India’s most actively traded exchange, the National Stock Exchange is in news for the wrong reasons. It is currently in the midst of a controversy that alleges it to be favouring some brokers over others. In the dynamic world of stock markets, where a minute’s difference could make or mar large volume trade, NSE is battling claims that allege that it often allocated specific servers to specific brokers to help them get an edge over their competitors.

According to reports a former NSE employee have told the Deloitte team that is conducting forensic audit of the exchanges that often oral instruction for various server allocation and other changes were given by seniors. However this employee did not name any seniors as per the forensic review report from Deloitte.

Deloitte has been carrying out these reviews to analyse allegations of preferences given by NSE to select brokers in the process of co-location and co-hosting services provided to brokers.

Speaking to the former NSE employee who also acted as a whistle blower, Deloitte learnt that the NSE decision to give more servers with multiple IPs was taken to reduce the risk but he could not recall the when and how of this decision. Moreover through its audits, Deloitte has been battling with chains of lost emails, trails that go dry soon after and stoic silence of many crucial employees.

While another consultant firm Ernst & Young is also being roped into these forensic audit to remove any conflict of interest, the true impact of this preferential treatment is hard to gauge. One basic question that comes to mind was why a randomiser was never put into place for information dissemination through these servers? Why did the first server have to log in first every time?

To say that the picture is pretty opaque would be an understatement but the concern is why the move might have helped a few brokers who are well connected, how severly have the millions who subscribe to other brokers for a fee got disadvantaged? Perhaps nothing better highlights the need for better transparency in one of the nation’s most actively traded exchange.

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