NSE saga unfolds myriads of issues that need to be addressed

The entire NSE episode has brought to the fore several issues to the forefront for India Inc to act and avoid such fiasco in their organisations.

The outgoing chairman of the Securities and Exchange Board of India (Sebi), Ajay Tyagi, says that Sebi tried in earnest to resolve the NSE co-location case and governance lapses at the exchange.

Still, the fact is different. Even after having completed five-year tenure to the coveted post and being eligible for further extension, was replaced by a former banker, Madhabi Puri Buch.

The Sebi's February order on NSE around hiring irregularities and governance lapses at the NSE, failed to identify an unknown third person or 'Himalayan Yogi' who received the exchange's data from former chief executive Chitra Ramkrishna.

Former Sebi chairman, M Damodaran feels that the fatal flaw in any organisation will be to allow any two persons occupy the top management positions for years together as they tend to concentrate all decision-making in their hands without empowering persons at other levels. Also, he stresses needs to be addressed on priority before the problem becomes unmanageable.

Getting distinguished individuals on the Board, he went on, and describing it as power packed is pointless, if it does not exercise the power.

Both, Ramkrishna and Anand Subramanyam have now been taken in judicial custody in a co-location scam case by CBI. A SEBI report says that Ramkrishna sought the guidance of the mysterious 'Himalayan Yogi' in all personal and professional matters for two decades.

NSE started co-location services, facilities, which are dedicated spaces attached with facilities like power supply and bandwidth in August 2009, where due to the close proximity to stock exchange servers, traders got faster access to the price feed like buy or sell quotes distributed by the stock exchange. In the entire episode, it has been alleged that some brokers in connivance with insiders, took advantage of the fact that NSE provided data on first come first serve basis for making handsome profits.

Trader who logged in to the NSE server first, would get access to information like buying or selling as well as cancellation of orders, compared to others who logged on to the server later.

Known as 'Tick-By-Tick' (TBT) data feed, it disseminated information sequentially in the sequence the brokers connected or logged in to the server, unlike a broadcast where everyone gets the price information at the same time.

Brokers at the co-location facility are given details of the servers and the ports to which they could connect to access the price feeds. OPG Securities, hands in glove with officials in NSE's IT department, was able to figure out which server had the least load so that they could get connected to the NSE server faster. Now, it has to be seen that how far the new SEBI chairman was able to clean the entire capital market regulation process from the menace.