26 July 2024
Investigations into the co-location scandal at the National Stock Exchange (NSE) have unearthed a new facet of market manipulation by high-frequency traders. The malpractice involved firing a barrage of algorithmic orders, many more than they are allowed to, to crowd out orders of rival brokerages. However, the NSE co-location investigation is much wider, with the regulator looking at unfair price dissemination and preferential treatment to some brokers.
The allegations are that some traders with leased space at the NSE co-location facility got preferential treatment during 2012-14. Even a split-second faster access can result in massive gains for high-frequency traders. Sebi already passed orders on two so-called misuses of NSE’s co-location facility in 2019. In 2018, Sebi asked NSE to investigate the matter. NSE then used the services of retired Kerala high court judge Arvind Sawant.