[10][11][12] In a recent verdict, the Madras High Court issued a notice to SEBI, MCA, ED in response to a Public Interest Litigation (PIL) filed by the Chennai Financial Markets and Accountability (CFMA).
[19] It is mentioned in passing in the NSE's 2009-10 annual report statement: "In keeping with global trends, the exchange has provided members a co-location facility for low latency high frequency trading.
"[24] The Economic Times first reported that on 22 May 2017, SEBI issued show cause notices to the exchange and fourteen individuals, including former managing directors Chitra Ramakrishna and Ravi Narain.
[24][25] Notices have been sent to Ravi Narain, vice-chairman of NSE, who was serving as chief executive officer (CEO) and managing director (MD) at the exchange during the period when the alleged violations took place.
Among other officials who received show cause notices were former technology heads — Ravi Apte, and Umesh Jain, and former chief operating officer Subramanian Anand.
NSE vice-chairman Ravi Narain had put in his papers on 2 June 2017, amid regulators intensifying their probe into the alleged lapses in high frequency trading.
[30][31] The consent process is an alternative dispute resolution mechanism, allows an alleged wrongdoer to settle a pending issue by accepting a penal action without admitting or denying the guilt.
When such a significant development happens in market, SEBI generally puts out a discussion paper, consults its Technical Advisory Committee (TAC) and then issues guidelines.
[33] It was during this period, the NSE continued operations such as HFT for many years, "enabling brokers to help their clients especially the Foreign International Investors (FII) to make piles of illegal cash".
[citation needed] Later in 2010, NSE started providing colocation facility but without any formal approval from SEBI under the name of Direct Market Access (DMA).
Thus, CB Bhave, Ravi Narain and Chitra Ramakrishna formed the crucial conduit which executed colocation facilities at NSE with the blessings of P Chidambaram.
[citation needed] As mentioned in the whistle-blower's letter, these players, in the garb of research, got full granular time series data from NSE and created algorithmic programs to game the market through brokers such as OPG, Alpha Grep etc.
[57] The scam was exposed in 2015, when a whistleblower sent a letter to SEBI alleging that NSE provided preferential access to a few high-frequency traders and brokers to the exchange's trading platform.
The broker entity to receive maximum benefit in the scandal was OPG Securities, which was provided multiple login IPs and allowed access from the secondary servers.
[46] SEBI's TAC report also revealed that OPG securities was given access using the co-location facility during 2010-2014 that enabled it to log in to the NSE server before any other entity and receive data before any other broker in the market.
Whistle-blower Ken Fong's letter points to Bangalore-based, front-end technology provider Omnesys, a company that sold trading software to NSE's members and is said to have benefited, legitimately, from its ability to connect ahead of others to the exchange's servers.
[74] In November 2015, the whistle-blower's letter referred to SEBI's technical advisory committee (TAC) report that concluded in March 2016, that NSE systems were prone to 'manipulation' and thus recommended an investigation.
[87][88][89] SEBI also barred Ajay Shah, Infotech Financials’ two directors- Sunita Thomas and Krishna Dagli and Suprabhat Lala from being associated with any entities recognized by the markets regulator for a period of two years.
[92][93] The Securities Appellate Tribunal (SAT) has given a four-week timeline to eight NSE officials including past CEO Chitra Ramakrishna, to file rejoinders in their pleas against SEBI penalising them in the co-location case.
[98] On June 29, 2022, Chitra Ramkrishna was fined 5 crore by SEBI[99] for her part in disregarding the unauthorised installation of black fibre connections to the exchange's co-location trading engines.
[104] The Enforcement Directorate (ED) in Delhi has detained Ravi Narain, the former CEO of the National Stock Exchange (NSE), in a phone tapping case, on 30 August 2022.
[105] On 28 September 2022, in the phone tapping case, the Delhi High Court granted statutory bail to former NSE CEO and MD Chitra Ramkrishna and Anand Subramanian.
[106] On 1 November 2022, the ED argued against Chitra Ramkrishna's bail in the Delhi High Court, saying that she was the "mastermind" behind the criminal conspiracy involving the alleged illegal phone tapping of NSE employees and that the money laundering case was related to this.
[109] I-T officials also disclosed that they have gathered reconstructed order books with cash being transmitted to tax havens (preferred by FIIs) like Cyprus, the British Virgin Islands, Mauritius, and Hong Kong — wherever OPG securities had access.
[111] On 28 May 2018, the Central Bureau of Investigation filed nine-page first information report (FIR) a year after the second whistle- blower, calling himself Jaime Jones, made serious allegations in a letter to the SEBI chairman.
[121] Sebi levied penalties of Rs 11 crore on eight businesses, including the National Stock Exchange (NSE) and its previous chiefs Chitra Ramkrishna and Ravi Narain, in the case involving software related to algorithmic trading.
[129][130][131] On 18 July 2022, the Delhi Court prolonged Chitra Ramakrishna's remand by four days in a money laundering case involving suspected phone tapping and spying of stock exchange staff.
[132][133][134] The Central Bureau of Investigation (CBI) arrested former Mumbai Police Commissioner Sanjay Pandey on 24 September 2022, in connection with an alleged case of illegal phone tapping on NSE employees.
[141] On 8 July 2015, Sucheta Dalal wrote an article on Moneylife's portal alleging that certain NSE officials were leaking sensitive data related to HFT or co-location to a select set of market participants so that could trade faster than their competitors.
[74] The co-location scandal came to light when the NSE filed a defamation suit on 21 July 2015, claiming damages of ₹1 billion in the Bombay High Court against Moneylife, to stop the publication and circulation of the article.