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Tags Current Affairs

Co-location scam in NSE

Date: 07 March 2022 Tags: Miscellaneous

Issue

The NSE co-location scam is being investigated by multiple agencies against former CEOs Chitra Ramakrishna and Ravi Narain.

 

Details

  • Co-location is a facility where a third party can lease a rack/server space along with other computer hardware.

  • The facility provides infrastructure such as power supply, bandwidth, and cooling for setting up servers and storage of data.

 

Allegations

  • It is alleged that some brokers had leased co-location facility of NSE and were able to log on to the NSE’s systems faster with better hardware specifications.

  • The algorithmic trading gave them an unfair advantage and access during the period from 2012 to 2014. 

  • A split second advantage gave the trader a huge advantage as the NSE used to disseminate information through unicast.

 

Investigations

  • Investigations by SEBI revealed that preferential access was given to stock brokers at NSE’s co-location faculty. 

  • A single stock broker was able to log on to multiple dissemination servers through multiple IPs assigned to him. This gave at least 15 brokers preferential access.

 

Actions by SEBI

  • SEBI has asked NSE to pay Rs 624.89 crore and prevented the exchange from accessing the market for funds for six months.

  • Former CEOs of NSE, Ramakrishna and Narain were asked to give up 25 per cent of their respective salaries drawn during a certain period. 

  • They were also prevented from associating with a listed company or a market infrastructure institution or any other market intermediary for a period of five years.

  • Ramakrishna and Narain were fined in February 2022 for corporate governance lapses during appointment of Anand Subramanian as NSE’s group operating officer.

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