Home / Markets / Stock Markets /  Inside the NSE that Chitra Ramkrishna ruled

MUMBAI : Anand Subramanian, the former chief operating officer (COO) of the National Stock Exchange of India Ltd (NSE), moved around the office in Mumbai’s Bandra Kurla Complex with the aura of a high-flying chief executive. A separate lift in the building was reserved for him and Chitra Ramkrishna, the former chief executive officer (CEO). A ‘protocol team’ followed wherever he went—whenever he visited the trading floor, the team ensured separate hand towels and soap dispensers in the washroom.

Nobody knows if the directions for this special treatment came from the mystic, the Himalayan Yogi, with whom Ramkrishna apparently shared confidential information. Subramanian, who had little or no experience in the financial sector, was initially engaged as a consultant in 2013 and then appointed as the COO in 2015 with egregious compensation and extraordinary hikes.

In an email to Ramkrishna on 19 February 2015, the mystic, whose identity has yet not been established, directed: “I propose with love and abundant blessings that you will be called from April 01, 2015 as “GROUP OPERATING OFFICER & ADVISOR TO MD" at the same level as group president of the company". This mail also spelt out a new travel policy.

Subramanian was now entitled to fly “business class for domestic" destinations and first class to international locations that exceeded five hours of journey time. According to the tax department, and also a Sebi order, both Subramanian and Ramkrishna travelled to tax havens such as Mauritius and Seychelles. We don’t know if they did so in their official capacity.

Meanwhile, NSE tweaked the travel policies for other management leaders, verbally. They were asked to fly economy class even when they were entitled to business class travel, exchange officials said.

Soon after his appointment, Subramanian began throwing his heft around, needling executives in every department, according to several NSE employees Mint spoke to. At times, direct reportees of the CEO had to even seek consent from Subramanian. “At one point, NSE needed to clear vendor payments urgently. NSE’s systems could have come to a halt otherwise since these payments were pending for a long time. They required authorization from the CEO’s office, but it was Subramanian who cleared the payments," said a former employee who didn’t want to be identified.

All these rule-book tweaks and disgruntlement lead to the first whistle blower complaint in 2015, opening the doors to multiple investigations.

Nevertheless, the powers of the mystic, who appears to have run the show at India’s most technologically savvy exchange, and that of Subramanian, are two important spokes in the giant wheel of bizarre transgressions and governance failures at the NSE. Between 2013 and 2016, nearly every NSE system was put at risk, officials said. There were fiduciary failures at every step—in how the exchange’s processes and policies were undermined; in how the board conducted its business; and in how governance was sidestepped.

An email query sent to the NSE was not answered.

Market regulator—Securities and Exchange Board of India (Sebi)—had in its order in February this year underlined that hiring a person with no relevant experience and delegating powers equivalent to that of the MD and CEO was an important issue that may have significant impact on the functioning of the stock exchange. Sebi added that the amount of disproportionate gain or unfair advantage made as a result of sharing information with an unknown third party—the mystic in this case—and a hiring irregularity could not be quantified.

Some experts view the episode as Sebi’s failure. More about it later. First, let’s take a closer look at NSE’s governance failures.

Governance slips

The list of governance transgressions are unending. Technology policies were circumvented to allow the mystic to communicate even as key data from the exchange went missing, its former board (before 2015) failed to heed the regulator’s directives, and the former NSE management, under Ramkrishna, stymied internal secretarial audits in 2015. Then came the allegations of unfair advantage provided to a few brokers. A whistle-blower complaint, from an individual who went by the name Ken Fung, stated that the NSE’s colocation and algo trading services provided an unfair access to a few brokers. Colocation refers to the service where the exchange permitted brokers to locate their servers in its own premises. This reduces latency and enables faster access to market data and thereby trading.

Listed companies are barred from sharing financial details and board meeting agenda, or even minutes of any board meetings, with unauthorized people. All such violations come under the ambit of insider trading. For an exchange which imposes governance and disclosure standards on listed companies and can initiate disciplinary proceedings against brokers, the bar certainly has got to be higher.

“The exchange failed miserably at maintaining higher standards of governance by sharing key data with a person whose identity is still not clear. Sure, the exchange is privately held but it is a public institution for all purposes," said the equity desk head of a foreign institutional investor who did not want to be identified.

Ironically, Ramkrishna during her tenure as the chief of NSE, proposed a new corporate governance initiative called ‘NSE Prime’. The idea was to raise governance standards for companies listed at the exchange—it launched in December 2021.

Despite all these, some are of the opinion that the governance lapses at NSE are just a thing of the past.

The Association of National Exchange Members of India (ANMI), a pan-India body for national exchanges, issued a statement on Twitter stating that it “reposes confidence in the working of NSE".

“Institutions are different from individuals. We cannot do away with the reputation of an institution just because of one individual. In case of Ramkrishna, the consequences have been meted out," JN Gupta, founder of Stakeholders Empowerment Services and a former executive director at Sebi, said.

Data leaks

The business of stock exchanges thrives on data protection. And every department at the NSE has a data leakage policy (DLP). But that didn’t quite work adequately between 2013 and 2016.

As per the DLP policy, employees at the exchange cannot use USBs (universal serial bus) on computers. Emails with sensitive and confidential information are stopped through automated alert systems. Such emails are quarantined, brought to the notice of the direct reporting head, and are manually released when okayed by the senior official concerned.

