National Stock Exchange's COLO Scam Explainer

The National Stock Exchange (NSE) saga that has been playing out over the last few days is the kind of material that would make for a perfect script of a thriller that any OTT platform would die for. While the actual wrongdoings inside the NSE pertain to what is now known as the ‘NSE Colocation Case’ or the COLO Scam which took place between April 2013 and December 2016, most people learned of it by way of a 190-page Securities and Exchange Board of India (SeBI) order on February 11, 2022, that made headlines for its interesting revelations listed below.

Through this SEBI order, we discovered the ‘existence’ of a Himalayan Yogi, how Chitra Ramakrishnan, the then MD, and CEO of NSE was guided by this Yogi through emails regularly, including the appointment of Anand Subramanian as Group Operating Officer and advisor to the MD. The case has remained in the spotlight with the IT department initiating inquiries against Ramakrishnan, followed by the Central Bureau of Investigation which launched a probe in May 2018, carried out the arrest of Subramanian in Chennai on February 25, five years later after the new information emerged.

Given the immense interest that this, National Herald has tried to piece together information in the public domain and find answers to a few of the many questions that this case has unearthed but remain to be answered to everyone’s satisfaction.

Who is Chitra Ramakrishna?

The former Managing Director and Chief Executive Officer of the National Stock Exchange (NSE), Chitra Ramakrishna is a chartered accountant who was once hailed as the ‘queen of the bourses.’ She was appointed joint managing director of NSE in 2009 and promoted to CEO in 2013. Her career began with the Industrial Development Bank of India (IDBI) in 1985 as an assistant manager in charge of capital markets. In the 1980s, Ramkrishna was also involved in the drafting of the legislative framework of Sebi. Ramkrishna had been associated with the NSE in a leadership position since its inception in 1991.

Who is Anand Subramanian?

Now under arrest, Anand Subramanian was once a low-key employee and foreman of a Chennai-based logistics firm Transafe Services Private Limited. He went on to become the Group Operating Officer of the National Stock Exchange by MD and CEO Chitra Ramkrishna. Before this appointment, Subramanian was brought in as an advisor to the MD, within a few weeks of Ramakrishnan assuming the post.

Occupying a cabin next to that of the MD, Subramanian is said to have been delegated powers and responsibilities that were equal to Ramakrishnan and his perks included international travel by first class. Subramanian, the CBI believes, holds vital information and clues to the COLO Scam at NSE since he was a close confidant of Ramkrishna with loyalty going beyond official duty.

What is the NSE colocation issue?

The COLO case pertains to certain brokers receiving unfair preferential access to NSE servers, by placing their own. HFT firms and proprietary trad

What is the NSE colocation issue?

The COLO case pertains to certain brokers receiving unfair preferential access to NSE servers, by placing their own. HFT firms and proprietary traders get to locate their computers in the same premises where an exchange's computer servers are housed. This enables such firms to access stock prices a split second before the rest of the investing public. With stock prices changing every microsecond, a trader, who gets the stock prices before others in the queue, such firms stand to make sizable gains given that he knows the information before the others.

Why was Anand Subramanian’s hiring by NSE unusual?

The 190-page report of the Securities and Exchange Board of India dated February 11 showed that Chitra Ramkrishna, who was MD and CEO of NSE from 2013 to 2016 took key decisions on the advice of a ‘Himalayan Yogi,’ who instructed her to appoint Anand Subramanian as group operating officer. Not just was the appointment done but Subramanian was offered an annual salary of Rs. 1.68 crore.

This offer to join the NSE as Chief Strategic Advisor was done on April 1, 2013, when Subramanian was vice-president at Leasing and Repair Services of Transafe Services Ltd, a subsidiary of Balmer Lawrie and Co. with a salary of less than Rs. 15 lakh per annum. The only person involved in his hiring was Ramkrishna, who interviewed him. However, there was no noting made in his personnel file in relation to his interview or hiring. Despite his senior role, Subramanian was not designated as a key managerial person at NSE.

Has the SEBI imposed any penalties?

Yes. Sebi has imposed penalties on NSE, Ramkrishna, and her predecessor Ravi Narain for governance lapses in the hiring of Anand Subramanian. Sebi has also slapped a fine of Rs. 3 Crore on Ramkrishna, Rs. 2 Crore each on NSE, Subramanian, Narain, and Rs. 6 Lakh on V R Narasimhan, who was the chief regulatory officer and compliance officer. NSE has further been barred from launching any new product for six months.

Who is the controversial yogi?
While speculations continue, the CBI seems to indicate that Subramanian is himself the Himalayan yogi. Separately, a forensic audit by consultancy firm E&Y, showed that it was indeed Subramanian himself who was guiding Ramkrishna all along posing as the Himalayan Yogi.

The EY forensic audit involved scrutinising the Skype accounts of Subramanian and finding evidence linking him to the mystery on the computer he used during his time at the NSE. This evidence includes ‘author’ details, ‘last modified’ details, and ‘created’ details of emails linking the Skype, mobile numbers, and the email id-ID 'rigyajursama@outlook.com'.

What is Chitra Ramakrishna’s say in the matter?

Ramkrishna has admitted to sending several emails containing confidential data about the exchange to an email id rigyajursama@outlook.com. During her interrogation, Ramkrishna revealed that the person was a Siddha Purusha or Yogi, residing in the Himalayas. She claimed that he was a spiritual force who had been guiding her for the past 20 years and that as a spiritual force, he would manifest at will. Ramakrishna has however denied that the yogi is Subramanian, something that the NSE believes but Sebi is not convinced about.