NSE co-location case: ‘Independent’ study gives clean chit to prime accused OPG  

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 An ‘independent’ technical forensic study commissioned by a software vendor of OPG Securities, the prime accused in the NSE co-location case, and carried out by IIT professor contradicts the findings of the SEBI and auditors Deloitte and gives it a clean chit.

 The report questions the premise of the whole controversy such as the lack of agreement on the definition of first login and the possibility that a member could ensure receipt of data ahead of others. The report also claims that the Show Cause Notice issued by SEBI is self-contradictory on the issue of early login.

 The report, commissioned by Accel Trading, has been shared with SEBI. Moneycontrol has seen a copy.

 Another major point of disagreement is the claim of any material gains. SEBI in its reports indicated that trading by OPG reduced dramatically after the introduction of multicast tick-by-tick (MTBT). ISB, on the other hand, claimed that average daily intraday profit of OPG rose exponentially after the introduction of MTBT.

 The expert report further claims that OPG’s trading success was agnostic to the data dissemination methodology (Multicast vs TCP) and that OPG’s market share, trading volume and trade count increased exponentially after introduction of MTBT.

 The report highlights that the performance of primary server trading IP was marginally better than performance of secondary server trading IP on parameters such as trade count, trade volume and order-to-trade ratio. The reports also shows similar findings around first-to-connect and non-first-to-connect trading IP.

 The report rather also highlights that data analyst in the SEBI TAC report itself rebuts any advantage of either connecting first or connecting to secondary TBT POP servers, as there are many days out of the 30 days analysed by SEBI TAC when OPG was not connected to the secondary server. “It did not establish first connect and yet OPG was among the top 5 players in terms of market share and vice-versa.”

 Therefore, the report concludes that the trading performance was agnostic to the alleged preferential access given to OPG and that algorithms, hardware, software and technical capabilities of trading members dictated success.

 The report brings to light important technical nuances that given the exchange traffic, congestion control implementation in TCP and jitter present in the NSE network, it was not possible that any member could have manipulated the NSE TBT system. “Co-located trading members were equally likely to receive data at the same time. Under no circumstances, could OPG ensure receipt of data ahead of others at NSE.”

 “Furthermore, the non-allocation of sender port 1 (10990) for OPG on most of the TBT POP servers ensured that OPG was almost never disseminated data first at NSE,” said the report.

 When asked to comment on the development, OPG said the report had been shared with SEBI and it had no further comment to offer.