In November 2015, the DLP policy had stopped the delivery of emails between Ramkrishna and the third person—the mystic.

Thereafter, on Ramkrishna’s verbal instructions, Sankarson Banerjee, chief technology officer (CTO)-Projects at the NSE, wrote an email internally to Narayan Neelakantan, an employee in his team, asking to investigate why the id—rigyajursama@outlook.com—was unable to send or receive emails. The mystic went by the title Rigyajursama.

Next, an internal mail was circulated to allow such exchange of emails between the mystic and the CEO, going forward.

“This is a clear case of manual interference that allowed such email exchanges. The data policy was overridden. When coming from the CEO directly, there is little an employee could do," said the technology head of a private sector bank who didn’t want to be identified.

The Sebi order from February also underlines how technology checks were bypassed on specific instructions from Ramkrishna. Sebi noted that email alerts were configured by NSE to specifically identify those sent to ‘rigyajursama’.

Now, much of the data to establish the identity of this mystic has gone missing. Personal laptops used by Ramkrishna and Subramanian had been destroyed as ‘e-waste’.

A Sebi show cause notice from 22 May 2017, on the alleged colocation scam, is critical of NSE’s electronic data retention policy. The notice pointed to a lack of documented policies and protocols in the functioning of tick-by-tick system (the market data dissemination system) and the lack of a coherent data retention policy for emails and other information for key employees who were no longer with the exchange.

In the capital markets, brokers need to maintain data/call data records with clients under Sebi norms. So, an exchange not being able to maintain data records is a serious lapse. “During colocation, NSE claimed to have lost email data citing migration to a new outlook system," said a regulatory official.

Board lapses

The NSE board that oversaw the rise of Ramkrishna and Subramanian (in FY2014-15) had 11 members. It was headed by S.B. Mathur, a former chairman of the Life Insurance Corporation. Its accountability is now being questioned by regulatory authorities.

Subramanian was hired and then elevated to the post of COO under Mathur’s watch.

In her deposition before Sebi, Ramkrishna said that before Subramanian was hired, he had met both Ravi Narain (former vice chairman of the board) and SB Mathur.

Besides the hiring, Subramanian’s rise at the NSE with powers practically equalling Ramkrishna happened with the board being largely silent. “The board of NSE, in its meeting held on 11 August 2015 delegated substantial power of management akin to the powers granted to Ramkrishna at the NSE board meeting," Sebi said in its order.

“It should have been the responsibility of all the directors to have enquired about Subramanian’s background, relevant job experience and suitability for being part of the senior management team. And whywas a consultant delegated with significant executive powers," asks Hemindra Hazari, an independent research analyst.

Sebi officials who spoke to Mint said that the board under Mathur was resistant to any suggestions and directives from the regulator. When the tenure of four directors were up, Sebi pushed through with board candidates that it preferred—Mohandas Pai, Ashok Chawla, Dharmishta Rawal and Dinesh Kanabar (FY2015-16).

“They were Sebi’s clean-up men. They were receptive to Sebi communication on the lapses in hiring and the colocation scam. It is only after these appointments that the inquiries began within the exchange," a source said.

On 29 November 2016, the new board members wanted to sack Ramkrishna. However, she quickly jotted down a handwritten resignation letter, pre-empting a possible sacking, Mint reported on Tuesday.

Regulator missteps?

This brings us back to Sebi and its responsibility as the regulator. While the NSE and its board clearly sidestepped best practices and governance standards, did Sebi crack the whip in a way it should have? Sebi, in its February order, held Chitra Ramkrishna, Ravi Narain and Anand Subramanian, besides NSE and its board, guilty of violating the Securities Contracts (Regulation) Act, Sebi Act, and the Stock Exchanges and Clearing Corporations (SECC) Regulations.

Typically, individuals termed “not fit and proper" under the SECC Regulations could be barred from associating with any exchange or market intermediaries for a lifetime. Yet, Ramkrishna was barred for just three years.

Second, the regulator failed to establish the identity of the mystic.

“In this day and age, it is a bit surprising that the regulator is not able to find the identity behind a single email id," commented a senior software expert who did not want to be identified. “In the case of the colocation issue, Sebi was able to pinpoint a millisecond advantage by select brokers. So, finding an email id should not be difficult," he added.

The Sebi Act gives the regulator all the powers for search and seizure—it appears that they may not have been exercised in this case. The regulator’s February order has relied mostly on an EY forensic audit commissioned by the NSE in 2018.

Third, the EY report and NSE responses were sent by October 2018. So, many market watchers are questioning why Sebi took three and half years to pass its order.

Nevertheless, under Sebi rules, the regulator needs to give every party adequate time to respond as part of the quasi-judicial proceedings. In its order, the regulator has detailed on the show cause notices it sent and the responses it received and when. India’s finance ministry is now also examining whether Sebi took the necessary punitive steps. Clearly, the NSE saga, which has attracted the world’s attention, is far from over.


Jayshree P Upadhyay

Jayshree heads a team of reporters focussing on legal, regulatory, investigative stories. She has worked for over a decade, reporting on financial scams, legal stories and the intersection of corporate and regulatory issues. She is based in Mumbai and has previously worked with Business Standard, Mint, The Morning Context and Bloomberg TV India.
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