The NSE Co-Location Fraud
The National Stock Exchange (NSE) is one of the two leading stock exchanges in India. Ironically, the National Stock Exchange was created as a result of a huge scam which happened in the Bombay Stock Exchange (BSE). The regulators were of the opinion that the broker nexus in the BSE was too strong. Hence, in order to reduce their power and give investors more options, the NSE was created.
However, ironically, NSE has now found itself in the middle of a massive scandal. Securities and Exchange Bureau of India (SEBI) which regulates Indian stock markets has found the National Stock exchange guilty in the co-location fraud.
In this article, we will have a closer look at what the co-location scandal is. We will also understand how stockbrokers used technology as well as their personal connections in order to gain a competitive edge over their peers.
What was the Fraud?
The NSE co-location scam included possible market manipulation by brokers and technology companies.
What were the Repercussions?
Ever since the scam broke out, the NSE has been facing litigation for several years. Now since it has been convicted it faces several monetary implications. However, most importantly its image as an unbiased stock exchange has been tarnished.
Hence, one of Indias largest stock exchanges has been found guilty of enabling insider trading. Although the issue has been detected and also penalized, it still raises questions on the entire trading infrastructure in India.
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