Connecting the Dots - NSE Scam

One of the brokers affected in the co-location scam at NSE (National Sock Exchange) is Way2Wealth.

I will reproduce here what was mentioned in www.moneylife.com

“W2W’s CEO MR Shashibhushan, and directors CK Nithyanand and BG Srinath, GKN Securities’ partners Sonali Gupta, Om Prakash Gupta and Rahul Gupta and Prashanth D’souza, CEO of Sampark are also barred from holding any position with a market participant or entity for the next two years.”

“W2W and GKN were directed to pay Rs15.34 crore and Rs4.9 crore with an interest of 12%, respectively. Both the brokerages are also barred from taking any new client for the next one year and are not to undertake any trade for two years.”

Now the question is who started Way2Wealth?

Way2Wealth is a A Coffee day Company.

Now who started and supported Café Coffee Day enterprise?

Here I will reproduce what is mentioned in the Way2Wealth website:

The visionary behind Way2Wealth, Mr. V.G. Siddhartha, 55, is the Chairman and Managing Director of our Company. He holds a bachelors degree in arts from the University of Mysore. V.G. Siddhartha has a long association with coffee, given the family’s interests in coffee plantations in Southern India for more than 130 years, and he has an experience of approximately 22 years in the coffee business. He set up CDGL in 1993 to export coffee beans and later forayed into coffee retailing in different formats in India. He also set up his own stock broking firm, Sivan & Co., at Bengaluru. He was recognized as The Entrepreneur of the Year by Economic Times in September 2003. In 2014, he was awarded with ET Retail Hall of Fame for his contribution to the growth in retail sector. 

Coffee Day Enterprises Limited’s business interest spreads across Retail, Technology Parks & SEZs, Logistics, Investments, Financial Services and Hospitality. PE funding for CDEL from NLS Mauritius LLC, Kohlberg Kravis Roberts & Co (KKR) and Standard Chartered Private Equity (SCPE)

The next question what is Way2Wealth stands for?

Again from their website:

Started in 1984, Way2Wealth is an Investments Consultancy Firm known for making investing simpler and more profitable for investors. We offer a wide range of products & services under one roof, for the convenience and benefit of our customers. We service our customer relationships through a team of over 1000 wealth managers spread across 573 easily accessible Investment Outlets in almost all major towns and cities in India.

Question to Ponder

Is it possible for one broker (out of thousands) has a wonderful idea about taking advantage of Algorithmic trading and avail benefit of co-location (as per SEBI investigation).

Do the executive responsible at the W2W got the idea from self or someone brought the idea to them?

Here we have to agree with Ms Sucheta Dalal on the following:

Instead, SEBI opted for what is called a ‘desktop’ investigation, which was limited to examining email records and ordering the NSE itself to commission investigations without even tackling the various conflicts of interest that were evident to everybody right then. It is almost as though SEBI has got so used to regulatory capture by the NSE, that its officials feel too diffident to adopt a tough line.  

On the other hand, if it accepts the order, the amount that will be paid is less than the sum that is already impounded. Moreover, given that the business of the Exchange itself is unaffected, it can use the six-month period when it is barred from the market to work on its initial public offering (IPO) which will still attract a lot of support. The NSE is not the first major exchange in the world that has suffered such a setback and grown past it. Both, NASDAQ and New York Stock Exchange (NYSE) have had their share of scandals, but have dealt with them and moved on.

It is quite possible that the members penalized by SEBI (Securities and Exchange Board of India) got away very lightly without reaching / revealing the ultimate identities behind the veil.

SEBI may have missed connecting the right dots.

Note:

Coffee Day Enterprise vide its letter to BSE / NSE has informed that it will take legal recourse against the order.

Mr. V G Siddhartha is an India based businessman from Karnataka. Started Café Coffee Day, invested in Mind Tree and other successful ventures. He is son-in-law of Mr. S M Krishna (Former Chief Minister of Karnataka, Former Indian Minister of External Affairs and Former Governor of Maharashtra State)

Article by Ms Sucheta Dalal in Moneylife is a very thought provoking one on SEBI.