Mumbai: The Central Bureau of Investigation (CBI) has examined Ajay Narottam Shah, a close aide of former Finance Minister and Congress leader P Chidambaram in a 2018 co-location and algorithm scam, involving NSE CEO Chitra Ramakrishna. Currently, Shah, now a research professor, was named in a May 2018 FIR in the scam. During UPA’s tenure, Shah had served as a consultant to the Ministry of Finance, the Centre for Monitoring Indian Economy, and the Indira Gandhi Institute for Development Research.
In its investigation, the CBI has found the former National Stock Exchange (NSE) MD and CEO Chitra Ramakrishna had provided confidential data to Ajay Shah and Infotech Financial Services while being fully informed that the firm was providing software to the brokers. Notably, Sunitha Thomas, sister-in-law of Ajay Shah, is the director of Infotech Financial Services. Thomas is the wife of Suprabhat Lal, who was then-senior vice president of NSE.
Back in 2009-10, NSE had contracted Infotech Financial Services to develop software. Shah provided assistance in developing the software ‘Chanakya’, which was used by the brokers. These brokers had access to a secondary server from where they got data before the other brokers in a co-location facility. In 2018, CBI mentioned that Shah had collected NSE trade data during 2005-06 under the pretext of doing research. He played a vital role in exploiting NSE TBT architecture and provided support in developing the algo software using his research data which was illegal.
When the scam was exposed in 2015, SEBI, in its investigation, had found that Shah was in an official contract on data sharing with NSE after 2012. Earlier, he and his wife collected the data presenting themselves as researchers. Chitra Ramkrishna and other NSE officially categorically denied sharing any data with Shah. However, Shah had informed SEBI, and he and his wife were signatories to a data-sharing agreement with NSE. The then-Chief Technology Officer of NSE, Ravi Apte, had also told SEBI that he had facilitated data transfer to Shah based on the agreement. He also claimed Ravi Narain, former MD of NSE and Ramkrishna, had requested the data transfer to Shah.
Ajay Shah is one of the directors at the Centre for Monitoring the Indian Economy or CMIE. Its surveys and data are often used by Congress and opposition parties to target the central government. In 2019, CMIE had come up with pessimistic estimates of “jobs” in India even though the country was seeing a steady 7% growth and reports had suggested in 4 years, 18 million jobs were created in the transport and professional sector alone.
In the co-location scam, it was alleged that some brokers who were in contact with the insiders took advantage of NSE’s data delivered a ‘first come, first serve basis to make profits. Known as the ‘tick-by-tick’ data feed that would provide the brokers connected to NSE server that has the least load would get quicker information about buy/sell order, order modification, order cancellation etc., compared to other traders who would connect to the server later. In the stock market, the difference of milliseconds in obtaining the data and reacting on it means a huge difference in the profit share.
Due to the fact that brokers connected to the server via co-location facilities were getting information earlier than the other brokers, unlike the broadcast where everyone gets information at the same time, they made huge profits going against the market regulations.
During the investigation, CBI came to know about a mysterious Himalayan “yogi” who was in touch with Ramkrishna. She had shared classified information with the so-called Yogi, and he was providing personal and professional guidance to her, allegedly including the NSE’s matters. Initially, it was believed Subramanian was the Yogi, but later SEBI, in its final report, rejected the claim.