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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