SEBI had received complaints that National Stock Exchange (NSE) co-location facility had provided unfair access to select trading members. The co-location issue relates to brokers placing their servers at the exchange’s premises during 2011-14 [No doubt it happened during the Corrupt Congress Regime], which reduces the time for an order and provides a speed advantage to these over those located away from the premises. Faster access to data feed of an exchange, even by a split second, can result in huge gains.
SEBI in its investigations found that (i) NSE’s architecture with respect to dissemination of data was prone to manipulation and market abuse; (ii) preferential access was given to certain stock brokers; (iii) non-compliance of internal policies by permitting ineligible entities to lay fiber at co-location facility for various stock brokers; and (iv) there was a possibility of collusion between NSE officials and stock brokers. Subsequent forensic investigations by an independent third party (Deloitte) also broadly corroborate with the initial findings.
Consequent to the investigation, SEBI has issued show-cause notice to 14 top officials of the NSE in May-17. Since the controversy broke out, there has been lot of high profile resignations with MD, Ms. Chitra Ramakrishnan, Vice Chairman and founder Mr. Ravi Narain and the Vice chairman, Mr. Anand Subramanian putting their papers. The regulator has also directed the revenues from co-location business earned since Sept-2016 to be transferred to a separate bank account and accordingly could lose such revenues to regulatory actions.
The High Court of Mumbai fined the NSE for exposing their wrongdoings as NSE had filed a defamation case against Sucheta Dalal the Author of the article exposing the NSE Co-Location Algorihm Trading Scam.
You decide if you want to trust the National Stock Exchange ?