Trick 1- Exploitation of Co-Location Facilities for Unfair Market Advantage
- Brokers exploited co-location servers at the NSE to gain time advantages in trading.
- Received market data milliseconds before others, enabling profitable trades.
- Collusion with exchange officials facilitated this exploitation, undermining market integrity.
1. NSE Co-Location Scam (2010–2014)
Steps of the Fraud:
- Preferential Server Access:
- Certain brokers, notably OPG Securities, were allegedly granted early access to the National Stock Exchange’s (NSE) co-location servers, allowing them to receive market data ahead of others.
- Manipulation of Trading Algorithms:
- These brokers utilized high-frequency trading algorithms to capitalize on the advanced information, executing trades milliseconds before the general market.
- Collusion with NSE Officials:
- Investigations suggested collusion between NSE officials and the brokers, facilitating the unfair access and undermining market integrity.
- Regulatory Action:
- The Securities and Exchange Board of India (SEBI) imposed penalties on NSE and barred certain officials from the securities market for their involvement.