NSE Co-location case: CBI registers case against OPG Securities owner Sanjay Gupta, others
MoneyControl: Tarun Sharma: May 30, 2018
The CBI on Wednesday registered a case against Sanjay Gupta, owner and promoter of OPG Securities Pvt Limited, Aman Kakrady (brother-in-law of Sanjay), Ajay Narottam Shah (who facilitated Gupta by developing and providing Algo software Chankaya) and against some officials of SEBI and National Stock Exchange whose names are unknown.
CBI has registered cases under criminal conspiracy, PoC Act and section 66 of IT Act. The moves follows the agency's searches at about eight places in Mumbai, Bengaluru and Delhi.
OPG Securities is the centre of the ‘co-location controversy’ on the NSE, in which some brokers who had availed of the server co-location facility, got preferential access to the exchange’s trading system. These brokers had somehow managed to connect to the exchange’s back-up server, and hence could access the price feed faster, giving them an advantage over other brokers.
Modus Operandi
Sanjay Gupta allegedly abused the server architecture of NSE in connivance with officials of NSE. Officials of NSE provided unfair access to OPG Securities to their server using co-location facilities during 2010-12.
Between 2010 and 2012, Gupta was the first to login. After the introduction of Load Balancer in NSE server after 2012, servers of all other brokers were connected to the primary server of NSE. However, Sanjay connived with NSE officials and was able to get access to the backup server. It helped OPG Securities get faster access to market feed ahead of other brokers.
Also read - NSE algo case: After bourse’s top brass, brokers come under SEBI lens
A complaint was filed with SEBI. However, Gupta managed to get a favourable report from SEBI.
The complaint was about abuse of the tick-by-tick architecture of NSE server. Gupta reportedly bribed some SEBI officials to get a favourable order. He allegedly directed employees to delete some important mails texts and logs, with an intention to destroy electronic evidence.
It was also alleged that Ajay Shah, who had collected the NSE trade data in 2005-06 under the pretext of research activities, developed the software that was sold to select brokers, including OPG Securities. He along with Aman, were illegally trading in Dubai, Ghana, Singapore, Hong Kong and China through OPG.
What the CBI FIR states
According to CBI’s FIR, NSE allegedly passed the information regarding the time NSE exchange servers were switched giving speed advantage to OPG Securities over other brokers.
Co-location setup of servers “gives a 10:1 approx speed advantage in comparison to other brokers. Further till 2014, information was disseminated by exchange server to the brokers attached with co-location facility through “tick by tick” based system architecture”, the FIR stated.
The FIR pinned the blame on Sanjay Gupta alleging that he “dishonestly and fraudulently managed the data centre staff of NSE who started to let OPG Security Pvt Ltd connect to the backup servers especially”.
“OPG had got far better and fast access to the market feed in comparison to other brokers. The favour shown by unknown officials of NSE to OPG Securities by providing market feed first in comparison to other brokers resulted in wrongful gain to OPG and wrongful loss to other brokers or investors,” it said
The FIR further stated that Gupta influenced SEBI officials by bribing them. “The bribe amount was paid to unknown officials of NSE and SEBI by accused persons which shows criminal misconduct on part of NSE and SEBI by accused persons which shows criminal misconduct on part of unknown public servants for showing undue favour to OPG Securities Pvt Ltd,” it said.
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