NSE manipulation case: CBI raids properties linked to Chitra Ramkrishna
What's the story
The Central Bureau of Investigation (CBI) on Saturday conducted raids on different locations in the alleged market manipulation case involving former National Stock Exchange (NSE) CEO Chitra Ramkrishna. The raids are being carried out across Delhi, Gurugram, Noida, Mumbai, Kolkata, and Gandhinagar at the offices of various stockbrokers, who allegedly misused the NSE's co-location service in collusion with its authorities.
Context
Why does this story matter?
The 2018 case involves allegations of preferential access to some brokers via the NSE's co-location facility (where brokers can buy "rack space" for their servers), giving them faster and unfair access to the market data. It is alleged that some brokers, in collusion with insiders, took advantage of the algorithm and the co-location facility to profit themselves extravagantly.
Details
What are the recent developments in the case?
Last month, the CBI filed a charge sheet against Ramkrishna and former NSE COO Anand Subramanian in connection with the matter. They were previously detained by the investigative agency in response to a report by the Securities and Exchange Board of India (SEBI), which charged Ramakrishna for illegally appointing Subramanian and sharing secret market information with one unidentified "Himalayan Yogi."
Action
Rs. 3 crore penalty against Ramakrishna
The SEBI had penalized Ramkrishna with a Rs. 3 crore fine on February 11 for allegedly violating many guidelines during her tenure, including Subramanian's appointment. It said Ramkrishna was influenced by the unidentified Yogi in numerous significant decisions between 2013 and 2016. The Yogi's true identity has yet to be determined by investigators, however, an audit report indicated that he may be Subramanian himself.
Information
How did the case unfold?
As per The Indian Express, a whistleblower originally raised concerns about unequal access in January 2015. He informed the SEBI that a few brokers accessed the NSE system and engaged in illegal algorithmic trading, it said. However, an inquiry was launched after journalist Shantanu Guha Ray filed a PIL in the Delhi High Court in 2017 requesting the probe be expanded to include algo-trading.
Scam
What is NSE co-location scam?
The NSE co-location scam was flagged by the SEBI in 2018. It involved the country's biggest bourse providing some high-frequency traders access to speed up algorithmic trading. The traders were illegally given access to the NSE's server architecture through a "co-location" facility, which allowed them to log in before others. Later, some NSE and SEBI officials were also found involved in the scam.