Ms. Chitra Ramkrishna, who was the MD and CEO of NSE from April 2013 to December 2016, referred to a yogi as "Sironmani" a spiritual force that could manifest itself anywhere it wanted and did not have any physical or locational co-ordinates and largely dwelt in the Himalayan range who has been guiding her for the past 20 years on personal and professional matters. This crazy statement made me google about her, and with nothing much available in the internet, landed up buying this book. NSE was the best in terms of technology. But all the present news appears to be cover for skelton in the cupboard, else why all this come out now? In 2015, a whistle-blower's letter had opened a 'Pandora's Box'.Was the Regulatory body sleeping all these years? Is it so difficult to trace Emails the mode by which the spiritual force was communicated to? Why did they not use telepathy to communicate, and soon the laptop was earmarked as e-waste? These were the thoughts running in my head, as I grabbed the book, feeling sorry the way a beautiful qualified CA (hope even that is not a fraud) was used as a puppet or wondering if she was really involved in all this, if so to what extend.
The Market Mafia by Palak Shah was my 16th of 2021. The author’s path-breaking investigative journalism fleshes out the meticulous planning and organization behind the COLO scam, the dark drama involving SEBI probe and its loosely-knit final verdict. With each chapters, each engrossing, they are:
- House of Cards
- Life in the speed lane
- The Great Data Theft
- Battle of The Bourses
- The Goldmine's Code
- The 'Heart of Darkness'
- Some Gambles are 'More Equal'
- The Whiff of Money
Harshad Mehta and Ketan Parekh are considered the ‘formidable villains’ for exploiting the systemic loopholes to manipulate share prices. Once the Demigods of Dalal Street, the rogue stock traders attracted such severe crack-down from government investigative agencies that could shock even the most hardened criminals. But a scandal of much larger magnitude involving data theft at NSE and the Multi Commodity Exchange(MCX), that Mehta and Parekh could ever rev-up, has largely remained a mystery. The former exploited the loopholes in the India's banking system, stock market infrastructure remained unharmed. But the data breach by Ajay, Susan and their associates was India's first fraud that laid a direct Siege on NSE and MCX, where billions of dollar worth transactions take place daily.
The cabal hand-picked by SS Nadkarni, to set up NSE from scratch, was a turning point in the History of bourses in India. On one side was Ajay and Susan, two leading stock market scholars who never formally employed by NSE yet remained perfect insider and on the other side were Ravi Narain and Chitra Ramkrishna, two of the longest-serving bosses of NSE . NSEs board was filled with Babus retired from FM or entities regulated by it. Political patronage served to ensure that SEBI remained friendly to them. To the outer world, the BSE was brokers club but NSEs image was cast in its lofty standards of legal compliances. Soaring stock prices and the market capitalisation greatly influence board policies and deal-making in companies. It is also a cash cow, which can be milked simply by price-moving policy announcements. PC was Prima uomo to Stock Market. When Chitra Ramkrishna was made MD & CEO, Mr. Anand Subramanian, who was delegated substantial power of management akin to the powers granted to the MD and CEO. Mr. Subramanian was offered to join the NSE in the role of chief strategic adviser from April 2013 for an annual compensation of ₹1.68 crore. Prior to this, he had worked in Balmer and Lawrie in a middle level management with zero exposure to capital markets and was drawing less than ₹15 lakh per annum as of March 2013. In addition, he was re-designated as Group Operating Officer (GOO) and Adviser to MD. These appointments were against the Hiring policy. He was given charge of people management, new business, corporate communication, marketing, business excellence, research and development, pricing, strategic planning and subsidiaries—IISL, DOTEX, NSE Tech and NSE IT. According to a source, the letter was not even made available to company secretaries SN Ananthasubramanian and Co (SNA) for audit. The management is said to have claimed that it was an internal communication. His wife Sunitha Ananda was heading NSE Chennai.
In 2015, SEBI was woken up by a whistleblower, who described the contours of a front-running market operation perpetrated for over five years involving the use of COLO and High-Frequency Trading. Surprisingly, SEBI never scrutinized NSE’s COLO grid – an omission of duty – before the whistleblower highlighted the skulduggery.
In 2008, the then SEBI Chairman C B Bhave’s detachment from his Dharma as ‘the market watchdog’ opened the door for data theft at the National Stock Exchange (NSE), India’s largest asset pool. It also led to the installation of defective Co-location (COLO) trading infrastructure at NSE, by an unofficial decree, which gave a select few brokers preferential access to equity derivatives. Fast-moving trading bots, deep-rooted nexus between enterprising PhD scholars Ajay Shah and Susan Thomas, economists, top dollar earning executives, politicians, bureaucrats and salivating brokers were at play.
