How brokers used NSE’s system to make fast buck

MUMBAI: In 2010, the NSE started allowing brokers to place their servers in the same room where the exchange had its trading servers (engines).

These servers are the heart of any exchange’s trading system. Brokers always try to have the fastest access to trading engines so that they can have the price information ahead of the competition, execute order before other brokers can do so and profit from the same. Hence, they try to place their own own servers closest to the exchange’s trading engines. Even a time difference of one thousandth of a second can lead to profit or loss worth crores of rupees.

Sebi fines NSE Rs 1,100 crore, bans two ex-MDs in brokers’ scam

The regulator also asked NSE not to introduce any new derivatives contracts for the next six months. Sebi, through five different orders, also banned the three brokers from the market for up to five years and asked them to disgorge illegal gains and interest on the same, aggregating about Rs 51 crore.

At that time, the NSE had a software system that used to allow price information to reach brokers in the same sequence they had logged into its trading engine. The NSE also had a secondary server that was not known to many brokers and hence had lower load than the primary server. The server that had lower load also gave out trading information faster than the main server.

Three brokers — OPG Securities, GKN Securities and Way2Wealth Securities — knew about this system glitch in the NSE. So they had placed their servers in the NSE’s server room — or co-located their own with that of the exchange and always logged on to the secondary one ahead of others to get faster access to price information.

NSE scam

Some of the NSE officials were aware of this system glitch but rather than correcting the system, they facilitated the three brokers to continue to game the system to make illegal profit.
OPG Securities also hired top officials from an IT subsidiary of the NSE to have better understanding how the exchange’s server could be gamed. It also had some arrangement with a staff at NSE’s data center who could precisely tell the broker when the servers would start, which helped OPG Securities to connect to the server ahead of others. Some NSE staff also helped the broker to switch to the fastest servers to access trading data.

The co-location scam continued till 2014 when the NSE had to switch to a new system which allowed for distribution of trading data to all brokers at the same time, irrespective of when the broker had logged on to the server.
And then in August 2015, through a letter from a Singapore-based whistleblower, Sebi got a whiff of the matter and started investigating.

Japanese ruling not to hit Ness Wadia’s board role

MUMBAI: The Wadia Group said on Tuesday that its director Ness Wadia will “continue to play the role” in the enterprise despite him being sentenced to a two-year suspended jail term in Japan for possession of drugs.

“It is a suspended sentence (for five years). Hence it will not impact Ness in discharging any of his responsibilities, both within the group and outside,” said a Wadia group spokesperson. Ness, the elder son of Nusli Wadia, is on the board of four listed Wadia group companies, which together has a market capitalisation of $12 billion. Ness is the managing director of Bombay Burmah and is a director of Britannia, Bombay Dyeing and National Peroxide.

Japanese ruling not to hit Ness’s board role

On Tuesday, Ness went about with his work as usual at the Wadia International Centre, the group’s HQ in south Mumbai. A suspended sentence for five years means that Ness will not have to serve jail term unless he commits any other offence during the five-year period of suspension. The news of Ness’s imprisonment made the Wadia Group companies’ shares tank by up to 10% with flagship Bombay Dyeing plunging the most in Tuesday’s volatile market. Stock exchanges have sought clarifications from the four Wadia companies following the news reports on Ness’s jail term. National Peroxide’s scrip fell nearly 6%, while shares of Bombay Burmah and Britannia went down by over 2% each.

Most legal experts TOI spoke to said the Japanese court order will not impact Ness’s directorship in listed Indian companies. Under Indian securities law, a person will be disqualified as a director of a company if he has been convicted for any offence by a court and has been sentenced for a minimum six-month jail term. However, former Sebi executive director J N Gupta, said, “Court, according to Indian Companies Act, is limited to domestic jurisdiction.” Since Ness has been convicted by a foreign court, he may not face disqualification as a director in India.
One lawyer, however, said it is unclear what stand Sebi would take regarding the continuation of Ness’s directorship in the four listed Wadia companies even though there is no dispute over his conviction by a Japanese court.
Ness, 47, first joined the board of Bombay Dyeing in 2001 and later other Wadia companies. He is also the co-owner of Kings XI Punjab cricket team in the popular Indian Premier League (IPL). Ness gave way to his younger brother Jeh to take charge of Bombay Dyeing, a company chaired by Nusli Wadia, who has a net worth of nearly $7 billion.

