The Central Bureau of Investigation (CBI) is understood to have widened its probe into the NSE co-location scam to bring within its ambit possibilities of alleged “collusive policy making” at the Centre to preserve the dominance of the exchange in the country’s capital market ecosystem.

The investigative agency is believed to be scrutinising a series of email exchanges in 2010 between then NSE Managing Director and CEO Ravi Narain and National Institute of Public Finance and Policy (NIPFP) professor Ajay Shah. Under the lens are separate mail exchanges (private email addresses) between Shah and former Finance Ministry top official K P Krishnan, who was then Joint Secretary in the Capital Markets Division, sources said. BusinessLine has exclusive access to these mails.

The CBI spokesperson declined to comment on the agency enlarging its scope of probe in the NSE matter. BusinessLine’s repeated requests for comments and confirmation of all such mail exchanges remained unanswered from all the three key players — K P Krishnan, Ajay Shah and Ravi Narain.

Sources said that the CBI, as part of its investigation of the NSE co location matter, may go deeper into the policy-making in the Finance Ministry since the early 1990s on the capital market front.

Screen shots of email exchange

Screen shots of email exchange

Screen shots of email exchange

Screen shots of email exchange

One charge-sheet filed

So far, the CBI has filed one charge-sheet in the NSE co-location scam against the former Chief Executive Officer of the bourse, Chitra Ramkrishna, and former Chief Operating Officer Anand Subramanian charging them with misuse of authority and administrative lapses. It has also conducted searches on the premises of a number of brokers seeking evidence for filing a supplementary charge-sheet. The supplementary charge-sheet is to back the main charge of manipulation of the co-location facility for the benefit of a few brokers.

The CBI is understood to be probing if Ravi Narain along with Ajay Shah sought to influence policy outcomes through policymakers in the Finance Ministry to preserve NSE’s dominance and ensure a monopoly in the equity market, especially derivatives where the NSE was emerging as a force to reckon with.

A mail sent by Ravi Narain to Ajay Shah on November 8, 2010 flags a subject titled “Re; Raghu Rajan”.

“Can you brief him on this whole Exchange issue and the conflict of interest so deeply embedded. If he writes, it will help a lot,” said this mail; Narain appeared to asking Shah’s help to ask Raghu Rajan to write an article on the aspect of conflict of interest in stock exchange ownership and how it needed to be curbed. To this mail by Narain, Shah replied, “Will push.” Shah also shared with Narain, “Raghu Rajan’s work number in the US” so that he can have a “quick word”.

Also under the CBI lens is the access that Shah had with senior Finance Ministry official K P Krishnan in discussions around policy issues on stock exchanges and SEBI orders on stock exchange-related matter.

The mail exchanges in 2010 — well before the NSE co-location mess — between the two are understood to have also revolved around the set of “star civil servants” (who were then posted in the IMF and other top overseas institutions) who could potentially be worth “intellectually influencing” in the days to come!

MCX-SX order under lens

Also on the email discussion was a September 2010 SEBI order passed against MCX-SX, a Jignesh Shah-promoted firm that wanted a licence to operate an equity bourse after being allowed to be a currency exchange.

Shah is understood to have asked Krishnan: “Have you read it? What do you think? Will it withstand the attacks that are sure to follow?”.

To this query, Krishnan is understood to have responded by mail: “Haven’t yet read the order but will do so tomorrow. I am sure Abraham would have done a good job of it. On all your questions, let us chat after I have read the order”.

Abraham was the wholetime SEBI member who signed the September 23, 2010 order denying sanction to MCX/SX for starting equities and derivatives trading.

CBI goes back in time
Under CBI probe are 2010 multiple email conversations on alleged policy influence on stock exchanges
Under CBI lens are then NSE MD & CEO Ravi Narain, NIPFP Prof Ajay Shah and ex-FinMin official K P Krishnan
Move seen as widening of existing CBI probe on NSE Co-location scam
CBI’s yet to be filed supplementary charge sheet likely to throw light on brokers and other vested interests influence on policy outcomes