Chanakya, (meaning the most clever) the Algo software developed by Sunita's company IFPL, derived its name from the third century BCE Indian teacher cum philosopher, jurist and economic scientist born as Vishnugupta. TBT data gave Ajay an insight into the probabilities of an exchange order book.
"When regulation is weak, it encourages players who have strength in fixing the regulatory system to their own advantage. Even a few years of faulty regulation can do long-term damage to an industry by killing off firms with high ethical standards and endowed with skills in running a business as opposed to skills in fixing the system." This is not about NSE, Bhave or any secret TBT data expedition. It is what Ajay wrote in his column 'The X factor in regulation' about the metoric rise of Shah and MCX in a leading financial daily. Ajay was member of NCDEX and split his fury against MCX. The battle of supremacy in India's financial market did not end abruptly since MCX SX fell behind in the race. There was the National Spot Exchange Ltd. (NSEL) Fiasco. The NSEL owned by FTIL group, was India's first electronic commodity exchange that facilitated the purchase and sale of commodities, including agricultural products, by providing spot delivery of goods. Then, the exchange said, it had secured permission from the Ministry of Consumer Affairs under the Central Government to Start trading, under the argument that it would ease the pressure on the farmers to sell their proceeds at a lower price due to lack of warehouse. It was allowed to operate in 16 states in India. Once operational brokers played for profit, and trading went on a feverish pitch, as it was violating the norms of the delivery cycle by extending the contract beyond 11 days, and allowing traders to enter into simultaneous pair contracts. Stock prices came down, Rakesh Jhunjhunwala picked up Shah and FTILs stake in MCX, and FTIL was rechristened as 63 Moons Technologies Ltd. Shah was arrested. Shah dragged the exchange to CCI (Competition commission of India) holding NSE guilty of monopolistic practice in 2011, case is pending in SC where it is languishing pending trial. Paranjape, joined MCX, and the exchange started secret data pipeline to Susan under the pretext of usual research by IGIDR. HFT-driven Algo trading volumes were on a rise at MCX. What Anand did with the data he got from HFT remains a mystery, like what IFPL did with the data it got from NSE. It appears to be for developing Algo Strategy.
Forsensic auditor managed to find email exchanges for communications within. The key mandate was to check systemic lapse, the emphasis was never on detecting fraud, and accesses were not given to them. Two of the largest exchanges suffered an unprecedent data breach. Nobody, including super-cop SEBI, wanted to conduct a thorough probe. During the data breach at NSE, Bhave relinquished the path of Dharma. During MCX, it was Tyagi, Chidambaram recommended Bhave and Jaitley recommended Tyagi.
FMC (Forward Market Commission) is a regulator to commodity markets like SEBI was to equities. BSE had some of the marquee names in its lists of shareholders including Thomas Caldwell and George Soros. Nifty and Sensex are benchmark index values for measuring the overall performance of the stock market. Nifty is the Index used by the National Stock exchange, and Sensex is the Index used by the Bombay Stock Exchange. NSE had a tech arm called NSE IT, lot of work outsourced by exchanges top brass was just in the domain of it's sister company. NSDL was established as the head of the depository, Bhave made demat of shares compulsory for listed companies and refused to handle any physical or paper shares by institutional investors. NSE created to break the monopoly of BSE, but with demat, BSE became - bread crumbs. The digital transfer of shares from one account to another took place in NSDL, when its stock was hitting peaks, IT investigation shattered NSDL and Bhave's reputation as the pioneer of Corporate governance and compliance measurement system, shook. NSDL came under a cloud for fake demat accounts scam.
The Whistleblower wrote from Singapore in 2015 under pseudonym - Ken Fong, the elaborately detailed, 8 page letter was enough to set the cat among the pigeons. It was send to SEBI, and veteran financial market Journalist Sucheta Dalal, who published it in her personal finance portal Moneylife. She is the investigative journalist who blew off the humongous Harshad Mehta Scam of 1992. Rajeev Kumar Agarwal, SEBI's then WTM seeked NSEs response on the letter. The SEBI Cross Functional Team (CFT) in 2015 was the first batch of regulatory officials that went into the details of NSE's COLO farm since it was established over 5 years ago, and took the matter to SEBI's Technical Advisory Committee (TAC), employed IIT Bombay to do the audit of NSE. OPG securities from Delhi had the fastest access. External Forensic auditors too were appointed. Before Deloitte submitted its first report, Agarwal was made to quit SEBI in an undignified manner. Agarwal's ouster from SEBI was a peculiar case that shows the power play of the 'bureaucratic brotherhood' in India and the cable that was accustomed to armtwisting the administrative system. After his exit, the probe did not move much further. Half-baked orders were issued, with several gaps, leaving enough loopholes to give escape routes for the accused.