Facebook redesigns app, rolls out dating service to 14 more countries

Facebook Inc on Tuesday unveiled a redesigned app and rolled out its dating feature to 14 more countries as it tries to boost user-engagement on its social network.

The revamped app makes it easier for users to engage with groups of people who share similar interests, the company said in a blog post.

Facebook said countries including Brazil, Philippines, Vietnam, Singapore and Malaysia will now have access to its dating service, which has been updated with a feature called “Secret Crush” that allows users to explore potential romantic relationships within their friend circle.

The company also said that its users will soon be able to ship Marketplace items anywhere in the continental US and pay directly for purchases.

“This means sellers who opt to list items for shipping can reach more buyers and get paid securely – and buyers can browse from a wider selection and be confident that their purchase is protected with buyer protection,” Facebook said.

Facebook also introduced a new Events tab that allows users to see what’s happening around them, get recommendations, discover local businesses and coordinate with friends to make plans.

Mexico urges U.S. to ratify new NAFTA deal: ‘We want that free trade agreement’

MEXICO CITY – Mexico’s President Andres Manuel Lopez Obrador on Tuesday urged U.S. lawmakers to ratify a revamped North American trade pact a day after the Mexican Senate paved the way by passing a bill to strengthen the rights of trade unions.

READ MORE: Trump boasts that threat of tariffs forced Canada to agree to new NAFTA deal

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The leaders of Mexico, the United States and Canada signed the trade agreement at the end of November after a long negotiation, but it requires ratification in each country’s legislature to take effect and replace the North American Free Trade Agreement (NAFTA), in force since 1994.

“When the labor reform is approved, two purposes are accomplished: the main one is that it benefits Mexican workers… but it also fulfills the commitment that was made with the government of the United States,” Lopez Obrador said during his daily morning press conference.

“Now it is up to the U.S. government, the U.S. legislators, to finish approving the free trade agreement,” he added. “We are fulfilling (our obligations) and we want that free trade agreement with the United States and Canada.”

U.S. Democratic lawmakers have said the new United States-Mexico-Canada Agreement (USMCA) must ensure workers in Mexico have the right to unionize, a step that requires new labor laws.

Democrat House Speaker Nancy Pelosi, leader of the House of Representatives, has said that U.S. lawmakers should not endorse any agreement to replace NAFTA unless Mexico passed a law to protect labor rights.

READ MORE: Nancy Pelosi says new NAFTA not possible without worker rights in Mexico

On Monday, the Mexican Senate approved a reform that enshrines the right of Mexican workers to organize and gives them more control over their contracts.

The bill, which was passed by the lower house earlier in April, aligns Mexico with international treaties, according to Mexican lawmakers. It awaits the signature of the president to enter into force.

— Reporting by Diego Ore; Editing by David Gregorio

SBI’s new rules for savings accounts: Key points

NEW DELHI: Savings bank account holders in SBI having more than Rs 1 lakh balance will earn a quarter percentage point less interest from Wednesday with the country’s largest lender linking the interest rate to the RBI’s repo or short-term lending rate. However, SBI savings bank account holders with less than Rs 1 lakh balance will continue to get 3.5 per cent interest on deposits.

According to the information provided on the website of State Bank of India (SBI), the interest rate on savings bank accounts with balances above Rs 1 lakh will be 2.75 per cent below the RBI’s repo rate, which currently stands at 6 per cent.

Hence, the SBI will give 3.25 per cent interest on savings bank deposits with a balance exceeding Rs 1 lakh. At present, the interest rate is 3.5 per cent. The interest is paid quarterly.

The interest rate on such balances will go up in case the Reserve Bank hikes repo rate (the rate at which it lends to banks) and may fall further if the repo rate continues its downward journey.

The SBI, which controls nearly a quarter of the banking system, was giving interest at a rate of 3.5 per cent for savings bank deposits up to Rs 1 crore and 4 per cent for deposits above Rs 1 crore till Tuesday (April 30).

Earlier in March, the SBI had announced that it will be linking its savings deposits rates and short-term loans to the RBI’s repo rate from May 1 with an aim to ensure faster monetary transmission.

