Co-location scam in NSE
Date: 07 March 2022 Tags: MiscellaneousIssue
The NSE co-location scam is being investigated by multiple agencies against former CEOs Chitra Ramakrishna and Ravi Narain.
Details
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Co-location is a facility where a third party can lease a rack/server space along with other computer hardware.
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The facility provides infrastructure such as power supply, bandwidth, and cooling for setting up servers and storage of data.
Allegations
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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.
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The algorithmic trading gave them an unfair advantage and access during the period from 2012 to 2014.
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A split second advantage gave the trader a huge advantage as the NSE used to disseminate information through unicast.
Investigations
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Investigations by SEBI revealed that preferential access was given to stock brokers at NSE’s co-location faculty.
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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
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SEBI has asked NSE to pay Rs 624.89 crore and prevented the exchange from accessing the market for funds for six months.
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Former CEOs of NSE, Ramakrishna and Narain were asked to give up 25 per cent of their respective salaries drawn during a certain period.
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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.
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Ramakrishna and Narain were fined in February 2022 for corporate governance lapses during appointment of Anand Subramanian as NSE’s group operating officer.