Technology has no doubt made life a lot simpler for humans. However, technology is also a double-edged sword that can be used for a wide variety of illegal purposes. Recent case of Chitra Ramkrishna, former National Stock Exchange (NSE) MD and CEO is a perfect example. The alleged NSE algo trading scam, also referred to as High Frequency Trading (HFT) scam is one of the most shocking that we have come across in recent times. Here we unravel all the details of the alleged scam to give you a better understanding of how things could be manipulated at the highest levels.
What is NSE colocation scam?
If the NSE colocation scam is described in detail, it would easily fill a complete book and may even require multiple volumes. In simple terms, NSE colocation scam involved an intricate system that benefitted specific brokers. NSE had launched colocation facility in 2009, which was available to brokers who can afford it. With the colocation facility, the brokers were able to get early information about prices of shares and sales and purchase volumes.
In share trading, even a few seconds can make the difference between profit and loss. This is exactly how the brokers made use of the colocation facility to register gains. The brokers were able to see changing stock prices much faster, as compared to other investors who did not have access to colocation facility. They exploited the inherent flaws of the colocation system to make profits. It went undetected for several years, till it was revealed by a whistleblower in an email.
What is the size of NSE colocation scam?
Since the NSE colocation scam is quite complex, it may take a long time to estimate the size of scam. Moreover, due to the technical nature of the scam, the exact value of irregularities may never be found. Initial estimates suggest that the people involved in the scam may have been making anywhere between Rs 50 core to Rs 100 crore every day.
Assuming that the scam continued for around five years, the total amount could be quite huge. It is alleged that some foreign institutional investors were also involved in this scam. So, a lot of money has also gone out of country in illegal manner.
When did the NSE scam start?
As per initial investigation, it has been estimated that the scam occurred between 2010 and 2015. Till March 31, 2013, Ravi Narain was the MD and CEO of National Stock Exchange. At that time, Chitra Ramkrishna served as the deputy CEO. Later, Chitra Ramkrishna became the MD and CEO of NSE and held that post till December 2016.
What are the NSE scam accused saying?
Both Ravi Narain and Chitra Ramkrishna have said that they had limited knowledge of technical matters. As such, they had to rely on advice provided by functional heads to take decisions. They also said that they were not micro managing the colocation facility, as they had limited knowledge of advanced technology being used.
Who is the Himalayan Yogi in NSE scam?
In her defense, Chitra Ramkrishna had said that her actions were guided by a Himalayan Yogi. This revelation has made the case even more intriguing. According to CBI investigation, the mysterious Himalayan Yogi could be Anand Subramanian. A former NSE Group Operating Officer, Anand Subramanian was later arrested by CBI.
It was Chitra Ramkrishna who had chosen Anand Subramanian to serve as her advisor. He was later promoted as Group Operating Officer (GOO), entitled to receive Rs 4.21 crore as his pay cheque. Investigations are currently underway to ascertain Anand Subramanian’s exact role in NSE colocation scam.
The NSE colocation scam is currently under investigation. A clearer picture will emerge about all those involved when investigative agencies file their chargesheet in court. Hopefully, this case works as a lesson for all stakeholders. We hope steps will be taken to ensure that such things do not happen again. Stock exchange scams dent confidence of retail investors, who often risk their hard-earned money.