The NSE co-location scam involves market manipulation at India’s largest stock exchange, the National Stock Exchange of India. Certain people got market information ahead of the rest of the market, allowing them to earn huge profits, thus violating the NSE’s demutualization exchange governance and transparency-based system.

Overview:

• Insiders’ alleged collaboration in rigging NSE’s Algo-trading and using co-location servers resulted in large earnings for a group of brokers.
• In January 2015 the Securities and Exchange Board of India (SEBI), received the first anonymous complaint through a whistle-blower revealing a multibillion-dollar market fraud.
• According to the whistle-blower, members were allegedly able to earn profit from advance knowledge received from some exchange authorities.
• Over five years, the total default amount through NSE’s high-frequency trading (HFT) is anticipated to be Rs 500 billion.
• The Securities and Exchange Board of India (SEBI), Central Bureau of Investigation (CBI), and the Income-tax Department are investigating the NSE co-location case. They are looking into the involvement of NSE and SEBI officials, as well as NSE’s current and former executives and brokerages.
• In response to a Public Interest Litigation (PIL) filed by the Chennai Financial Markets and Accountability Authority, the Madras High Court has issued a notice to SEBI, MCA, and ED.

What is Co-location?

Co-location facilities are certain dedicated spaces in the NSE building and are extremely close to the dedicated exchange servers where algo and high-frequency traders can deploy their programs or systems.

By: Brijesh Kumar