sister-in-law, and wife of Suprabhat Lala, Assistant Vice-President, NSE.

Shah, who was on the board of the National Securities Clearing Corporation Ltd in August 2012, failed to disclose this conflict of interest to the NSE and its officials, the Sebi order said. This conflict of interest was ignored by Lala when the LIX project was awarded to Infotech.

The regulator said that Shah, along with his sister-in-law and an NSE official, “have collusively worked to fulfil their commercial goals by fraudulently using the data that was obtained by them from NSE to develop an algo trading software and products". This trading software was used for sale to market participants for dealing in the securities market. Some of these products were allegedly used by firms for unfair access to NSE’s systems.

Sebi charged Shah with violating Sebi’s Prevention of Fraud and Unfair Trade (PFUTP) norms and barred him from having association with any market infrastructure institute, listed company or registered intermediary for a period of two years.

Sebi also directed Lala, Thomas and Infotech not to associate with the securities markets. Infotech and its two directors, which includes Thomas, have been barred from providing services to any Sebi-registered entity for two years. Lala has also been barred for two years.

Co-location refers to traders placing servers in close proximity an exchange, which gives them a time advantage that leads to massive profits.

“The sentence of punishment to certain individuals/entities is too small considering the probable profits made by them using that "unfair access" provided to them by the NSE... it gave them huge unfair gains in the market at the cost of millions of others,” said head of leading Mumbai-based legal firm.