‘Himalayan Yogi’ to botched trade: controversies that damage NSE’s image
Technology is a tiger that everyone rides, Chitra Ramkrishna, then CEO of NSE, India’s largest stock exchange, told PTI eight years ago.
At the time, she herself rode the tiger at the helm of the National Stock Exchange, which had overtaken the 100-year-old Bombay Stock Exchange as India’s largest stock exchange within a year of its launch in 1994.
Ironically, it was a major technical glitch in NSE’s sophisticated algorithm-based ultra-fast trading that propelled her to the top as the first female CEO in the male-dominated world of stock trading: the morning of the October 5, 2012, NSE was hit by the so-called ‘fat finger trade’ which resulted in a trade being executed in a split second for a huge amount of Rs 650 crore and triggering a huge ‘crash’ flash’, wiping out nearly Rs 10 lakh crore of investors’ wealth on the Indian stock market in seconds.
The momentum was such that a mandatory halt to trading could only be put in place after a sudden 16% collapse in the Nifty benchmark – it missed two checkpoints, first at 10 %, then to 15% in six seconds. .
The madness ended after 15 minutes but someone still had to pay the price. The head that rolled was that of NSE CEO Ravi Narain. A few months later, Narain’s baton was officially handed over to his deputy, Chitra Ramkrishna, on April 13, 2013.
Now Ramkrishna, 59, is at the center of an equally bizarre scandal after it was revealed that she was guided by a mysterious ‘Himalayan yogi’ in making key business decisions about business decisions. exchange which have impacted the business of an exchange which recorded an average daily turnover of well over Rs 2 lakh crore last year and which ranks as the largest derivatives exchange in the world and the fourth for cash shares in terms of number of transactions.
Several people familiar with the developments said on condition of anonymity that the time has now come to deep clean this renowned institution and that instructions have come from the top to all regulatory, enforcement and and investigation to get to the bottom of things. events amid suggestions that misconduct, including serious cronyism, was covered up by officials, even though it was known to them several years ago.
A former senior regulator, who scrutinized the affairs of the stock exchange very closely at the time, said senior management and some key directors had clearly failed in their duties, largely because they trusted to people in an institution that serves as a front-line regulator for the Indian Capital Market, where NSE holds a virtual monopoly with over 90% market share in certain key segments.
Virtually every regulatory, administrative and investigative agency in the country is at work and those under the scanner include all of the directors who have served on the NSE board over these years, management staff as well as those on the regulatory and government sides, a senior official mentioned.
The issues examined are not limited to the identification of the “Yogi”, but also encompass much larger concerns such as failures at various levels, including board, regulator and government, including including those relating to controversial colocation facilities and high-frequency trades, the official added.
Another ex-regulator, who also did not wish to be named, said NSE owes its existence and growth to a collective effort by government, regulators and industry, and that it could be reinstated. formed by a group of committed and visionary individuals. .
However, it seems that a coterie of ex-bureaucrats and ex-bureaucrats, very ambitious brokers, high-ranking officials and a few corporate executives, including those in the stock market, created and exploited various loopholes for their own personal gains, he added.
With the years-old case finally coming to public attention, officials said, directives have come from above now that no one should be spared and all veils must be lifted to expose every wrongdoing or failing. , from the smallest to the biggest.
The former regulator said it was staggering that the whole saga remained buried for almost a decade despite multiple orders passed by the Securities and Exchange Board of India (Sebi) which point to the power play at the works in this cocktail of corruption, deception, money laundering, illicit trade and business rivalry.
Such concerns are also expressed on the “fat finger” fiasco of October 5, 2012.
The exchange was also told by Sebi that it was wrong to resume trading in 15 minutes, unlike a much larger trading halt which was required by regulations, and not to notify the other major exchange, the BSE.
“Fat-finger trade” is a term used to refer to a typing error or improper pressing of orders on trading terminals. But there were allegations that the crash was triggered by something else – perhaps it wasn’t a technical error but deliberate manipulation. The exchange was later censored by Sebi after an investigation and asked to strengthen its systems and processes.
Yet what followed seems to have been quite the opposite, at least in terms of human resources.
Soon after his elevation, Ramkrishna appointed Anand Subramanian as his adviser and then promoted him to Group Operations Manager with a whopping salary of Rs 4.21 crore. He also happened to be her friend’s husband and an NSE staff member. NSE’s board turned a blind eye to the appointment on the grounds that he was a consultant and the CEO had the power to appoint him.
A much bigger mistake was revealed when a Sebi-ordered audit and regulatory intervention in October 2013 uncovered the presence of an unknown person, who Ramkrishna said was a “Himalayan yogi” and his spiritual mentor, practically guiding all of his business decisions, including the controversial appointment and promotions of Subramanian.
The audit revealed several email exchanges between Ramkrishna and the unidentified yogi.
In its final report, in October 2016, the audit and exchange dismissed the exchange of information, which the regulator had deemed sensitive, as a routine affair by stating that Subramanian himself was impersonating the Yogi for manipulate Ramkrishna and all was well. since they both left ESN, the official said. Ramakrishna left in December 2016.
This was clearly a whitewash on the part of the exchange in an effort to keep the scandal a secret and allow Ramkrishna a graceful exit, the official said, adding that Sebi in his final order refused to accept that Subramanian was impersonating the yogi. .
Several people, including those who worked with the exchange’s senior management at the time and in regulatory and government departments, have said that it seems almost certain that this Yogi is an imaginary identity created by one or more people, some of whom hold key positions to control Ramkrishna.
Sebi imposed a fine of Rs 3 crore on Ramkrishna, Rs 2 crore each on NSE, Narain and Subramanian and Rs 6 lakh on VR Narasimhan, who was the chief regulatory officer and chief compliance officer.
In addition, Sebi banned the NSE from launching any new product for a period of six months, while Ramkrishna, Subramanian and Narain were barred from associating with any market infrastructure institution or intermediary registered by Sebi. for 2 to 3 years.
NSE said that there have been several board and management changes of the exchange over the past few years and that it has operationalized Sebi’s guidelines on various issues over the years and taken measures to further strengthen the control environment, including the technology architecture. .
The exchange also stated that it is committed to the highest standards of governance and transparency and will cooperate fully with the regulator for a satisfactory closing of the matter.
Ramkrishna was part of the initial management team selected by the government to create NSE, which was incorporated in 1992 and became operational in 1994. She was the third person to lead the exchange after RH Patil, its first head, and Narain.
Incidentally, she was also part of a team that drafted the legislative framework for the securities market regulator Sebi in 1987.
(Reported by Barun Jha.)
(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)