I am trying to understand exactly how certain brokers, who had preferential access to NSE servers, were making money.
I know that the orders placed by these brokers were filled first. But as far as I am concerned, the speed of execution has never been an issue in trading. What really mattered always whether I was right about the direction of the trade or not.
So, how does it matter if some of these brokers were able to get their orders filled first? If they were wrong about the direction of the trade, wouldn’t they be losing money anyway? For example, if these guys were to place buy orders on Reliance (which has been falling non stop in last 3 days) and their orders were filled first, wouldn’t they still be losing money??
What am I missing here? Did they have access to more information than the rest of us that somehow revealed the direction of the stock movement in advance? What exactly was that information? Level 2/3 data may be??
Any explanation would be greatly appreciated! I am going crazy thinking about this
For normal users there is a split second delay in the data that comes through some of these brokers, this is a great disadvantage for high frequency traders. Furthermore, nse platform itself is crummy, the 5 paisa increments for securities is clearly designed to increase volatility and favor institutional traders.
I think this has happened long back . There were two server in NSE , primary and secondary(backup) , 4 or 5 companies got access to this secondary and they getting the price ticks half a second earlier and they were getting good profit.
How sebi found this is , when they checked logs or something , there where 4 or 5 companies , whose orders are alone being in top , then they backtraced and found whats happening.
I didn’t get one thing. Being a private organization NSE and BSE have prerogative to provide their facilities to their customers on preferential basis. Pay more get more (like other organizations, even govt financial institutions provide services on preferential basis). Am I missing anything here? @nithin@siva
It is responsibility of SEBI to safeguard interests of minority Shareholder(At least on papers). Stock exchanges are regulated by SEBI. Giving preferential access to any entity apparently means being unfair to smaller players.