MUMBAI: In 2010, NSE started allowing brokers to place their servers in the same room where the exchange had its trading servers (engines).

These servers are the heart of any exchange’s trading system. Brokers always try to have the fastest access to trading engines so that they can have the price information ahead of the competition, execute order before other brokers can do so and profit from the same. Hence, they try to place their own own servers closest to the exchange’s trading engines. Even a time difference of one thousandth of a second can lead to profit or loss worth crores of rupees.

At that time, NSE had a software system that used to allow price information to reach brokers in the same sequence they had logged into its trading engine. NSE also had a secondary server that was not known to many brokers and hence had lower load than the primary server. The server that had lower load also gave out trading information faster than the main server.

Three brokers—OPG Securities, GKN Securities and Way2Wealth Securities—knew about this system glitch in NSE’s system. So they had placed their servers in NSE’s server room, called co-located their servers with the exchange’s servers and always logged on to the secondary server ahead of others to get faster access to price information. Some of the NSE officials were aware of this system glitch but rather than correcting the system, they facilitated the three brokers to continue to game the system to make illegal profit.