The member brokers have been directed to share the know-your-customer (KYC) details and ledgers of their clients, ID of devices used to put the trade orders, IP addresses as well as the media access control (or MAC) addresses which is an unique identifier for every laptop and mobile handset manufactured, two people aware of the communique from the bourse told ET.
“It is evident that exchange authorities want to know the locations of the traders. Maybe they are examining whether sub-brokers of franchisees in remote locations had accessed user IDs and passwords of a large number of unrelated investors for derivative trades. In such cases, we won’t know whether such trades were unauthorised unless there are complaints by actual investors. Also, the exchange could be looking into whether orders were placed from outside the country,” said chief technology officer of a large brokerage.
Focus on Unauthorised Strategies
Each broker has been given a set of clients on whom the information has to be shared.
The exchange surveillance department had sought the information, largely related to local clients, last Friday, sources confirmed.
The F&O volumes on NSE surged nearly 737% between January 2020 and March 2022. The average daily F&O volumes were ₹140.25 lakh crore in March 2022 against ₹16.75 lakh crore in January 2020.
“From the unique nature of the queries, it seems the focus is on many high net worth clients whose F&O trading volumes had suddenly shot up. The exchange may also be looking into how algo trading has been used, whether these trades were outsourced to algo players by these large retail investors or unauthorised strategies were used. For instance, brokers have been asked to give the IP addresses of a client with the different client codes,” said Mitil Chokshi, senior partner at chartered accounting and forensic firm Chokshi & Chokshi.
An investor’s unique client codes with various brokers are mapped to her PAN.
The brokerages have also been asked to disclose the mode of order placement for the various trades. For placing orders, clients can use brokers’ mobile apps, log into the website, chat options, call a relationship manager, send an email, or use the call and trading facility under centralised desk of brokerages through recorded lines.
Regulatory Issues
According to market circles, the exchange may be looking into instances of freak trades as well as reasons behind a sudden spurt in trade volumes by a set of clients.
“The IPs generated when an order is placed would indicate the locations. It would show whether orders were placed from multiple locations, particularly as mobility due to the pandemic was restricted. There are understandable regulatory concerns when someone else is trading on a client’s behalf, especially when it comes into riskier trades like F&Os for which the original client may be either unaware of or has not given any explicit consent to the broker,” said another person.