In the Co-location scam case, SEBI dismissed charges against the National Stock Exchange (NSE) and its former CEO, Chitra Ramkrishna. SEBI’s Whole Time Member Kamlesh C Varshney ruled that there was insufficient evidence to prove allegations of collusion and misconduct. The decision clears NSE and its leadership of any wrongdoing in the matter.
New Delhi: The Securities and Exchange Board of India (SEBI) dropped proceedings against former National Stock Exchange (NSE) CEO Chitra Ramkrishna, former Vice Chairman Ravi Narain, former Group Operating Officer Anand Subramanian, and four other senior NSE executives involved in the co-location scam.
SEBI Whole Time Member Kamlesh C. Varshney issued the order, citing a lack of sufficient evidence to support the allegations of collusion and misconduct against NSE and its leadership.
Referencing a 2023 report from the Indian School of Business (ISB), In its order, SEBI stated,
“There are no new evidences in the current proceeding,”
The available evidence, SEBI noted, did not meet the required ‘preponderance of probability’ standard necessary to prove collusion between OPG Securities (OPG) and NSE officials.
SEBI concluded,
“Due to the absence of sufficient material/evidence/objective facts on record in this case, the test of ‘preponderance of probability’ fails to produce enough justification for the establishment of collusion/connivance between OPG and its directors with the Notices”
This decision follows a January 2023 ruling by the Securities Appellate Tribunal (SAT), which overturned SEBI’s April 2019 directive for NSE to disgorge Rs. 625 crore.
NSE introduced the co-location facility in 2009, allowing brokers to place their servers within the exchange’s data centers for a fee, enabling them to access market data slightly faster than other participants.
The controversy arose in 2015 when whistle-blowers alerted SEBI to potential preferential access issues. SEBI’s investigation revealed that NSE’s data dissemination system was vulnerable to manipulation and market abuse, leading to an inquiry into 15 stockbrokers, including OPG Securities.
In 2019, SEBI ordered NSE to disgorge Rs. 624.89 crore and imposed a six-month trading ban. However, after NSE appealed, SAT reduced the disgorgement amount to Rs.100 crore.
SEBI also directed OPG Securities to disgorge Rs.15.75 crore with interest, but this ruling was later overturned, and the matter was sent back to SEBI for reassessment. SAT further instructed SEBI to re-evaluate the case, focusing on recalculating the disgorgement, reassessing the allegations of collusion, examining claims of crowding out other traders, and determining penalties for any evidence concealment.
SEBI’s role was to investigate whether OPG and its directors gained an unfair advantage through secondary server access or by crowding out other market participants. SAT previously ruled that merely logging into the primary server first did not constitute an unfair advantage, thus narrowing SEBI’s scope of investigation.
Following the SAT ruling, SEBI issued fresh notices in May 2023 to NSE and others. Throughout the proceedings, SEBI provided the accused parties with access to documents and opportunities for cross-examination.
Despite these opportunities, SEBI found no substantive evidence of collusion against NSE or its former executives. NSE defended its co-location practices, explaining that the secondary server was intended as a backup in case of primary server failure, and any misuse was addressed through disciplinary actions against traders, including OPG Securities.
Read Also: Delhi High Court Fines CON MAN for Posing as PMO Official to Gain VIP Temple Darshan
Chitra Ramkrishna argued that the evidence did not support the allegations against her and maintained that the charges of ignorance and connivance were contradictory. Anand Subramanian similarly contended that there was no specific evidence against him in the show cause notice, despite several reports, claiming there was no solid foundation for the allegations.
Ultimately, SEBI dismissed the charges against NSE’s former executives and others due to insufficient evidence of collusion. While SEBI acknowledged that NSE lacked a well-defined policy for the co-location facility and failed to properly monitor the secondary server’s usage, this did not prove collusion with OPG Securities or its directors.
In a separate ruling, SEBI ordered OPG Securities to disgorge Rs. 85 crore, imposed a six-month trading ban, and upheld a five-year debarment from trading.
FOLLOW US ON YOUTUBE FOR MORE LEGAL UPDATES
