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Markets regulator Sebi has issued an order prohibiting erstwhile Financial Technologies (India) Ltd (FTIL), now called 63 Moons, from providing ‘straight through processing’ (STP) software, used for putting through trades without any human intervention, on the ground that the company is not fit and proper.
This is curious, to say the least, and matters because it reflects on the supervisory capacity and fairness of the markets regulator. The FTIL/63 Moons application for providing STP software was for the period 2016-19.
Now that Sebi has denied this permission, does this mean that all the trades carried out during this period should be deemed illegitimate, having been carried on software that was not authorised? What is the speed with which such applications are processed and disposed of ?
Further, if FTIL software is unfit for STP services, is other FTIL software also unfit? The Forwards Markets Commission, which deemed FTIL unfit for owning and operating stock exchanges, in a matter that is still sub-judice, did not forbid the company from offering its software for stock market operations.
Was this an oversight or simple acceptance of the popularity and reliability of the ODIN software supplied by FTIL, which played a defining role in democratising stock investment by allowing brokers and sub-brokers spread out across the country to manage client orders for placing trades on the nation’s major bourses?
A further question relates to the regulator’s capacity to ensure the integrity of the technological processes that underpin securities trading.
Is Sebi guided by the reputation of those who provide software and services or by its ability to audit software and systems? Ketan Parikh and Rajat Gupta had solid reputations till they did not.
This piece appeared as an editorial opinion in the print edition of The Economic Times.