A co-location facility is a dedicated space rented by a third party for transactional purposes
With the arrest of former national stock exchange and CEO Chitra Ramkrishna in a co-location scam on March 6 by the Central Bureau of Investigation (CBI), the focus now will move on to how the entire episode was planned. her interrogation agency. Ms. Ramkrishna was taken to CBI’s seven-day detention center for questioning.
Ms. Ramkrishna, who accepts that she was guided by a “Himalayan Yogi” while making key decisions during her tenure as head of the country’s top stock exchange, has was arrested following CBI’s nearly four-year investigation against a Delhi-based stockbroker.
The central agency’s investigation received a shot after market regulator Securities and Exchange Board of India (SEBI) released a report showing that the NSE’s top management was accused of abuse. exercise power in this regard.
As SEBI reports, Ms. Ramkrishna, who was appointed chief executive officer and chief executive officer of NSE in April 2013, sought guidance from the enigmatic “Himalayan Yogi” in all matters. personally and professionally for about 20 years.
While legal actions are being taken on the whole matter, let’s try and understand what exactly co-location is and what a scam is.
Facilities at the location
A co-location facility is a dedicated space tied to facilities such as power and bandwidth, which can be rented out by third parties for high frequency as well as other transactional processes.
Traders can rent such spaces and set up their system or program to engage in trading activities.
NSE started a co-location service in August 2009, where, due to its proximity to the stock exchange’s servers, traders have faster access to price data such as buy or sell quotes. distributed by the stock exchange.
Faster data access has enabled traders to receive quotes earlier than others and execute trades faster, thus making them profitable. Also, because the fees for these services are high, only large brokerage firms can afford to rent such a space.
What is the NSE co-location scam?
Throughout the entire episode, it was alleged that some brokers, with insider relationships, took advantage of the NSE’s provision of data on a first-come, first-served basis to make high profits.
In other words, traders who log into the NSE server first will have access to information such as buying or selling as well as canceling orders, compared to others who log into the server later.
This is known as a ‘Tick-By-Tick’ (TBT) feed, which continuously disseminates information in the sequence that brokers have connected or logged into the server, unlike a broadcast. waves where everyone receives price information at the same time.
Co-location brokers are provided with detailed information on the servers and ports they can connect to to access the price feed.
One whistleblower in the case alleges that OPG Securities, with help from some officials in the NSE’s IT department, was able to figure out which servers had the least load so they could connect to the NSE servers. faster. The trader is alleged to have mapped multiple IPs to a single server to gain access to the first two or even three connections to that exchange server and overwhelm the other members.
Latest developments
Meanwhile, a Delhi court on Wednesday (March 9) placed Anand Subramanian, a former NSE group executive officer, into judicial custody for fourteen days, in connection with the co-location scam.
Mr. Subramanian was arrested by the CBI on February 24.
The CBI official brought him before the Sanjeev Aggarwal court on Wednesday. The federal investigative agency transferred a plea to the court saying he was not required to be questioned further and asked the court to place him in judicial custody. The court authorized the transfer of the CBI and the postponement of Subramanian to fourteen days of judicial custody. Now he will be lodged at Tihar Prison.
Recently, SEBI fined her Rs 3 crore, after the market regulator discovered that she allegedly shared important inputs about the NSE with “Himalayan Yogi”.
