Co-location facilities are dedicated spaces leased by third parties for business purposes.
With the arrest of former National Stock Exchange Managing Director and CEO Chitra Ramakrishna by the Central Bureau of Investigation (CBI) on March 6 in the co-location scam case, the focus will now be on how the entire episode was planned, as the Central Bureau of Investigation (CBI) The agency interrogates him. Ms. Ramakrishna has been sent to seven-day CBI custody for questioning.
Ms. Ramakrishna, who admitted that she was directed by a “Himalayan Yogi” while making important decisions during her tenure as the head of the country’s top stock exchange, was booked by the CBI for nearly four years against the Delhi-based stockbroker. He was arrested after investigation.
The central agency’s probe came under fire after markets regulator Securities and Exchange Board of India (SEBI) issued a report indicating alleged abuse of power by the top management of NSE in the matter.
According to a SEBI report, Ms Ramakrishna, who was appointed as the Managing Director and CEO of NSE in April 2013, sought the guidance of the mysterious “Himalayan Yogi” in all personal and business matters for almost 20 years.
While legal action is being taken in the whole matter, let us try to understand what are co-location facilities and what is scam.
co-location facilities
Co-location facilities are dedicated spaces connected to facilities such as power supply and bandwidth, which can be leased by a third party for high frequency as well as other business processes.
Traders can rent such space and set up their own systems or programs to engage in trading activities.
NSE launched co-location services in August 2009 where, due to its close proximity to the stock exchange servers, traders got fast access to price feeds such as buy or sell quotes distributed by the stock exchange.
The fast access to the data helped the traders to get the quotes earlier than others and execute the trades faster, thus making profits for them. Furthermore, since the fees for these services were high, only large brokers could rent such space.
What is NSE co-location scam?
Throughout the episode, it is alleged that some brokers in connivance with insiders took advantage of the fact that NSE provided data on a first come first serve basis to earn good profits.
In other words, the trader who logs into the NSE server first will have access to information such as buy or sell as well as cancel orders later than others who log into the server.
This is called a ‘tick-by-tick’ (TBT) data feed, which transmits information sequentially by brokers connected to or logged in to the server, as opposed to a broadcast where everyone gets the price at the same time. information is available.
The brokers at the co-location facility are given the details of the server and port they can connect to to access the price feed.
A whistleblower in the case alleged that OPG Securities, with the help of some officials of the IT department of NSE, was able to find out which server had the least load so that they could connect to the NSE server faster. The trader allegedly mapped multiple IPs to the same server in order to gain access to the first two or three connections to that exchange server and crowd out other members.
latest developments
Meanwhile, a Delhi court on Wednesday (March 9) sent former NSE group operating officer Anand Subramaniam to fourteen days’ judicial custody in connection with the co-location scam case.
Subramaniam was arrested by the CBI on February 24.
The CBI officer produced him in the court of Sanjeev Agarwal on Wednesday. The Federal Investigation Agency filed a petition before the court stating that he did not require further interrogation and requested the court to send him to judicial custody. The court allowed the CBI move and sent Subramaniam to fourteen days’ judicial custody. He will now be kept in Tihar Jail.
Recently, SEBI had imposed a penalty of Rs 3 crore on him after the market regulator found that he had allegedly shared important information about NSE with “Himalayan Yogi”.