India Markets closed

Sebi completes investigation in co-location controversy, report may be tabled in board meet on March 28

Maryam Farooqui
1 / 1

Yes Bank, Goldman Sachs settle case with Sebi

It was alleged that the private sector bank had violated LODR (Listing Obligation and Disclosure Requirement) norms, while Goldman Sachs did not comply with the merchant banker regulations in the matter of Yes Bank.

Moneycontrol News

It was in March 2016 when SEBI's technical advisory committee had submitted its report on NSE violating norms of fair access, allowing some brokers to benefit from trading data feed. The controversy will see its end as the market regulator has finished its investigation of 20 brokers in the National Stock Exchange (NSE) co-location (colo) controversy, according to a Business Standard report.

Moneycontrol had earlier reported that the regulator has initiated its own investigation into the co-location case.

Sebi’s investigation report

In its report, SEBI has a detailed analysis of brokers using the colo facility to churn out thousands of trades and make huge profits, according to sources.

“There is a high probability that some brokerages who were using dark fibre connections received preferential treatment from bourse officials,” said a person privy to the development. However, he refused to give further details of the findings.

Also Read - NSE co-location case: SEBI heat now on brokers who logged in first repeatedly

The report is likely to be tabled in Sebi’s upcoming board meeting on March 28. With this report, Sebi could soon pass its final order on the entities involved.

What is the co-location?

Co-location or co-hosting in the market terms means that a service is offered by the stock exchanges to stock brokers and data vendors allowing them to locate their trading and other systems within the exchange premises.

Issuing a discussion paper for framing new norms to regulate this co-location service, the regulator said that investors residing at places closer to the trading pit enjoy low latency (measure of time delay experienced in a system) on account of physical proximity to the stock exchange's trading system.

What is the controversy?

The case relates to some brokers allegedly getting preferential access through co-location facility at the NSE, early login and 'dark fiber' - which can allow a trader a split-second faster access to data feed of an exchange.

Even a split-second faster access is considered to result in huge gains for a trader. Some staff members allegedly told the forensic auditors appointed by the NSE that they acted on "advice from seniors" regarding preferential access for some to the co-location facility.

(With inputs from PTI)