As part of its efforts to level the playing field for algo trading in India, the securities market regulator SEBI has expanded on the rules applying to co-located servers/
For high-frequency trading, which is driven by fast computer algorithms, brokers need their servers located close to the exchange’s own data centre, a facility called co-location.
In its Thursday circular, SEBI has advised stock exchanges to allow direct connectivity between the co-location facility of one recognised stock exchange and the co-location facility of other recognized stock exchanges. “Stock exchanges are also advised to allow direct connectivity between servers of a stock broker placed in co-location facility of a recognized stock exchange and servers of the same stock broker placed in co-location facility of a different recognized stock exchange,” the note said. This facility should be available to all co-located brokers, who want the proximity to exchange servers, in a fair and equitable manner
Also, colocation services provided by a third party vendor or outsourced from a third party is “deemed to be provided by the stock exchanges”, SEBI noted. Hence, the exchange shall ensure complete control and jurisdiction over the matters related to its co-location facility. It will also “remain responsible and accountable for actions of such outsourced entity with respect to co-location services.” Stock exchanges are required to submit a quarterly compliance report to SEBI regarding the outsourcing services, after placing it before the board of the respective stock exchange
The regulator also said that the new facilities should be put in place within a month’s time.