‘When the music stopped, Chitra was the only one without a chair’

When you see a picture of Chitra Ramkrishna you will agree with reports that she plays the veena and tries not to miss Chennairsquos winter Carnatic concert season The Kanjeevarams simply done ponytail and makeup free face relay an image of a nononsense committed leaderWhat you donrsquot expect is the news that broke on February 17 Ramkrishna one of the Indian financial sectorrsquos most respected names was accused of misusing her position as then Managing Director and CEO of the National Stock Exchange NSE to make inappropriate appointments sharing confidential information with an unidentified spiritual guru who she admitted lives somewhere in the Himalayas and who she first met on the banks of the Ganga and allowing him to influence her actions related to operations of the exchange Sucheta DalalThe Central Bureau of Investigations raided her Mumbai property and issued a lookout circular in a 2018 case where it was alleged that she supported the tinkering of the server architecture of the Exchange in order to allow a private company access to data before any other broker Ramkrishna claimed during the investigation that the colocation facility was extended when her predecessor Ravi Narain was at the helm An investigation by the regulator Securities and Exchange Board of India SEBI revealed that it was the yogi who was in fact running the NSE through her taking a call on promotions including the hiring of Anand Subramanian who was appointed Group Operating Officer a position most say he didnrsquot deserve Last Friday news broke confirming an even more bizarre allegation with the arrest of Subramanian He is in fact the yogi who created an email ID to which Ramkrishna sent mailsThe NSE board is believed to have hushed up the matter when it came to light allowing her to step down in 2016 instead of axing her Narain resigned a year later in 2017 Ravi Narain who was MD and CEO of NSE from 1993 to 2013 has been blamed by Ramkrishna during interrogation for commencing the colocation facility PicGetty ImagesWhile we are certain that writing teams at OTT production houses are already onto this case for their next project Mumbaibased investigative journalist and author Sucheta Dalal seems to have preempted this fall from grace In a successful book she coauthored with her husband Debashis Basu Absolute Power Inside story of the National Stock Exchangersquos amazing success leading to hubris regulatory capture and algo scam Dalal scrutinised the changes in capital market regulation and infrastructure after the Harshad Mehta scam Ironically one of these was to set up NSE as a cleaner alternative to the Bombay Stock ExchangeIn an email interview with midday Dalal who is managing editor of Moneylife Magazine discusses the equation between Ramkrishna and Subramanian and how many beyond the two had hoped to profit from the NSErsquos inroads into corridors of powerEdited excerpts from the interviewWas Chitra Ramkrishna knowingly and willingly involved in the wrongdoing or was she simply a representative of an organisation that rode on misgovernanceI have been a journalist for over 35 years and have covered the capital markets right through Chitra Ramkrishna was part of the founding team at the National Stock Exchange NSE when it was set up in 1992 So I have known her for over 20 years However I did not know her personally I was more in touch with Dr RH Patil who founded NSE and Ravi Narain who went on to become the vicechairman We have written a lot about Chitra in our bookmdashhow she started with the debt segment of the market her own strange appointment which was also fudged by the powerful committee at NSE by the way and later the arrogance with which she conducted herselfBut it wasnrsquot just her She was the only person left without a chair when the music stoppedThe NSE has to be seen in perspectivemdashthe phenomenal work that it did for the first 10 years since its founding and how it helped transform Indiarsquos capital market cannot be ignored The decline happened when its success led to a position of absolute power In the language of the markets it is called lsquoregulatory capturersquo where the regulated entity becomes bigger and more powerful than the regulator In NSErsquos case it happened with full collusion of the finance ministry and some key bureaucrats prior to 2015 As far as I am concerned I think that the bigger issue that is going unaddressed is what we call the colocation scam where some large traders got illegal access to the NSE servers allowing them to reap thousands of crores in illegal profits This is being systematically buried by the regulatorWas there any evidence if the lsquofaceless yogirsquo who was giving Ramkrishna directions thenNo There was absolutely no public information about any lsquoyogirsquo But her strange equation with Anand Subramanian and how he was brought in from a travel companyrsquos subsidiary Transafe Services Ltd a subsidiary of Balmer Laurie where he earned just R15 lakh to become NSErsquos GOO at a package of over Rs 168 crore that too as consultant working only four days a week was known In the next three years he received multiple increments and redesignations and an increase in perks until his cost to the NSE was about R5 crore He was allowed to work fourfive days a week and spend the weekends in Chennai His wife Sunitha Anand headed the Chennai office and also received the same pay hikes More importantly since he has no background or experience in running an exchange or technology he was not mentioned as a Key Management Person to the Securities amp Exchange Board of India SEBI as required by the lawNow that these allegations have surfaced in retrospect does all that you found make senseThere is a lot that is wrong with the NSE and how it functioned first under Ravi Narain and later under Chitra Ramkrishna There is also a lot about how the regulator and the finance ministry colluded with them We have documented this saga in detail in the book Other topics that require highlighting are how Chitra Ramkrishnarsquos appointment as NSErsquos MD in 2013 was manipulated and how she ran the Exchange like a private fief how NSE was repeatedly let off with a warning for serious violations such as fatfinger crash and client code modification how SEBI buried the algo or colocation scam by first asking the NSE to fix responsibility which the NSE failed to do and then deliberately issuing weak showcause notices and how the scandalous appointment and exit of Anand Subramanian was an egregious example of what was happening at the ExchangeWhatrsquos at the centre of this messEventually the motivation for all wrongdoing is greed and power So yes it played a big role once there was unlimited power and no control or supervision It is also a failure of the government and regulatorBritish historian Lord Acton said famously ldquoPower tends to corrupt and absolute power corrupts absolutelyrdquo In reference to Harshad Mehta you had once said ldquoI guess there is nothing surprising about it People who made easy money wanted the happy days to continuerdquo Was this the case with Chitra Ramkrishna tooYes The motivation of those in the finance ministry who allowed NSE to become this monster has to be personal It is an extraordinarily profitable exchange with a phenomenal operating margin of over 70 per cent There are plenty of people in the system who have managed to get NSE sharesmdasheven when it is unlisted at just Rs 1000Rs 1200 sharemdashand expect the valuation to jump at least five times or more when it gets listed and their role has to be investigated These include officials and bureaucrats Many may have their holdings routed through foreign institutional investorsWhat is the future of the NSEThe NSE is an important institution It is the largest derivatives exchange in the world It is in our interest as Indians that it should be cleaned up made accountable submit to the Right to Information Act improve its risk management systems and once again become an institution that we can take pride in It has had an astonishing 30 broker defaults in just over two years which has left tens of thousands of investors with huge lossesmdashwhich I estimate at over R5000 crore All this needs to be looked into People involved in the 2015 colocation scam continue in senior posts The slowdragging investigation and legal challenges will prevent a full clean up and a fresh start But if the Prime Ministerrsquos Office takes an interest and ensures that SEBI as the regulator shows spine then a full clean up is certainly possible