The Income Tax (IT) department has searched former top officials of the National Stock Exchange and a few brokers in connection with the ongoing algorithmic trading controversy. Sources in the tax department said the agency has searched premises of current and former NSE officials.
Algorithmic trading or algo in market parlance refers to orders generated at a superfast speed by use of advanced mathematical models that involve automated execution of trade while co-location involves setting up servers on the exchange premises.
The Securities and Exchange Board of India (Sebi) is also investigating into the NSE algo trading case to ascertain if brokers made unfair gains in connivance with the exchange officials.
It is alleged that some brokers got preferential access through co-location facility at the NSE, early login and ‘dark fiber’ — which can allow a trader a split-second faster access to data feed of an exchange. Even a split-second faster access is considered to result in huge gains for a trader.
Sebi has also issued show-cause notices to NSE and 14 key management personnel, as part of its investigation into alleged lapses in high-frequency trading or algorithmic trading offered through NSE’s co- location facility.