The bank further said all cash credit accounts and overdrafts with limits above Rs 1 lakh will also be linked to the benchmark policy rate, plus a spread of 2.25 per cent.

“The Risk premiums over and above this floor rate would be based on the risk profile of the borrowers, as is the current practice,” according to its website.
SBI’s domestic savings bank deposits stood at more than Rs 10.64 lakh crore at end-December 2018.
In December 2018, the RBI had proposed that floating interest rates on personal, home, auto and micro and small enterprises (MSEs) loans should be linked to external benchmarks like repo rate or treasury yields, from April 1, 2019.
However, the RBI later deferred the deadline saying it will hold further discussions with banks on linking interest rates.

As of now, banks follow a system of internal benchmarks, including Prime Lending Rate (PLR), Benchmark Prime Lending Rate (BPLR), Base rate and Marginal Cost of Funds based Lending Rate (MCLR).

Infrastructure sector growth improves to 4.7% in March

NEW DELHI: The growth of eight core sectors improved marginally to 4.7 per cent in March 2019 against 4.5 per cent in the same month last year.

For the full 2018-19 fiscal, the expansion rate of eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — remained flat at 4.3 per cent, official data released on Tuesday showed.

Coal generation growth was flat at 9.1 pet cent in March 2019. Natural gas, refinery products, fertiliser, steel and cement sectors recorded positive growth rates.

Crude oil production, however, contracted by 6.2 per cent in March. Electricity generation declined by 1.4 per cent during the month under review.

A fall in production of crude oil and refinery products had dragged the growth of the eight core sectors to 2.1 per cent in February.

The infrastructure sector growth will also have an impact on the Index of Industrial Production (IIP) as these segments account for about 41 per cent of the total factory output.

Vistara hires 100 pilots, 450 cabin crew from Jet

NEW DELHI: Almost 100 pilots and 450 cabin crew members of Jet Airways have been hired by Vistara. This Tata Group-Singapore Airlines JV is planning to induct some of Jet’s aircraft. The other Tata JV airline, AirAsia India, is also planning to take Jet’s Boeing 737s in its fleet.

Air India, SpiceJet and GoAir are among the Indian carriers that have taken Jet’s pilots and cabin crew on board. AI and AI Express were looking at inducting Jet’s B777s and B737s, respectively, but so far they have not done so.

Meanwhile, the situation at Jet is deteriorating by the day. On Tuesday, the airline told employees that their group mediclaim policy will lapse from Wednesday. “In the absence of any emergency funding from the lenders or any other source of funds forthcoming in the near future… we are not able to fund the premium of our group mediclaim policy… I sincerely regret to inform you that effective May 1, 2019, the group mediclaim policy cover for the Jet Airways family will cease. Under these circumstances, we would urge you to take a medical insurance cover of your choice,” the airline’s mail to staffers said.

The government is temporarily giving Jet’s slots to other airlines which quickly add capacity and bring down runaway fares. SpiceJet has started flying some of Jet’s B737s. The Tata Group JVs, Vistara and AirAsia India, are also planning to do the same.

AirAsia India Pvt Ltd’s (AAIPL) flying licence has listed Airbus fleet for its operations. Now the low cost carrier (LCC) has applied to the Directorate General of Civil Aviation (DGCA) for operating Boeing aircraft, the ex-Jet B737s, also. AAIPL currently has 20 Airbus A320s and is likely to add five more of these planes this summer. In addition to these, it is looking at ex-Jet B737s too. Suspension of operations by Jet has suddenly freed up slots at the choked Delhi, Mumbai and Bangalore airports.

AAIPL will complete five years this summer and be eligible to fly abroad and Vistara has already got the permission to do so. Jet had significant number of flights to the Gulf and Southeast Asia, and bilateral to both these places had been exhausted. If Jet does not revive in coming weeks and months, its international flying rights would also be distributed to other airlines.

Read this story in Marathi

Starbucks found guilty of profiteering Rs 4.51 cr

NEW DELHI: The GST investigative arm has found Tata Starbucks guilty of profiteering to the tune of Rs 4.51 crore by not reducing prices of coffee despite a cut in the rate. Investigation by the Directorate General of Anti Profiteering (DGAP) has revealed that Tata Starbucks, the equal joint venture between the Tata and global coffee chain Starbucks, had hiked the base price of one its coffee variant after the GST Council cut tax rates on restaurants from 18 per cent to 5 per cent with effect from November 15, 2017.

