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Journalism of Courage
Market regulator Sebi has penalised 18 entities, including the National Stock Exchange (NSE), its former managing director Chitra Ramkrishna and group president Ravi Varanasi, in the ‘dark fibre’ case.
The Securities and Exchange Board of India (Sebi) has imposed penalties of Rs 7 crore on the NSE, and Rs 5 crore each on Ramkrishna and Varanasi. It also levied a fine of Rs 5 crore on former NSE group operating officer Anand Subramanian. Further, it slapped a fine of Rs 6 crore on Way2Wealth Brokers, Rs 5 crore on GKN Securities and Rs 3 crore on Sampark Infotainment. According to a Sebi order passed Tuesday, they have been asked to pay the total amount of penalty within 45 days.
The case relates to the alleged differential access given to certain broking firms in the form of ‘dark fibre’ at NSE, to connect across the colocation facilities before other members.
The dark fibre or unlit fibre, with respect to network connectivity, refers to an already laid but unused or passive optical fibre, which is not connected to active electronics/equipment and does not have other data flowing through it and is available for use in fibre-optic communication.
Sebi initiated an investigation with respect to the dealings of several entities, for the period 2009-2016, to probe into the matter of providing connectivity to certain stock brokers by NSE in a manner which may be detrimental to the investors or the securities market. “W2W (Way2Wealth) and GKN, in collusion with the employees of NSE and Sampark made significant profit due to unfair latency advantage available with them,” Sebi said in its 186-page order.
Others penalised by the markets regulator are Nagendra Kumar SRVS, Deviprasad Singh, MR Shashibhushan, Prashanth D’Souza, Om Prakash Gupta, Sonali Gupta, Rahul Gupta, Netaji Patil, Rima Srivastava, Parshant Mittal, and Mohit Mutreja.
It was alleged that Sampark arranged the cabling in the co-location rack of NSE in such a manner that some stock brokers, Way2Wealth Brokers, and GKN Securities had lower latency compared to other trading members connected to the Sampark Multiplexer placed in NSE Meet Me Room.
The investigation revolved around alleged preferential treatment meted out by NSE to W2W and GKN by allowing them to utilise the services of Sampark for laying of dark fibre cable for P2P connectivity despite Sampark not having the requisite license from the Department of Telecommunications.
Meanwhile, the cable was laid by Sampark in such a manner (directly at the rack of the broker at the exchange) that it resulted in W2W and GKN having a latency advantage over other brokers which were not availing the services of Sampark or who when applied to NSE for allowing them to engage Sampark for providing P2P connectivity were denied by NSE.
“Such an unfair advantage available with certain Stock Brokers is in contradiction to various regulations, recommendations and circulars issued in relation to the Colo facility emphasize on providing equal, unrestricted, transparent and fair access to all the brokers and all the participants without any bias or favour,” Sebi said.
