Co-location scam: NSE execs under radar, CBI says may expand scope of probe

The CBI said that it might check whether SEBI, NSE, or ministry officials were involved in the co-location scam

The Central Bureau of Investigation (CBI) on Wednesday said it is probing whether certain officials of the National Stock Exchange (NSE) had unfairly favoured certain companies by allowing them access to backup and secondary servers. The probe agency has said in a status report filed in the Delhi High Court, that is also trying to ascertain whether these officials had provided market feed first to certain broking agencies before others.

CBI also said it may expand the scope of the probe to ascertain whether officials from the Securities and Exchange Board of India (Sebi), NSE, or any other government ministry and its departments were involved in the scam.

“Any fraudulent act or any commission or omission of act resulting in wrongful gain to anyone, or wrongful loss to anyone, committed by any public or private person irrespective of the fact that he is named in the First Information Report or not, shall be examined during the investigation,” the probe agency said in its report to the high court.

The status report by CBI was prepared after a journalist had filed a public interest litigation claiming that CBI and Sebi had limited the scope of the probe by investigating only OPG Securities Private Limited and its promoter Sanjay Gupta. Following CBI's status report, the high court disposed off the case and asked the petitioner to approach it again in case he wasn't satisfied with the way the probe was conducted.

The alleged scam dates back to period between June 2010 and March 2014, when the NSE had employed a new Tick-By-Tick (TBT) architecture at one of its co-location facilities. The TBT architecture gives preference to members that connect first to the server placed at the co-location facility. It is alleged that OPG Securities took advantage of the architecture and was able to log in first regularly between those four years with help from NSE officials.

Following complaints from whistleblowers, Sebi had probed the issue and found that OPG Securities had indeed gained unfair access to the servers. In its order banning OPG Securities and its promoter Gupta from capital markets for five years, Sebi had said that the company had made unlawful gains of Rs 15.57 crore, “which could not have been made but for the illegal connections made to the secondary POP server”.