The probe into the irregularities at the National Stock Exchange (NSE) has widened as the Central Bureau of Investigation (CBI) started questioning the exchange’s former CEO Chitra Ramkrishna on Thursday evening. The agency also issued lookout notices against NSE’s former CEO Ravi Narain and its former chief operating officer Anand Subramanian on Friday.
Meanwhile, tax raids on the Mumbai and Chennai residences of Ramakrishna and Subramanian continued for the second day on Friday. A senior I-T department official told FE that financial transactions of Subramanian’s wife Sunitha Anand, a former NSE official, were also being investigated.
Official sources also told FE that the Enforcement Directorate (ED) was about to join the multi-agency investigation.
It is not immediately clear if Narain and Subramanian have fled the country or are still in India. The CBI is also learnt to be investigating other unnamed NSE officials to gather evidence on allegations that some brokers got preferential access through the co-location facility at the stock exchange. Early login and ‘dark fiber’, which allows a trader a split-second faster access to the data feed of an exchange, could potentially result in big gains for a trader.
The CBI had booked owner and promoter of Delhi-based OPG Securities Sanjay Gupta and others in connection with the alleged abuse of NSE co-location facility. The agency is also probing unidentified officials of market regulator Sebi.
“It was alleged that the owner and promoter of the said private company (OPG Securities) abused the server architecture of NSE in conspiracy with unknown officials of NSE. It was also alleged that unknown officials of NSE, Mumbai, had provided unfair access to the said company using the co-location facility during the period 2010-2012 that enabled it to login first to the exchange server of Stock Exchange that helped to get the data before any other broker in the market,” the CBI has stated in an FIR.
It emerged that Gupta was the first to log in in 90% of cases which prompted murmurs in the stock broker circuit, and resulted in a load balancer being introduced by the NSE. According to CBI FIR, Gupta once again managed the data centre staff of NSE to get connected to the backup servers which were with zero load and provided far better and faster access of market feed to OPG Securities in comparison to other brokers.
The probe agency has alleged that he had managed to manipulate Sebi’s inquiry against the role of OPG Securities in the misuse of TBT (tick-by-tick) architecture of servers by paying bribe to the officials of the stock market regulator.
The ambit of the ongoing tax raids include “suspected generation of black money by way of abuse of co-location facility in the NSE”, an official said.
In an order issued on February 11, the Sebi had stated that Ramakrishna and Subramanian committed “financial misdeeds” and identified serious governance lapses and misrepresentation of facts at NSE between 2013 and 2017.
After finding serious lapses in governance and misrepresentation of facts, Sebi imposed a penalty of `3 crore on Ramakrishna and `2 crore each on the NSE’s former MD and CEO Ravi Narain, and Subramanian. The regulator found that Ramakrishna shared sensitive information pertaining to financials, appraisals, increments and strategy with an unknown person, who is also referred to as the “Siddha Purush” by Ramakrishna.
Sebi had added, “Hence, there appears to be a glaring conspiracy of a money making scheme that involves Noticee No. 1 (Ramakrishna) and No. 6 (Subramanian) with the unknown person, by which Noticee No. 1 would increase the compensation granted to Noticee No. 6 and Noticee No. 6 would then pay the unknown person from such increased compensation.”
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