Catch the guilty, SEBI

    Is SEBI trying to throw a carpet over the sins of those associated with NSE Colocation scam?

    Is SEBI trying to throw a carpet over the sins of those associated with NSE Colocation scam?
    Is SEBI trying to throw a carpet over the sins of those associated with NSE Colocation scam?

    The Securities Exchange Board of India (SEBI) has issued a new set of Regulations for Settlement Proceedings effective Jan 1, 2019. This appears to be paving a way for SEBI to not punish those guilty in the National Stock Exchange (NSE) Co-location scam and let them off with a mere slap on the wrist. If true, this is absolutely shocking and warrants a Public Interest Litigation (PIL). There is a simple reason for why the NSE top brass should not be let off – the whole co-location installation was illegal as SEBI had not given permission to the NSE to do so[1]. In January 2010, NSE quietly started co-location services without an official announcement from SEBI (C B Bhave was its Chairman at that time). Were some in the SEBI too complicit? Who is the boss here? How could NSE lord it over the SEBI?

    SEBI has not acted against Ajay Shah, nor has the government. This is just appalling. The same modus operandi is being used to now rape and plunder from another exchange and SEBI and the Finance Ministry just look on…

    When the Bombay Stock Exchange (BSE) complained about NSE’s move, SEBI did little. Even as early as in 2011, complaints were coming into SEBI about unfair access to some Foreign Institutional Investors (FII)s and SEBI ignored them. And then there is the little matter of a case in the Madras High Court wherein the Court has served notice to the SEBI to explain its action (or inaction)[2]. Is SEBI shielding some of its own guilty in this?

    Who benefited?

    The list of co-conspirators is long[3].  The then Finance Minister Palaniappan Chidambaram, realized that there was far more money that can be made in stock markets (the Harvard education helped) than in deal kickbacks. Lobbyist Ajay Shah was his blue-eyed boy and a close aide of the then capital market secretary K P KrishnanSusan Thomas, wife of Ajay Shah and her sister Sunitha Thomas (wife of NSE’s then trading head Suprabhat Lala) formed High Frequency Trading (HFT) firms like Infotech and Chanakya to exploit the loopholes in NSE architecture. They then turned around and sold their technology to brokers such as OPG Securities. Ajay Shah has been named in a Central Bureau of Investigation (CBI) chargesheet in his role in enabling OPG Securities get illegal access to the NSE servers. Yet he roams free.

    The players who benefited from the HFT Scam
    Fig 1. The players who benefited from the HFT Scam

    Every investigation that NSE ordered into its own functioning was done in a manner that seemed to indicate that they knew how to get the expected outcome – in other words, NSE was trying to become its own judge, jury and executioner[4].

    More muck on Ajay Shah

    In replying to a question by Lok Sabha MP Dr. Kirit Somaiya on Co-location scam, the Govt. replied on Aug 10, 2018, that SEBI had examined the role of one of the professors associated with National Institute of Public Finance and Policy in relation to his association with NSE and accordingly, enforcement proceedings have been initiated against various entities/persons, including the said professor.

    This was almost four months ago and the Professor still roams free. Worse, he has also been caught doing the same thing in a different exchange, the Multi-Commodity Exchange (MCX). This surfaced after a whistleblower alleged that data from the MCX was accessed by Ajay Shah, who is also being investigated for the algo trading scam at the NSE[5].

    SEBI has not acted against Ajay Shah, nor has the government.  This is just appalling. The same modus operandi is being used to now rape and plunder from another exchange and SEBI and the Finance Ministry just look on…

    Continued…

    References:

    [1] NSE started tick-by-tick services illegally while SEBI looked the other wayAug 23, 2018, MoneyLife.in

    [2] Notice to SEBI on NSE’s co-location servicesAug 18, 2018, The Hindu

    [3] Who benefited from the HFT scam? Oct 4, 2017, PGurus.com

    [4] Is NSE trying to become its own judge, jury and executioner? Nov 19, 2017, PGurus.com

    [5] MCX probing ‘abuse’ of pact with IGIDRNov 26, 2018, Hindu Business Line

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    4 COMMENTS

    1. SEBI won’t do a thing. The appointment of it’s chief is a rip off. The guy, originally from HP cadre, got deputed for two years to UP Cadre with a Congress godfather and then spent most of his service life at the Centre. He specialised in taking out ambiguous orders as JS and AS Mines, the interpretation of which could milch prospective miners but was manna for the various Mines mafias in the country which had standard rates for the interpretation they wanted to the detriment of revenues and ecology. Prakash Javeekar didn’t have a clue about what was going on and made much if this UPA star. When eventually some affected prospective miners got to brief the PMO – perhaps – he got wise to it and quietly got himself posted as AS in the Finance Ministry and managed to pole vault to SEBI from there. He will do everything in SEBI that will discredit the present Govt and help the Congress.

    2. It is the prerogative of the PM to form his ministry. NaMo was quick on DeMo !!
      After looking at Arun Jaitley’s performance as DM for a shot period and FM for over four years now proves that NaMo let us down on SEBI. NaMo lost opportunity to restructure SEBI. PC and his gang will have the last laugh.

    3. The staggering depths of the greed of these people are unfathomable. It verges on sadism to gleefully beggar the nation and sit and watch while its multitude struggle to survive -where even to make payment on your utilitity bill is an invite for one to incur a bribe or otherwise face disconnection. Utterly shameful!!

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