Anand Subramanian arrested by CBI in NSE co-location case

Subramanian, according to sources, was arrested from his Chennai home late Thursday night and will be taken to the federal agency’s headquarters in Delhi where he will be produced before a local court for custody.

Subramanian was placed under arrest after he failed to cooperate in the agency’s ongoing probe triggered by the revelation of email exchanges between Ramkrishna and an individual referred to as ‘yogi’.

Sebi had penalised Ramkrishna for allegedly violating securities contract rules in the appointment of Subramanian as group operating officer and advisor to the MD. It said Ramkrishna was steered by the ‘yogi’ in the appointment of Subramanian.

Other than Subramanian, the agency also questioned two former NSE chief Ramkrishna and Ravi Narain. Narain was the managing director and CEO of NSE from April 1994 till March 2013, while Ramkrishna was MD and CEO of the exchange from April 2013 to December 2016.

The case, flagged by Sebi in 2018, relates to allegations that certain brokers received unfair preferential access to NSE servers. Stock prices on the trading screen keep changing every microsecond. A trader, who gets the stock prices before others in the queue, learns about the prices in advance, giving him an opportunity of sizable gains. In the period 2010-14, some brokers got connected to the exchange server before others.

It was alleged that OPG Securities, one of the trading members, was provided unfair access between 2012 and 2014 that enabled it to log in first to the secondary server and get the data before others in the co-location facility.

A whistleblower in 2014-15 complained to the Securities and Exchange Board of India (Sebi) saying some brokers in collusion with a few top NSE officials had abused the colocation facility. NSE was then using the so-called tick-by-tick (TBT) server protocol to relay data to members. The peculiar part about this protocol is how it delivers the information. Normal data protocols send data to all users connected on the network at the same time. But TBT transmits in the sequence of orders received. In other words, the user who gets the access to the system first would receive data earlier than the rest.

Co-location is a popular system that exchanges across the world offer to sophisticated trading members. While the main stock exchange servers in India are in Mumbai, the brokerages using them are spread across the country. Using normal internet connection to access these systems sometimes leads to data latency, or delay in transmission of data.

With Bureau inputs