NSE co-location case

NSE co-location case

Subject: Economy

Context: SEBI on Wednesday (February 10) imposed a penalty of Rs 1 crore on the National Stock Exchange (NSE), and Rs 25 lakh each on Chitra Ramakrishna and Ravi Narain, the former managing director and vice-chairman of the exchange respectively, in connection with its three-year investigation in the co-location case

Concept:

• Colocation facilities work as a type of data center that rents equipment space and bandwidth to companies and businesses that need a network service provider at a reasonable cost.
• Colocation facility of NSE establishes a network connection with the trading system of NSE IFSC limited for trading.
• It was alleged that the brokers got preferential access through the co-location facility at the stock exchange, early login, and ‘dark fiber’, which can allow a trader a split-second faster access to the data feed of an exchange. Even this infinitesimally sooner access is considered to result in huge gains for a trader.
• The unfair access issue pertains to 2012-14 when NSE used to disseminate price information through a unicast system.
• Under unicast system a system information is disseminated to one member after another.
• Post a whistleblower complaint SEBI formed an expert committee under the guidance of its Technical Advisory Committee (TAC) to examine the allegations against NSE.