DailyPost 2128

The co-location of brokers servers leading to undue advantage of microseconds, leading to trading profits of a windfall nature, by the National Stock Exchange, NSE, is the co-lo scam, as it popularly known today. Three ground rules, generally accepted by all of us, seems to be terribly broken; first that cutting edge technology, brings with itself transparency and does not allow for mass scale manipulation of the system. Secondly, people who have been a part of the system not for years but decades together, can be relied upon. Thirdly, the management, law enforcement, other governments agencies and the political executive respond and react with the alacrity to an issue or a crisis, as it deserves. Crisis has never been defined in Indian governance.

You can take your own call to hush, push or shrill, being the management. The process and time can be played around with. Indian governance is epitome of timelessness. In 2010, NSE allowed co-location of broker’s servers in the same room as NSE’s trading servers. Dark fibre lines from the co-located servers to the broker’s offices was also allowed. This was the data topology and its movement. In 2012, some top NSE executives allowed select brokers to log onto bourse’s trading server ahead of others. The information advantage was transformed into price advantage by these brokers, over all others. It led to huge illegal profits. The system flaw was that if a broker who logged in first, he would get price data ahead of the others the whole day.

The system flaw and micro second advantage was known to NSE executives. It was provided to a select band of brokers. In 2015, a Singapore based person alerted SEBI and a journalist, about the co-lo racket. SEBI set up a technical committee and NSE’s transmission system was changed to send data simultaneously, not sequentially. So, the scam started sometime in 2102 and continued till 2015 or so, when it was changed to simultaneous transmission of price data. When it started Ravi Narain was the MD and Chitra Ramakrishna joint-MD. In April, 2013, Ravi Narain was made NSE’s vice president and Ramakrishna its MD. Both have been with the NSE since the days of its creation and presumably knew every nitty gritty of it.

They would also have known of the Harshad Mehta case and the background to the creation of NSE. The creation of NSE has been a watershed moment in India’s economic history. The issue finally revolves around trust and reliability which the Indian system in not able to create in a variety of areas. On the face of it, they were most reliable, going by the track record available, with one of its kind expertise to run the show. Chitra Ramakrishna’s Himalayan Yogi story can at best be termed as nauseating. While all accused battling their legal destiny, the arrest of an ex-top cop has made the case even murkier. He was arrested on the charge of illegally tapping the phones of NSE staff. As is proverbially said, law will take its own course. But our course is pre-decided; we live in an age were getting duped in the new normal.

Sanjay Sahay

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