Just as ore has to be processed to extract gold, raw data must be processed to extract its true value. Since 1987, CMIE, Ajay's family enterprise made all its profits from the mining of data that was later sold to brokers, bankers, policymakers and other finance professionals.
These are to investigated and tried by a law enforcing agency beyond the scope of SEBI. Wayback machine is used to dig out past information that is hidden by organisation to wash off records. It is an internet archive library that stores billions of web pages that have been taken down by the operators or organisations but were created in the past.
For the May , 2010 flash crash in US, 5 years after in 2015, April 21st; the US Department of Justice brought in 22 criminal counts, including fraud and market manipulation against Navinder Singh Sarao, a British financial trader. (another interesting story, googled about it and here is what I found
Ajay was ingrained into the workings of NSE's core operations since its inception, wrote the risk management codes for derivatives, created Nifty, held board seats and committee positions in crucial exchange subsidiaries and sister companies. Yet Ramakrishan, NSE's joint MD since 2009 and associated with it since inception, say "I may have met him infrequently. He was known to NSE as a researcher and academician. I'm not able to recollect any arrangement for sharing data with Ajay"; but ended up awarding key contracts to his associates and friends. Narain once said with regard to Ajay "One of the few economists known in the capital market who writes policy papers based on data analytics."
NSE purchased 26% stake in Omnesys Technologies P ltd. in 2008 set up by Shrikant Pandit and inducted CR on its board as a shareholder director, it looked like a move to ward off competition from FTIL's ODIN, but has more to it. It had a sister concern Omnesys Tradenet (OTN) Pvt. Ltd. a stock broking co. playing in NSE, and Gana Yantrika Systems P Ltd. was the parent company to both. OTN was sold to Way2Wealth, a client of IFPL, using Chanakya to trade in NSE, owned by VG Siddhartha of coffee Day. The loss making companies share started going up after the collaboration with NSE, and in 2014 sold it to Thomson Reuters and soon after the price started falling. Omnesys could give access to NSE's DMA facility and COLO trading grid. There was the mystery of the 'Secondary Server' sitting at NSE. Data at NSE was hijacked by traders, data thieves and wily executives, and no one was taking note, definitely not the super-cop. The entire system ran on the whims and fancy of NSE officials. Abhishek Soni, the COLO employee who revealed this to Deloitte was asked to quit. There were 'dark fibre' lines providing private jet like service to two brokers, Way2Wealth and GKN capital an entity owned by OPG securities. A Mauritius entity controlled by a United States parent made profits of Rs. 20-30 crore between 2013-14 by trading in currency futures on NSE and BSE accessing feeds prohibited to Non-bank participants.
Who is Ramtoola, who contributed Rs. 2,842 crores in True North, a front to laundering money for politicians, businessmen, senior company executives, bureaucrats, cops, brokers, bankers or researchers from India? Why had both the previous and current Govt. not investigated links?
History shows that the origin of any market scam can be traced to 'procedural lapse' at different levels. A deep dive will show that faces or the front in any mega fraud are the boorish bunch of operators who fall victim to their greed, not knowing that the tie-suit executives are their silent handlers exploiting the systemic weaknesses they created themselves, knowingly or unknowingly. Follow up based on initial lead, often lead to unearthing of mega scandals. Criminal investigative agencies can be hired. 'Inadequate Transparency, (lack of) Public accountability and Parliamentary oversight are the four structural fault lines in SEBI's legal framework, that had made this power abuse possible.
Another article on the recent developments, like a fairy tale story - https://ranganathan.substack.com/p/a-mystic-mesmerises-a-mermaid?token=eyJ1c2VyX2lkIjo1OTc2MjEyNiwicG9zdF9pZCI6NDg4NDMyNTQsIl8iOiJ1UExxRSIsImlhdCI6MTY0NTAxMDY5NSwiZXhwIjoxNjQ1MDE0Mjk1LCJpc3MiOiJwdWItMzM5MjQ1Iiwic3ViIjoicG9zdC1yZWFjdGlvbiJ9.j3J4sBW3BGR8v6n7Aju7NluQDqgMkXXPLENuZJvESKM&r=zkwr2
Chitra Ramakrishna’s statement to SEBI’s queries on the mysterious ‘yogi’.
