NSE co-location case: Sebi to rope in forensic auditor

MUMBAI: Markets regulator Sebi will engage a forensic auditor for its ongoing probe into the NSE co- location case to ascertain whether brokers made unfair gains in connivance with the exchange officials.

The watchdog has already issued show-cause notices to the National Stock Exchange (NSE) and several of its current and former executives as part of its investigation into alleged lapses in high-frequency trading offered through NSE'S colocation facility.

Briefing reporters after its board meeting on Wednesday, Sebi Chairman Ajay Tyagi said the regulator is examining the exchange's response to the show-cause notice. In the NSE case, Sebi has issued show-cause notices to the 14 key personnel, he said. Besides, the regu- lator will engage the forensic auditor in the NSE co-location case to probe if brokers made unfair gains in connivance with exchange officials. Earlier, the NSE had appointed forensic auditors to look into the issues related to the co-location issue.

The case relates to some brokers allegedly getting preferential access through co-location facility at the NSE, 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 is considered to result in huge gains for a trader. Some staff members allegedly told the forensic auditors appointed by the NSE that they acted on “advice from seniors” regarding preferential access for some to the co-location facility.