Sebi to rope in forensic auditor to probe NSE’s co-location high frequency trading case

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 co- location facility.

Briefing reporters after its board meeting today, Sebi Chairman Ajay Tyagi today said the regulator is examining the exchange’s response to the show-cause notice. Besides, the regulator 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.

National Stock Exchange of India Ltd (NSE)

Securities and Exchange Board of India ( SEBI )