Mumbai: The Central Bureau of Investigation (CBI) on Saturday began nationwide searches on brokers who allegedly misused the NSE co-location facility during 2010-2015 and had unfair access to some network servers at the exchange.
“CBI is conducting searches on brokers across 10 locations in Delhi, Mumbai, Gandhinagar and Kolkata. These brokers allegedly misused NSE’s co-location facility to gain an unfair advantage over the broader market. The searches are to ascertain any financial gains made due to this access,” an official said, requesting anonymity.
Mint had reported on 30 March that CBI is relying on the Indian School of Business (ISB), Hyderabad’s report of 2017 to zero in on the profits or gains made due to lapses in National Stock Exchange (NSE) systems. The ISB report listed 30 brokers.
This is the second leg of the CBI’s investigation after examining the role of former senior NSE officials, including former chief executive Chitra Ramkrishna and former chief operating officer Anand Subramanian.
CBI’s official aware of the matter said that the agency is investigating the role of brokers who misused NSE’s architecture, and senior academician Ajay Narottam Shah who took sensitive data from the NSE for research but allegedly used it to develop an algorithm called “Chanakya”, who decided on the technology of NSE (during the relevant time). It is also probing the role of NSE and its former CEO Ramkrishna in the illegal appointment of COO Subramanian, giving him undue benefits and also sharing of sensitive information with a third party and finally the role of the Securities and Exchange Board of India (Sebi) and NSE officials in this matter.
CBI has already filed a charge sheet against Ramkrishna and Subramanian. The two are in judicial custody after a CBI special court denied their bail. They have appealed the CBI special court decision in the Delhi high court.
Delhi high court on Friday issued a notice to CBI to file its reply.
“Investigation has established that Sh. Muralidharan Natarajan, the CTO (chief technology officer) of NSETECH (a subsidiary of NSE), was responsible for putting in place the co-location architecture at NSE. He was reporting to Ms. Chitra Ramkrishna,” said CBI in the charge sheet.
“Investigation conducted so far has established that during the period 2010-15 (i.e. when the accused Chitra Ramkrishna was managing the affairs of NSE), OPG Securities had connected to the secondary POP server on 670 trading days in the futures and options segment. Investigation regarding allegations of preferential access granted to certain brokers by officials of NSE and undue gains made out of it, during the tenure of Chitra Ramkrishna and Anand Subramanian, is underway,” it added.
CBI further asserted that it believes the so-called ‘Himalayan Guru’ to be Anand Subramanian himself.
CBI, in its charge sheet, said Subramanian had created an email id ‘firstname.lastname@example.org’ on 10.03.2013 and used the same to communicate with Ramkrishna to further their criminal conspiracy,
“A search was conducted at the premises of Sh. Anand Subramanian, the then group operating officer and advisor to MD of NSE. In his disclosure statement U/s 27 of the Indian Evidence Act, he admitted having operated the said email ID “email@example.com” and accessed the said email ID in the presence of independent witnesses,” CBI had said.
“To add value to the robustness of evidence collected on the issue, MLAT (mutual legal assistance request) request to the USA has been sent by CBI through the Central Authority for collection of metadata and content data of the email ID firstname.lastname@example.org M/s Microsoft Inc,” CBI had told the special court.