Capital markets regulator Sebi on Wednesday imposed a penalty of Rs 3 lakh on Master Capital Services Ltd for flouting norms with respect to using National Stock Exchange's co-location facility.
In its order, Sebi said the broker has connected to the secondary server connection roughly on 81 per cent or 256 days out of total around 317 trading days in the F&O segment during the period 2013 and 2014 (till April 7, 2014) even after emails from NSE.
Therefore, Master Capital Services Ltd (MCSL) has violated the provisions of the NSE bye-law and code of conduct specified under stock brokers' rule, it added.
NSE co-location team had sent an email in December, 2011 to MCSL, which stated that "members are not supposed to connect to secondary server until exchange intimates to do so".
Further, the members can move to secondary source in case of non-availability of data from TBT (tick-by-tick) primary source, the email mentioned.
Secondary server was provided by NSE in order to enable members to connect to the same in case of disconnection / failure to connect to primary server. Therefore, it's not considered to be normal when brokers repeatedly connect to secondary server without justifiable cause, Sebi noted.
The Securities and Exchange Board of India (Sebi), had received multiple complaints pertaining to allegations of malpractices with respect to the co-location facility being provided by the National Stock Exchange of India Limited (NSE).
In the wake of allegations of preferential access to Tick-by-Tick (TBT) data feed given by NSE to certain trading members, the matter was taken up for investigation by the regulator.
MCSL was one of the trading members identified for comprehensive investigation,including forensic audit, for primary and secondary server connects.