I-T raids on former, current NSE officials in co-location case

16 Nov 2017


The Income Tax Department is conducting search operations at the premises of National Stock Exchange officials and brokers whose names figure in the co-location server controversy, reports today said.

These include former managing directors Ravi Narain and Chitra Ramkrishna, Suphrabhat Lala, and promoter of OPG Securities Sanjay Gupta.

OPG Securities is at the centre of the 'co-location controversy' on the NSE, in which some brokers who had availed of the server co-location facility allegedly got preferential access to the exchange's trading system. These brokers had somehow managed to connect to the exchange's back-up server, and hence could access the price feed faster, giving them an advantage over other brokers.

It is alleged that the breach happened with the connivance of some NSE officials, though this has not been established yet.

A senior income-tax department told Business Standard that searches were being carried out by the Delhi I-T Department in coordination with a Mumbai team.

He said, "The searches are to find out the beneficiaries of the alleged irregularities and to look for the evidence of illegal gratifications received by brokers for the benefit their actions passed on to beneficiaries.

''The searches are going on since yesterday (Wednesday) will continue for two more days."

Reports said the action had been initiated by the department after getting approval from the highest authorities of the finance ministry. The tax department will investigate all those persons who have been named in the show cause notice issued by the Securities and Exchange Board of India (Sebi).

The National Stock Exchange on Wednesday submitted a forensic audit report on the cash market, currency derivatives, and interest rate futures markets relating to the co-location case. The forensic report has been prepared by E&Y and the Indian School of Business. Sebi will prepare a future course of action based on the findings of the forensic report.

A few trading members on the NSE are alleged to have made a killing by unfairly gaining faster access to the price feeds, and it is suspected that some employees may have helped them. The case is being investigated by Sebi.

On 22 May, Sebi had served notices on the NSE and 14 of its current and former management personnel for alleged irregularities at its co-lo facility. The NSE already replied to the notice, though the contents are not known.

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