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Tuesday, March 21, 2017

NSE (NATIONAL STOCK EXCHANGE) OF INDIA MESS:-WHISTELBLOWER RAKES UP DARK FIBRE ISSUE


By
 Palak Shah, ET Bureau | Updated: Mar 20, 2017, 11.35 AM IST 

MUMBAI: A whistle blower, who in 2015 had made allegations of preferential access at National Stock Exchange’s (NSEs) automated trading systems to a few brokers, has yet again written to the regulator highlighting the misuse of ‘dark fibre’ trading links, the speed-highway for trade order execution. 

The letter addressed to Securities and Exchange Board of India (Sebi) dated February 14 alleges that NSE continues to play favorite, ensuring advantages to a select few, by blocking entry of alternative National Long Distance (NLD) license holders with no clearly defined public policy as to when and how it permits competing carriers into co-location. 

Replying to an email query from ET, the NSE spokesperson said, "Since the matter is under discussion between us and the regulator, you will appreciate that we will not be able to comment'' 



Dark fibre networks are dedicated communication line providing significant advantage over internet service providers (ISPs), with better scalability and speed. Co-location or co-lo is a data centre within the exchange premises hosting a broker’s server that are connected by fibre network. Co-lo space is rented by exchanges to brokers for speed trading. 



“Little has changed despite hue and cry over dark fibre matter and some are selectively allowed to install dark fibre without clear policy,” the letter said. "The only solution is to have transparency in allowing other NLD licence holders to give competitive links but for some mysterious reason, NSE continues to play favourite by blocking entry of alternative NLD player 



The whistle blower said that unfair access to co-location and speed trading line highlighted earlier in 2015 still remains, albeit with a change in time size from milliseconds to microseconds. A high level inquiry was ordered into the whistle-blower’s allegations in 2015 and Sebi’s final order is awaited. 



 “In a year, the average order response time at NSE co-location has gone down from two milliseconds to approximately 150-200 microseconds. Thus, if the errors which earlier occurred in milliseconds have been controlled, the exchange can continue to provide preferential treatment in micro-seconds and claim fairness. If some can be ahead by 20 micro-seconds, they are 100% ahead of others.” 



The letter says that while Sebi had asked exchanges to publish latency at co-location and BSE publishes it on real-time basis, NSE complies by publishing average latency across the quarter. Latency is the time for order matching and trade confirmation after a client keys it in. 



It is further alleged that dark fiber links are operating in a regulatory vacuum at commodity exchanges. A Mumbai based fibre network firm rejected by the NSE, was operating at MCX with impunity. The firm provides differential speed access to different clients based on revenue share and MCX may not check this on the alibi that it was not responsible to ensure fairness across firms since it does not provide co-location. The letter says a Mauritius entity controlled by a US parent made profits of around Rs 20-30 crore between 2013-14 by trading in currency futures on NSE and BSE accessing feeds prohibited to non-bank participants. 


A source close to the NSE said that dark fiber is a non issue as these links are not used for trade execution. The source further said that all the racks for Co-location are placed at equal distance and there is no case for preferential access and giving out quarterly latency numbers is not a concern as these numbers do not change sharply on real-time basis. 
The MCX did not reply to an email query and the BSE declined to comment. 


Read more at:
http://economictimes.indiatimes.com/articleshow/57726792.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst


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