The Union finance ministry has asked market regulator Securities and Exchange Board of India (Sebi) to probe the alleged "dark fibre links" between the BSE and the NSE, and has been informed, in turn, that a "preliminary fact finding" exercise is already underway.
The BSE and the NSE have also been asked to provide inputs.
When asked about the issue, the former declined to comment, and the latter said the allegations were baseless.
Business Standard has reviewed the letters sent by the finance ministry to the Sebi over the past few months, along with the internal notes, which were obtained under the Right to Information (RTI).
The documents showed that the ministry swung into action after receiving, in November, a whistle-blower account that talked about the "dark fibres" and other issues in high frequency trading (HFT).
According to the ministry note sent to the Sebi, "The recent letter from the whistle-blower dated October 3, 2015, talks about …