ED raids nine locations in Delhi-NCR in NSE manipulation case

🗞️ Subscribe Now: Get Express Premium to access the best Election reporting and analysis 🗞️

The ED case is based on a CBI FIR of 2018 where a brokerage firm was accused of manipulating the bourse in connivance with NSE office bearers.

The ED action comes exactly a month after CBI arrested Chitra Ramkrishna, who was the CEO and MD of National Stock Exchange (NSE) when the alleged manipulation happened. Before Ramkrishna, the agency had arrested Anand Subramanian, NSE’s former group operating officer, in Chennai on February 24.

On February 11, Ramkrishna was fined Rs 3 crore by SEBI for allegedly violating rules in the appointment of Subramanian. According to SEBI, several key decisions taken by Ramkrishna during her tenure as NSE’s MD and CEO from 2013 to 2016, including Subramanian’s appointment, were guided by an unidentified yogi “who may be largely dwelling in the Himalayan Ranges”.

Investigating agencies have not yet established the yogi’s real identity although an Ernst and Young audit report indicated that he may allegedly be none other than Subramanian himself.

The CBI’s case, however, pertains to charges of brokers being given preferential access to the NSE’s trading system in the form of a co-location facility through which they bought “rack space” for their servers. According to the agency, these traders obtained faster access to the Exchange’s data feed.

The CBI has booked Sanjay Gupta, the owner and promoter of Delhi-based OPG Securities Pvt Ltd, and others in the case.

According to the CBI, between 2010 and 2014, Gupta allegedly “abused” the NSE server architecture in a criminal conspiracy with officials from the Exchange. “…unknown officials of NSE gave OPG Securities Pvt Ltd access to servers which were technologically latest and least crowded at that particular period. This helped OPG Securities Pvt Ltd. in being mostly the first one to log in on the exchange server of the NSE,” the CBI’s FIR said.

The allegations of unfair access were first made by a whistleblower in January 2015. The whistleblower wrote to Sebi, alleging that a few brokers were able to log into the NSE system with better hardware specifications while engaging in algorithmic trading, to their unfair advantage. Algorithmic trading, or “algo” in market parlance, refers to orders generated at superfast speed by the use of advanced mathematical models that involve automated execution of trade.

A technical advisory committee report by the Sebi later found OPG Securities had consistently logged in first on selected TBT (tick-by-tick) servers on most trading days in 2010-2014, and also had access to servers that had better hardware. At this point, Gupta is alleged to have bribed Sebi officials for a favourable order in its enquiry.

Ramkrishna was MD and CEO of NSE from April 2013 to December 2016, while Narain held that post from April 1994 till March 2013.