New Delhi: Between 2012 and 2014, several Indian stock brokers received preferential access to servers used for high-frequency and algo trading at the National Stock Exchange (NSE).
This special access allowed certain brokers to game the system by placing trades ahead of their competition.
This ‘co-location’ scam – the technical term used for facilities that are dedicated spaces for high-frequency and algo trading – sent ripples throughout India’s financial system, leading to a probe by market regulator SEBI in 2016 and then eventually a case filed by the Central Bureau of Investigation in 2018.
The rot in the system was exposed due to a whistleblower’s complaint in which the entire modus operandi of the people profiting off the rigged system was laid out.
Details of the whistleblower complaint were first brought into the public spotlight when financial magazine Moneylife and its editor-in-chief Sucheta Dalal published two stories that examined the contours of the scam. Moneylife’s reportage was met with anger and frustration by the senior NSE management team, which chose to slap a Rs 100-crore defamation suit against the magazine – legal action that was struck down by the Bombay high court years later.
In the last five years, the market regulator has passed several orders in the co-location scam against NSE’s top officials, while imposing fines against NSE and former top officials Ravi Narain and Chitra Ramakrishna.
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