NSE co-location case: CBI arrests Sanjay Gupta of OPG Securities
Premium- The broker allegedly had misused NSE's co-location facility to get unfair advantage over the broader market.
Mumbai: The Central Bureau of Investigation has arrested Sanjay Gupta, managing director of OPG Securities in the matter pertaining to the NSE co-location scam.
OPG Securities was among the entities that had preferential access to the co-location facility of the National Stock Exchange. The broker allegedly had misused the co-location facility to get unfair advantage over the broader market.
A co-location facility is a service provided by exchanges where brokers and trading members place their servers on exchange premises to get faster access to market data and trading. While co-location of servers is a globally accepted practice, it is often criticized for being unfair to traders who do not have access.
In NSE’s case, the service was launched in 2009-10 without any standard processes, thus making the systems prone to manipulation.
Recently, the CBI conducted multiple searches in over ten locations with respect to the NSE- colocation scam. Essentially, these searches were done to establish if there were any financial gains made due to the unfair access to these brokers.
In 2018, CBI had registered a case against the company in a scheme involving certain data centre employees, Gupta and a few others obtained preferred access to the NSE server data from 2010 to 2014 using an algorithmic trading software. They also obtained quicker data access through the exchange’s secondary server by utilising the then-available co-location facility.
In its chargesheet, the CBI had alleged that unidentified officials of NSE, Mumbai had provided unfair access to the said company using the co-location facility during the period 2010-2014 that enabled it to log in first to the exchange server of the stock exchange that helped to get the data before any other broker in the market.
The probe also established that OPG Securities, one of the accused in the FIR, had connected to the secondary POP server on 670 trading days in the “Futures and Options" segment.
Mint had earlier reported that as per an Indian School of Business report nearly 30 brokers, comprising some well-known algo traders, who generated trading profits of 2582.6 crore between 2010 and 2014. These earnings came from both personal trades and trades executed on behalf of clients. The 17 participants in the Deloitte report who were allegedly abusing NSE systems to get an early log-in advantage were the focus of ISB’s investigation.
In its earlier order , Sebi had said that OPG Securities repeatedly connected to the secondary server almost on a daily basis without valid reasons and ignored NSE‘’s warning or advisories, for the purpose of gaining an unfair advantage over other trading members.
In March , the CBI had arrested former managing director of NSE , Chitra Ramakrishna and Anand Subramanium to probe the alleged abuse of the exchange’s server architecture for providing preferential access to select brokers. The duo has been in judicial custody since then.