This kept the retail sale price of the product pre and post GST rate reduction intact.

Sources said the DGAP has concluded its investigation in March and found that Starbucks profiteered Rs 4.51 crore.

This case will be now heard by the National Anti-Profiteering Authority (NAA), which will pass the final order about the quantum of profiteering.

When contacted, Tata Starbucks spokesperson said: “As a responsible organization, Tata Starbucks conducts its business ethically and complies with all the local laws and regulations”.

The company, since its entry in October 2012, operates around 140 outlets across Mumbai, Delhi-NCR, Hyderabad, Chennai, Bengaluru, Chandigarh, Pune and Kolkata.

GST rate on restaurants was slashed to 5 per cent without benefit of credit on inputs with effect from November 15, 2017. Before that the tax rate was 18 per cent with input tax credit (ITC).

Following that, restaurants were supposed to adjust their base price after taking into account the unavailability of credit on input. However, there have been complaints from customers that restaurants have hiked their base price of the products in such a way that the final sale price remained the same both pre and post GST rate cut.
“According to estimates the unavailability of ITC benefits can push up the cost of product by 10-12 per cent. However, in some cases we have seen that the base price has been increased by as much as 85 per cent,” one of the source told .
After studying the books of accounts of a company, the DGAP gives its report to the NAA for further action. If the NAA finds a firm guilty of profiteering then the amount profiteered has to be refunded to consumers by the company.
In case where the consumers cannot be identified, the amount has to be deposited into the consumer welfare fund of the Centre and states.

In February, the NAA had found another restaurant chain Jubilant FoodWorks, the operator of Dominos Pizza in India, guilty of not passing on GST-cut benefit of Rs 41.42 crore on sale of some pizza products.

Yes Bank shares dive 30% on Q4 loss

NEW DELHI: Shares of Yes Bank plummeted nearly 30 per cent on Tuesday after the company reported a loss of Rs 1,506.64 crore for the fourth quarter ended March 31, owing to rise in provisioning for bad loans.

The scrip after a weak opening further tumbled 28.39 per cent to Rs 170 on the BSE.

At the NSE, shares plunged 29.76 per cent to Rs 166.60.

The scrip was the worst hit among the front-line companies on both the indices during the morning trade.

Markets were closed on Monday due to elections in Mumbai.

The bank had recorded a net profit of Rs 1,179.44 crore on standalone basis during January-March period of 2017-18, it said in a regulatory filing on Friday.

The bank’s total income rose to Rs 8,388.38 crore as against Rs 7,163.95 crore in the same quarter of the previous fiscal, the bank had said in the filing.

On the asset quality front, gross non-performing assets (NPAs) of the bank doubled to 3.22 per cent of the gross advances as on March 31, 2019 from 1.28 per cent at the end of 2017-18.

Ness Wadia sentenced 2-yr jail for drug possession

NEW DELHI: Ness Wadia, the son of industrialist Nusli Wadia, has been sentenced a two-year jail term in Japan for possession of drugs — while on a skiing holiday to the country.

Ness is also the co-owner of Kings XI Punjab cricket team.

As per a report of Financial Times (FT), he was caught in New Chitose Airport in the northern Japanese island of Hokkaido with 25 grams of cannabis resin earlier in March this year.

“Mr Wadia spent a period in detention before his indictment on March 20 and an undisclosed period of detention before a court hearing. The Sapporo district court handed him a two-year prison sentence, which was suspended for five years,” the Financial Times claimed.

Wadia has since left Japan and has returned to India, it further claimed.
However, in a statement Wadia Group stated that the development will not impact Ness in discharging his responsibilities.

“The judgement is clear. It is a suspended sentence. Hence it will not impact Ness Wadia in the discharge of any of his responsibilities and he will continue to play the role that he has done hitherto, both within the Group and outside,” Wadia Group spokesperson said in a statement.

The Wadia empire has many units, which include Bombay Dyeing, Bombay Burman Trading, biscuit giant Britannia Industries to budget airline GoAir and a share in IPL franchise Kings XI Punjab with the total market valuation of its listed entities standing at $13.1 billion.