Mumbai: Sebi on Wednesday fined the NSE Rs 1 crore and two of its former MDs — Ravi Narain and Chitra Ramakrishna — Rs 25 lakh each for omissions and commissions in the now infamous co-location (co-lo) scam. This scam had taken place at the bourse between 2012 and 2014.
Sebi fined the three for their roles in the scam, which favoured some select stock brokers to get the NSE’s trading data ahead of others, and profited from it. The NSE, Narain and Ramakrishna have to pay the fine within 45 days from the date of the Sebi order.
In April 2019, Sebi had ordered the NSE to disgorge Rs 625 crore as a penalty, the fund being the exchange’s profit from co-lo services. Through this service, the NSE had allowed brokers to place their trading servers close to the stock exchange’s main server. This was allowed mainly to cut down on the time to get trading data from the bourse to the brokers. In turn, these brokers disseminated the data from the co-located servers to their clients for trading ahead of others to profit.
Co-lo service is not illegal and widely allowed globally, including by Sebi. However, in case of NSE’s co-lo scam, some exchange executives had colluded with OPG Securities, and probably other brokers, and regularly gave them early log-in access to NSE’s main and secondary servers. Between 2012 and 2014, NSE’s servers disseminated data on a first-come, first-served basis.
Since OPG Sec and some other brokers were logged in to NSE’s servers ahead of all other brokers, they also got the data ahead of others to profit from the same. “The violations in this case are serious in nature, even though there are no investor complaints on record arising out of such violations,” a Sebi adjudicating officer noted in the 96-page order.