The Central Bureau of Investigation (CBI) has arrested Sanjay Gupta of brokerage firm OPG Securities in the 2018 National Stock Exchange (NSE) manipulation case involving the former CEO of the bourse Chitra Ramkrishna.
Sources said Gupta was arrested since recent investigations into the case revealed that he had not only destroyed some evidence but also attempted to bribe officials of Security and Exchange Board of India (SEBI) when it was probing issues associated with NSE.
“Evidence has surfaced that he either bribed or attempted to bribe SEBI officials through a syndicate in Mumbai. We need to question him about that,” a CBI official said.
Gupta is the key and original accused in the 2018 FIR of the CBI which is also known as the NSE co-location case. It was only this year that Ramkrishna and others began being probed in the case by the CBI.
The CBI’s case pertains to charges of brokers being given preferential access to NSE’s trading system in the form of a co-location facility, through which they bought “rack space” for their servers. According to the agency, these traders obtained faster access to NSE’s data feed.
The agency in April filed a chargesheet against Chitra Ramkrishna, former CEO and MD of National Stock Exchange (NSE), and former NSE COO Anand Subramanian in connection with its case.
The CBI arrested Subramanian and Ramkrishna in connection with the case in February and March, respectively. The agency registered the case in 2018 but action against the two followed a SEBI report, which indicted Ramkrishna for illegal appointment of Subramanian and for allegedly sharing confidential information related to the bourse with a “Himalayan Yogi”.
On February 11, Ramkrishna was fined Rs 3 crore by the SEBI for allegedly violating rules in the appointment of Subramanian. According to the SEBI, several key decisions taken by Ramkrishna during her tenure as the NSE’s MD and CEO from 2013 to 2016, including Subramanian’s appointment, were guided by an unidentified yogi, “who may be largely dwelling in the Himalayan Ranges”.
An Ernst and Young audit report indicated that the Yogi may allegedly be Subramanian himself.
Between 2010 and 2014, CBI believes, Gupta allegedly “abused” the NSE server architecture in a criminal conspiracy with officials from the Exchange. The FIR states: “…unknown officials of NSE gave OPG Securities Pvt Ltd access to servers which were technologically latest and least crowded at that particular period. This helped OPG Securities Pvt Ltd. in being mostly the first one to log in on the exchange server of the NSE.”
Allegations of unfair access were first made by a whistleblower in January 2015. The whistleblower wrote to SEBI, alleging that a few brokers were able to log into the NSE system with better hardware specifications while engaging in algorithmic trading, to their unfair advantage.
Algorithmic trading, or “algo” in market parlance refers to orders generated at superfast speed by the use of advanced mathematical models that involve automated execution of trade.
A technical advisory committee report by the SEBI later found OPG Securities had consistently logged in first on selected TBT (tick-by-tick) servers on most trading days in 2010-14, and also had access to servers that had better hardware. At this point, Gupta is alleged to have bribed SEBI officials for a favourable order in its inquiry.