Sebi lens on bro­kers who logged in first on NSE co-lo­ca­tion server

Financial Chronicle - - COMPANIES, MONEY & MARKETS -

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.

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