In order to ensure fair access to the co-location facility, markets regulator Sebi on Thursday directed stock exchanges to allow direct connectivity between such facility of one bourse with the other.
Exchanges have been asked to allow direct connectivity between servers of a stock broker placed in co-location facility of a bourse and servers of the same stock broker placed in co-location facility of a different bourse.
This facility should be available to all the co-located brokers, who are desirous to avail such connectivity, in a fair and equitable manner, Sebi said in a circular.
"Stock exchanges are advised to allow direct connectivity between co-location facility of one recognised stock exchange and the co-location facility of other recognised stock exchange," it added.
While facilitating co-location facility, Securities and Exchange Board of India (Sebi) directed stock exchanges to put in place necessary systems for implementation of its circular within one month.
Sebi said that co-location services provided by a third party or outsourced from a third party is deemed to be provided by the stock exchanges.
The exchanges would have to ensure complete control and jurisdiction over the matters related to its co-location facility. Further, they will remain responsible and accountable for actions of such outsourced entity with respect to co-location services.
Also, they would have to submit a quarterly compliance report to Sebi regarding the outsourcing services after placing it before the board of the respective stock exchanges.
The regulator said facility that allows stock brokers and data vendors to connect to the stock exchange trading system over a Local Area Network would fall within the definition of Co-location and proximity hosting.