Mumbai, March 7, 2017

Capital market regulator Securities and Exchange Board of India (Sebi) has put various stock broking firms under investigation which may have used dark fibre cable network of Mumbai based Sampark Infotainment to connect to the co-location facility of the National Stock Exchange (NSE).

The probe is being carried out with regard to allegations made by a whistle blower in 2015 who accused three large stock brokers of gaining unfair access to NSE’s co-location for algo trading. Sebi feels more brokers could have benefited.

Sebi officials have been visiting of several brokers to collect data with regard to trades done using Sampark’s fibre network. Apart from trade data, email and phone call details of these brokers of up-to five years preceding 2015 are being verified. ET could not ascertain the identity of the brokers.

The NSE too had already initiated a separate audit of its systems and submitted its report to Sebi. The regulator, however, is carrying out separate probe as several brokers are believed to have used Sampark’s dark fibre network. Sebi did not comment on ET’s email query on the matter.

Dark fibre network are dedicated communication line that provide significant advantages over traditional ISPs, with better scalability and speed. These lines are controlled by the users rather than service provide. Earlier, a Sebi panel had investigated whether Delhi-based OPG Securities had unfair access to NSE servers, according to media reports. The panel also found irregularities by brokerages AlphaGrep, a high-frequency trading firm part of Coffee Day group and trading member GKN Securities on use of dark fibre of Sampark Infotainment, the reports said.

[The Economic Times]