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(SEBI Circular) Review of Guidelines for Co-location / Proximity Hosting Facility Offered By Stock Exchanges

1. SEBI, in consultation with Technical Advisory Committee of SEBI (TAC), has reviewed the applicable provisions of the SEBI circular dated May 13, 2015 regarding guidelines to be followed by stock exchanges while facilitating co-location / proximity hosting, particularly with respect to the following:
(i) Direct connectivity between colocation facilities of recognized stock exchanges.
(ii) Colocation services / data centre facilities entirely/ partially provided and managed by a third party data centre service provider.
(iii) Stock exchanges allowing stock brokers / data vendors to connect to the stock exchange Trading system over an internal Local Area Network (LAN).
2. Pursuant to the aforementioned review, stock exchanges are advised to allow direct connectivity between colocation facility of one recognised stock exchange and the colocation facility of other recognized stock exchanges. Stock exchanges are also advised to allow direct connectivity between servers of a stock broker placed in colocation facility of a recognized stock exchange and servers of the same stock broker placed in colocation facility of a different recognized stock exchange. This facility should be available to all the colocated brokers, who are desirous to avail such connectivity, in a fair and equitable manner.

3. In addition to the above, in order to ensure fair and equitable access to the colocation facility it is clarified as under:
(i) Colocation services provided by a third party or outsourced from a third party is deemed to be provided by the stock exchanges. Stock exchange shall ensure complete control and jurisdiction over the matters related to its co-location facility. Further, stock exchange will remain responsible and accountable for actions of such outsourced entity with respect to colocation services.
(ii) Stock exchanges shall submit a quarterly compliance report to SEBI regarding the outsourcing services after placing it before the board of the respective stock exchange.
(iii) Facility that allows stock brokers / data vendors to connect to the stock exchange trading system over a Local Area Network (LAN) shall fall within the definition of “Colocation / proximity hosting” as provided in SEBI circular dated May 13, 2015.
4. Further, it is clarified that, all provisions of SEBI circular CIR/MRD/DP/07/2015 dated May 13, 2015 on “Colocation / proximity hosting provided by stock exchanges”, shall be made applicable, including for cases such as colocation facility entirely/ partially managed by a third party and facility available to stock brokers / data vendors to connect to stock exchange’s system over LAN.

5. All other conditions as specified in the aforementioned SEBI Circular shall remain unchanged.

6. This circular is not applicable to Commodity Derivatives Exchanges.

7. Stock exchanges are directed to:
(i) take necessary steps to put in place necessary systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations within one month from the date
of the circular,
(ii) bring the provisions of this circular immediately to the notice of the stock brokers and also disseminate the same on their website, and
(iii) communicate to SEBI, the status of implementation of the provisions of this circular.

8. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.


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