SEBI drops charges against NSE, Ravi Narayan, Chitra Ramakrishna and others in co-location case citing absence of evidence

Capital markets regulator Sebi has disposed of the case against leading stock exchange NSE and its executives Ravi Narayan, Chitra Ramakrishna and others citing absence of sufficient evidence in the co-location case.

“Due to the absence of sufficient material and objective facts on record in this case, the test of ‘preponderance of probability’ fails to provide sufficient support to establish collusion/friendship between OPG and its directors,” the regulator said.

The case relates to the co-location scam, in which some brokers gained unfair advantage by getting faster access to NSE’s systems, data and trading facilities at the expense of the broader market.

The NSE introduced a colocation facility in 2009, allowing traders and brokers to install their IT servers on its premises for a fee.

According to a whistleblower in 2015, market manipulation was carried out by some brokers using this feature that allowed them to access data quickly.

The complaint said that OPG Securities got preferential access to NSE’s backup servers and that Ravi Narayan and Chitra Ramakrishna facilitated the fraud by not taking preventive measures by OPG.

The SEBI order noted that there is no dispute that the NSE does not have a detailed policy for the use of colocation facilities.

“NSE also failed to monitor the use of secondary server by TMs without sufficient reason. The defense put forward by NSE regarding issuance of welcome email in the form of ‘registration enablement mail’ while providing Colo facility to TMs. As first level regulator can His role is not said to be justified,” the order noted.

However, SEBI is of the view that this fact alone cannot help decide the issue of collusion between OPG and its directors.