SEBI: Can you please share the identity of the email id holder ‘rigyajursama@outlook.com’?
Ramkrishna*: The Siddha Purusha/Yogi is a Paramahansa who may be largely dwelling in the Himalayan Ranges. I have met him on occasions in holy places. No locational co-ordinates are given.
SEBI: Given the fact that the Siddha Purusha largely dwells in the Himalayan Ranges, kindly explain how He would have accessed emails and corresponded with you regularly.
Ramkrishna: To the best of my knowledge, their spiritual powers do not require them to have any such physical co-ordinates.
SEBI: Can you please share when you met him and who introduced you to him?
Ramkrishna: I met him for the first time on the banks of the Ganges nearly 20 years ago directly. Subsequently, over the years, I have taken his guidance on many personal and professional matters. Along the way, since he would manifest at will and I did not have any locational co-ordinates, I requested him for a way in which I could seek his guidance whenever I felt the need. Accordingly, he gave me an ID on which I could send my requests.
SEBI: Is the Siddha Purusha some person who was from NSE/NSE Governing Board at any point of time?
Ramkrishna: No, he is a spiritual force.
SEBI: Can you please elaborate as how the ‘Siddha Purusha’ was aware about a lot of intricate details on the functioning and hierarchy at NSE?
Ramkrishna: Largely, I would have provided that inputs.
SEBI: In the majority of correspondence, it is observed that Anand Subramanian was marked a copy. Please explain?
Ramkrishna: Primarily, I had clarity on issues that I sought. Who else and whom he would correspond with was outside my purview. He may have corresponded with many others too.
SEBI: As per the organisational structure and the governance principle, independently constituted board was available for consultation and guidance on aforesaid organisational matters. Please explain as to whether above consultation with the Siddha Purusha violates the principle of governance?
Ramkrishna: I would like to state that all discussions and guidance that are sought from board and or other available experts is always done. As an MD and CEO, before I am able to come to a perspective of my view only, the guidance is sought. It is only to enable me in my role to have a primary view. As we know, senior leaders often seek informal counsel from coaches, mentors or other seniors in this industry which are all purely informal in nature. In a similar strain, I felt that this guidance would help me perform my role better. Being spiritual in nature, there would never be a question of any confidentiality or integrity issues being compromised for the organisation. There would be no question of any personal gain because of the information shared. Hence, I felt that this would help me perform in the best interest of the organization.
* In the SEBI order, Ramkrishna has been mentioned as Noticee No 1
Ramkrishna met the unknown person several times: SEBI
According to SEBI, based on the e-mail correspondences between the unknown person and Ramakrishna and her statements to the regulator, it emerges that they allegedly met several times during the year 2015.
* In her statement to SEBI dated April 14, 2018, Ramkrishna submitted that she attended the meeting with the unknown person at the Swamimalai temple in Delhi and also met him on occasions in holy places.
* E-mail dated February 17, 2015 from the unknown person to the Ramakrishna said: “…p.s, keep bags ready I am planning a travel to Seychelles next month, will try if you can come with me, before Kanchan goes to London with Kaanchana and Barghava and you to New Zealand with two children. HK is a preferred transit or Singapore for onward journey. In case you need help pi let me know Seshu will do the needful. If you know swimming then we could enjoy a sea bath in Seychelles and rest in the beach. I am asking my tour operator to connect with Kanchan for all of our tickets.”
* E-mail dated February 18, 2015 from the unknown person to Ramakrishna: “Today you are looking Awesome. You must learn different ways to platt your hair which will make your looks interesting and appealing!! Just a free advice, I know you will grab this. Keep March mid a little free.”
* E-mail dated February 25, 2015 from the unknown person to Ramkrishna: “…PS : I overheard with Kanchan when you said lets pack and leave, Get ready count down starts now I accommodate for Seychelles where you can chill it out.”
* E-mail dated September 16, 2015 from the unknown person to the Ramakrishna: “Did you hear that Makara Kundala song I sent? You must hear the resonance of that iterations. I am happy to see cheer, on your face and absolutely from your heart. I did rejoice the time yesterday with you. These small things you did for yourself make you feel younger and energetic.”
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