MUMBAI: Intensifying the high-profile co-location case at NSE, the Department of Income Tax, on Thursday, searched two NSE-linked brokers in connection with tax evasion probe against entities and individuals said to be involved in the alleged wrong-doings.
Official searches were being conducted in Delhi and Mumbai since Wednesday and the tax sleuths are believed to have so far recovered documents and computer peripherals.
The co-location case pertains to allegations where, certain brokers, including OPG Securities, operating on its trading platform got preferential access to servers of the exchange. A co-location facility provides early login and faster access to data feed of the exchange. Even a split-second faster access can yield huge gains for a second.
Officials said the action was based on "actionable inputs" suggesting tax evasion by a few entities linked to the NSE and also the co-location issue, where it was alleged that certain brokers operating on the trading platform allegedly made abnormal profits as a result of getting preferential access to the servers of the exchange. The controversy has delayed NSE's IPO plans.
The case has been under the Sebi scanner for sometime, and the NSE has recently submitted the forensic audit report prepared by auditing firm EY, to the regulator. EY carried out the forensic audit into cash markets, currency derivative and interest rate futures platform. The nation's largest bourse had earlier engaged Deloitte for a forensic audit of its equity derivatives platform.
In July, the NSE had approached Sebi to settle the case through consent mechanism. The regulator has not responded to the proposal as yet, though.