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April 2022

NSE’S HIGH-TECH STOCK MARKET SCANDAL: WILL THE MASTERMINDS GO SCOT FREE?

By Palak Shah, Author and Journalist
Reading Time 8 mins
NSE was hit by a co-location trading scandal sometime in 2015 when a whistle-blower first complained to the Securities and Exchange Board of India (SEBI). Author and Journalist Palak Shah has done a deep dive investigation into the NSE co-location scam. His book The Market Mafia, published in November 2020, is a full-scale exposé of the deep rot in India’s financial market ecosystem. As a journalist working with some of the leading Business newspapers in Mumbai, Palak has much insight into the working of markets, exchanges, SEBI and regulations. Considering certain constraints, BCAJ sent him questions and carried this e-interview to throw light on how the NSE scam has unfolded and the delay in investigating it. Hope you enjoy reading it!

Q.1. Can you briefly explain the matter relating to the Colo scam and corporate governance issues at NSE?

Co-location (Colo) is nothing but proximity hosting of broker servers with NSE’s master order matching engine in the exchange premises at Bandra-Kurla Complex (BKC). It gives a superior trading speed and advanced information on price moves and order books. As I have detailed in my book, The Market Mafia, the Colo scandal goes back to 2010. When NSE started co-location trading, it lacked the necessary study from the market regulator SEBI and hence safeguards. There were flaws in the system, which investigation
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