Sebi lens on brokers who logged in first on NSE co-location server
SEBI’S investigation into the NSE co-location server controversy is focusing on 13 brokers though the audit done by Deloitte found 42 brokers to have availed of the facility.
According to reports, the markets regulator has narrowed down on the 13 brokers who logged in first and used the back up server on multiple occasions. Deloitte had said that 22 members were consistently first, second and third to log on the NSE servers repeatedly between 2012 and 2015.
Sebi insiders feel that multiple first-time logins point to possible collusion between NSE officials and brokers. So these cases will now be vetted by the forensic auditor.
Show cause notices have already been issued to the 13 trading members who logged on first, and used the back up server.
The issue dates back to 2015, when an anonymous whistleblower had written to Sebi that some trading members on the NSE who had subscribed to the exchange’s co-location server facility were getting an unfair advantage by virtue of faster access to the exchange’s trading engine that disseminates prices. The whistleblower alleged that this was done in collusion with some exchange officials.
The Deloitte report also identified brokers who were the second and third to log in to the server, but the current focus is on those who had logged in first.
The firms on the list of 22 brokers who logged in early on the NSE servers repeatedly include Kredent, Pace, Religare Securities, OPG Securities, NYCE, Motilal Oswal, Kotak Securities, DE Shaw, SMC Global, Crimson, Advent, Mansukh Stock Brokers, JM Global, AB Financial, Indus Broking, Quant Broking, Edelweiss Financial and Deutsche Equities.
Of these, Edelweiss, which logged in as second and third, has received a clean chit from the NSE.
Some media reports have said that SMC Global Securities had repeatedly logged in to the secondary server between 2012 and 2015. NSE did not issue a show cause notice to SMC Global, but the Sebi has sought a clarification from the firm.
As per the Deloitte report, the foreign broking houses that logged in early on the secondary server include Deutsche Equities and Barclays Securities. However, Deloitte did not find them to be repeat offenders. About 65 per cent of the NSE's business comes from the co-location facility. Sebi had asked the exchange to put its co-location income into an escrow account.