A city-based brokerage firm may soon face action by the markets regulator SEBI and top stock exchange NSE in a case relating to the alleged unfair access to the bourse’s co-location server. A team of officials of the regulatory authority recently visited the offices of the brokerage house to inspect its facilities with regard to the ongoing probe, sources said.
Besides, NSE has served a show-cause notice to the brokerage firm and will follow “due process” for further action, sources added. Sebi is also working on addressing the broader concerns that have come to fore after a probe into alleged lapses involving NSE’s co-location facility.
SEBI began probing the matter in early 2015 after it received complaints related to some brokers allegedly getting preferential access through co-location facility, 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 can result in huge gains for a trader.
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Speaking to reporters in Mumbai, Sebi Chairman UK Sinha today said the regulator is looking at imposing a bigger penalty for misuse of high-speed algo trades and is “following up” on full implementation of directions it issued in the case involving NSE.
While emphasising that India is one of the very few countries which has some mechanism for preventing misuse of algo trading, Sinha said the difficulty is that it is a highly technical issue and also that people who comment on the subject have conflict of interest.
“Sebi got its own examination and based on it, we gave certain directions. Majority of directions have been implemented but some have not. “We are following up the matter with concerned agencies and this matter will be taken to its logical conclusion. We are steadfast on our findings,” he said on the NSE matter.
At its last board meeting on February 11, Sebi had shared a status report on action taken by it following complaints about certain brokers getting preferential access and alleged lapses relating to NSE’s co-location facility. Sebi began probing the matter in early 2015 after it received at least three complaints related to some brokers allegedly getting preferential access through co-location facility, early login and ‘dark fiber’.