Chitra Ramkrishna, the former MD and CEO of the National Stock Exchange (NSE) who was arrested by the Central Bureau of Investigation earlier this year, has been fined ₹5 crore by SEBI for her role in ignoring the illegal laying of dark fibre lines to NSE’s co-location (co-lo) trading engines. A fine of ₹7 crore was imposed on the NSE for the same.
SEBI also imposed a fine of ₹5 crore each on the NSE’s current chief business development officer Ravi Varanasi and former Group Operating Officer Anand Subramanian. Besides, it imposed a ₹6-crore fine on Way2Wealth Brokers, ₹5 crore on GKN Securities and ₹3 crore on Sampark Infotainment for their role in the illegal use of dark fibre network.
SEBI said that the NSE gave preferential treatment to Way2Wealth and GKN Securities by allowing them to engage a non-eligible entity Sampark for P2P connectivity at the NSE co-lo. The brokers, in collusion with employees of the NSE and Sampark, made significant profit due to unfair latency advantage, SEBI said in its 186-page order.
Others penalised by SEBI are former NSE employees Nagendra Kumar SRVS, Deviprasad Singh, and MR Shashibhushan (Way2Wealth), Prashanth D’souza, Om Prakash Gupta, Sonali Gupta, Rahul Gupta, Netaji Patil, Rima Srivastava, Parshant Mittal, Mohit Mutreja (GKN).
Dark fibre networks are dedicated communication lines providing significant advantage over internet service providers, with better scalability and speed. Co-location is a data centre within the exchange premises hosting a broker’s server that is connected by fibre network. Co-lo space is rented by exchanges to brokers for speed trading. Some brokers were selectively allowed to install dark fibre without clear policy and the NSE played favourites by blocking entry of alternative national long-distance players. The NSE had no clearly-defined public policy as to when and how it permitted competing carriers into co-lo, which ensured advantages to a select few.
SEBI found that dark fibre cable was laid by Sampark Infotainment in such a manner that it resulted in Way2Wealth and GKN Securities having a latency advantage over other brokers not using Sampark or those who were denied Sampark connectivity.
“Such an unfair advantage, available with certain stock brokers, is in contradiction to various regulations, recommendations and circulars issued in relation to the co-location facility that emphasises on providing equal, unrestricted, transparent and fair access to all the brokers and all the participants without any bias or favour,” SEBI order said.
Earlier last week, the CBI arrested Sanjay Gupta, owner and promoter of Delhi-based OPG Securities and GKN Securities, in connection with the scam in which brokers allegedly abused the facility to make gains by getting early access to the stock market.