NSE Co-location case: Narain, Ramakrishnan play blame game in testimony to SEBI

The Securities and Exchanges Board of India (SEBI) is facing an uphill task in the NSE co-location case due to discrepancies in the responses of former NSE vice-chairman Ravi Narain and former MD Chitra Ramakrishnan. SEBI questioned the two former officials on multiple matters including Omenisys, Ajay Shah, and brokers allegedly involved in the case. Emails and messages to both Ramakrishnan and Narain elicited no response. Below are responses of Ramakrishnan questioned on April 12, and Narain questioned on April 13, to multiple questions posed by SEBI. On role in the selection of Transmission Control Protocol / Internet Protocol (TCP/IP) Ramakrishnan said the process involves evaluations by the technology teams after a process of multiple consultations as the first step. The final outcome is then presented to the NSE tech board that includes the Managing Director and Joint MD, after which the proposals are taken to the board for budget sanctions. This process, she said, would have been followed for selection of TCP/IP tick by tick (TBT) architecture and details on budget approvals and assessment documents would be available in the board minutes and with the technology teams, respectively. During the period, she noted, tech functions were handled by Ravi Apte, N Murlidharan, and G Shenoy. Narain, however, said, “I do not recall the specific people but it would have evolved out of discussion between the relevant business and technology people.” On role at NSE with a specific focus on 2009-2016 Narain said, after Ramakrishnan's appointment as Joint MD the day to day operations, technology, and Human Resources were delegated to her. He said co-location was seen as a natural evolution of technology in markets as was the case worldwide. The specific selection of TCP/IP technology was not done at his level. On steps taken to ensure 'equal and fair' access to TCP/IP TBT architecture Ramakrishnan said, “While these principles (of equal and fair access) would need to be embodied in the actual practice and implementation, the respective departments may have had their own monitoring ranges. In this case, I don’t recollect any specific exceptions flagged off nor a report of positive confirmation on the same. To the best of my knowledge respective Chief Technology Officer CTO’s and their teams would have been operationally responsible and respective CTO’s may now who in their team was operationally responsible.” Narain though said he has no recollection of a written equal and fair access guidelines either from MD’s office or from the board. On the reason for not implementing randomizer in TCP/IP TBT Ramakrishnan put the blame on the technical team. “These would be technical issues on which the tech teams would be best able to answer and typically would be a subject matter to discuss in the NSE Tech board or with the advisory committee for guidance.” However, she said these issues did come up for discussions at the NSE tech board and the experts on the board were actively involved. On the same question, Narain said, this was a hardcore technology issue, and relevant technology teams will be in a better position to explain. “I don’t recall any discussions around this,” he said. On an OPG email dates March 20, 2014, on variable response time for TBT data from different sources Ramakrishnan said, ‘The complaint came from the business side who indicated the tech had already been alerted on the complaint and were in touch with the member to redress the issue.” She added had the tech team seen this as a systematic issue then it would have been raised as a broader concern. On conflict of interest with Infotech Financial Both Ramakrishnan and Narain said they had no knowledge of Suprabhat Lala (senior NSE official) being related to Sunita Thomas, who had an algo software developer company -- Infotech Financials. “I don’t recall such a disclosure being flagged off to me in the first instance,” Ramakrishnan said. On nature of relationship with Ajay Shah Ramakrishnan said, “I may have met him infrequently. He was known to NSE as an academician and researcher’. Narain said, “We understood from NYSE the benefit of an exchange sharing data with researchers on market microeconomics. and in the Indian market has very few such economists known in capital markets who write policy papers based on data analytics. and the relationship with Ajay Shah was in that context”. Ramakrishnan noted all data provided to Ajay Shah for research was through standard formats and research wing. Ravi Varanasi, another senior NSE official, would be able to clarify if they were anonymised. for statistical or other purposes. Both Ramakrishnan and Narain said they were unaware of any instance of data being shared by Ajay Shah with Sunita Thomas.