Some brokers gained unfair access to NSE systems for algo trading: Govt
"The architecture of NSE with respect to dissemination of Tick-by-Tick through Transmission Control Protocol (TCP) or Internet Protocol (IP) was prone to manipulation or market abuse," Minister of State for Finance Arjun Meghwal said in written reply to Lok Sabha.
A Sebi panel has found the National Stock Exchange to have given preferential access to its co-location servers for algorithmic trading to some stock brokers, Parliament was informed today.
"The architecture of NSE with respect to dissemination of Tick-by-Tick through Transmission Control Protocol (TCP) or Internet Protocol (IP) was prone to manipulation or market abuse," Minister of State for Finance Arjun Meghwal said in written reply to Lok Sabha.
This system has been discontinued by NSE with effect from December 3, this year, he added.
The Securities and Exchange Board of India (Sebi) had constituted an expert committee to examine the allegations of unfair privilege access given by NSE to some brokers for its 'algo' trading.
Algorithmic trading or algo in market parlance refers to orders generated at super-fast speed by use of advanced mathematical models that involve automated execution of trade while co-location involves setting up servers on the exchange premises.
Quoting the Sebi committee's finding, the minister said: "Preferential access was given to stock broker(s), wherein it was possible for stock broker to log into multiple dissemination servers through multiple internet protocols assigned to him.
"It was also possible for a single member to have multiple logins to a single dissemination serve through multiple IPs assigned to it.
"It was observed that stock broker(s) had multiple advantage by logging in first or even second and third."
To check on this malpractices, Sebi has directed stock exchanges to further strengthen the co-location facility in order to ensure fair and equitable access.
In a separate reply, Meghwal said that Sebi found that companies which were either non-operational or had weak fundamentals and unsupportive price volume movements were being used by entities for price manipulation.
During January-November, Sebi has passed orders in the case of 13 such companies and debarred 1,336 entities.
Further, based on Sebi's direction, stock exchanges have also suspended trading in the shares of 203 companies. In addition, price bands of 160 firms were reduced to the lowest band of two per cent.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Power of Compounding: How many years will it take to reach Rs 3 crore corpus if your monthly SIP is Rs 4,000, Rs 5,000, or Rs 6,000
Power of Compounding: Salary Rs 25,000 per month; is it possible to create over Rs 2.60 crore corpus; understand it through calculations
Reduce Home Loan EMI vs Reduce Tenure: Rs 75 lakh, 25-year loan; which option can save Rs 25 lakh and 64 months and how? Know here
Top 7 Large and Mid Cap Mutual Funds with Best SIP Returns in 5 Years: No. 1 fund has turned Rs 15,000 monthly SIP investment into Rs 20,54,384; know about others
New Year Pick by Anil Singhvi: This smallcap stock can offer up to 75% return in long term - Check targets
03:05 PM IST