NSE co-location case: ED investigation likely to conclude next month

Widens ambit to also look at the recent technical glitch that halted NSE trading for hours

The Enforcement Directorate (ED) has expedited the money laundering probe in the National Stock Exchange (NSE) co-location (Co-lo) case after the government recently sought a detailed report from the federal agency. The report is expected to be finalised within a month.

The move comes at a time when the finance ministry is keeping a close watch on the exchange’s recent trading glitch — one of its worst outages — that jeopardised the interests of many market participants. The enforcement agency, too, is learnt to be looking at the glitch issue along with the Co-lo case.

“There has been substantial development in the Co-location matter rece­ntly. The probe is in an advanced stage and expected to be concluded in a month, said an official. He said the inv­es­tigations are not restricted to the Co-lo case but also various other aspects as it suspects that money was illegally ear­ned and remitted outside the country.

According to him, several testimonials, including that of the exchange’s erstwhile management and brokers have been recorded. Some more will soon be summoned and grilled, he said.

Sources said that ED has sought some inputs from the Securities and Exchange Board of India (Sebi) regarding this and also a status report from the income tax department. “We have already shared an interim report to the agency in the case,” said a tax source.

ED had filed its enforcement case investigation report in January 2019, following the Central Bureau of Inve­stigation’s (CBI’s) first information report (FIR) in the case on May 30, 2018. It was against OPG Securities’ promoter Sanjay Gupta, his brother-in-law Aman Kakrady, Ajay Shah, who facilitated Gupta’s operations by developing and providing a software called Chanakya, and some unnamed officials of NSE and Sebi. Sebi had, in February, dropped allegations of fraudulent and unfair trade practices against NSE’s former heads Ravi Narain and Chitra Ramakrishna in the Co-lo case. It had only charged them for violation of the Securities Contracts Stock Exchanges and Clearing Corporations (SECC) Regulations.

Even in January 2020, the regulator exonerated nine current and former officials of the exchange, including Narain, saying they cannot be held responsible for misconduct or non-compliance in the so-called “dark-fibre issue.” The co-location matter has been under Sebi scanner since 2015. It was alleged that NSE has not acted in a fair and equitable manner while dealing with its members and these nine officials were allegedly at top positions of the exchange during that period.

A co-location facility provides early login and faster access to data feed of the exchange. Even a split-second faster access can yield huge gains for a trader.

Meanwhile, the I-T department, had in 2017, conducted searches on two NSE-linked brokers in connection with a tax evasion probe against entities and individuals said to be involved in the high-profile co-location case.