Book Review: Market Mafia – How India’s Two Stock Exchanges, Finance Ministry and Regulators were compromised

Mukul Asher

This book is an outcome of meticulous and objective research conducted over a long period by Palak Shah. The book analyses how one of India’s top stock exchanges, NSE (National Stock Exchange), and its MCX (Multi Commodity Exchange) was captured by a group involving top Ministry of Finance and regulatory agencies officials led and shielded by top political leaders, market operators, established academics researching on the financial sector, and many media operatives and opinion-makers, and other assorted operatives. The book terms them Market Mafia.

The book contains eight chapters and a large number of references. The chapter titles are revealing. In consequence sequence, the titles are House of Cards, Life in the Speed Lane, The Great Data Theft, Battle of the Bourses, The Goldmine’s Code, the ‘Heart of Darkness’, Some Gamblers are ‘More Equal’, and The Whiff of Money.

The book contains many fascinating details written in an investigative reporter’s style. A short book review cannot do justice to such rich details, and those interested are urged to read the Book.

A brief chronicle of the sequence of events by which regulatory capture was carried out under the government in office at the time, UPA (United Progressive Alliance Government), are as follows-

  • In 2008, Nifty the benchmark index of NSE was launched on SGX, Singapore in violation of FEMA (Foreign Exchange Management Act) which came into effect in June 2000.
  • In 2009, the NSE illegally started a co-location facility in name of Direct Market Access (DMA) without SEBI’s (Securities and Exchange Board of India), the stock market regulator, permission. The co-location scam permitted favoured traders to trade stocks a fraction of a second early, using illegal algorithmic software.
  • In 2011, two academic economists, Ajay Shah and Susan Thomas started providing Algo in derivatives
  • Ajay Shah and Susan Thomas were given unauthorized access to data of NSE by its management under Ravi Narain and Chitra Ramakrishna
  • Omnesys Technologies a software company started providing algo-trading services. Omnesys Technologies and its subsidiary Chanakya Trade vistas & Infotech Financials Pvt. Ltd. were owned by Sunita Thomas who is a sister of Susan Thomas, wife of Ajay Shah. Omnesys Technologies also manages the NSE data centre.
  • Chitra Ramakrishna was on the Board of Omnesys. None questioned the conflict. The entire system was gamed.
  • Ajay Shah was reportedly paid a royalty of 10 per cent for designing the Nifty index, an unusual financial arrangement for a consultant.
  • In 2015, a whistle-blower complained to SEBI about the NSE co-location scam. The extent of the fraud is a part of the investigation but is variously reported to be INR several trillion.

The book also reports the nature of the regulatory capture of the MCX.  Thus, the book quotes the whistleblower as reporting the following-

“Dark fibre links are operating in a regulatory vacuum at MCX. A Mumbai-based fibre network firm rejected by the NSE (Sampark), was operating at MCX with impunity. The firm provides differential speed access to different clients based on revenue share and MCX may not check this on the alibi that it was not responsible to ensure fairness across firms since it does not provide COLO (Colocation). A Mauritius entity controlled by a United State parent made profits of Rs. 20-30 crore between 2013-14 by trading in currency futures on NSE and BSE accessing feeds prohibited to non-bank participants,” (p.162).

The book further notes: “All this was never properly investigated by SEBI. The speed links at NSE and MCX were also used by one of the largest HFT (High-Frequency Trading) and Algo traders who have a base in Mauritius, the US and India. There was a Deloitte report against several brokers and it had the name of this broker too. But this whole thing has been conveniently buried.” (p.163).

Public Policy Implications

As noted, Palak Shah’s well-researched book, exhibiting exemplary professional journalism, analyses the process of regulatory capture of NSE and MCX, and those in the position of public trust whom the book calls “Market Mafia”, who engineered and engaged in massive corruption by violating public trust for private gain, eroding confidence in India’s financial sector, and straining India’s social and political fabric. 

The above has several implications for India’s public policy. The omission of these in the book is one of its limitations.

First, is the introduction of new technologies, such as in trading arrangements at the NSE and the MCX, in regulatory regimes surrounding them. And in extending trading internationally, in this case to Singapore Stock Exchange, needs to be carefully planned, with due emphasis on transparency and accountability, and checks and balances.

Second, nearly all of those involved in the massive corruption in regulatory capture possess impressive paper qualifications from well-known universities in India and abroad. But without integrity, the strength of character, positive NEEYAT (intent), and desire to contribute to society, persons with such degrees generate counterproductive and harmful outcomes.

A relevant philosophical question is what is this knowledge? And this profound question needs to be addressed not just in India’s education policy, but by broader society.

Parental values and school education are vital to using knowledge and paper degrees for improving the economy and society. It is hoped that India’s New Education Policy (NEP) will be implemented with such an outcome in mind.

Third, as India progresses towards being a major digital economy, expands the scope of application of financial technologies (FinTech), focuses on achieving USD 10 trillion economies by the middle of the 2030s, and as it further improves its current ranking in the top seven stock market capitalizations ( As of March 30, 2022, the market capitalization of the BSE was INR 264.1 trillion, equivalent to USD  3.5 trillion at 1 USD@76) and more than 100 million individuals registered with the BSE, the stakes for India and its society of a repetition of such regulatory capture episodes are immensely higher.

Fourth, the book also alerts the readers that the credibility of major data sources, such as the CMIE (Centre for Monitoring the Indian Economy) used by corporates, government agencies, media, and researchers is vital for maintaining the trust and or sound analysis. The book suggests that the regulatory capture by the Market mafia has severely eroded the credibility of the CMIE as a data source.

Fifth, the book underscores the need for judicial reform. Bibek Debroy has persuasively argued that justice tarried or severely delayed is justice denied. Lawyers and the Judiciary must guard against the law being used to delay cases

The last sentence of the book is, “till date – the probe remains half-baked. Well, is anyone listening?” (p.220).

Since then, there has been some movement in investing in the regulatory capture of the NSE and the MCX. It is hoped that the judicial probe will also involve Ministry of Finance officials of the UPA government, and the officials of relevant regulatory agencies during the fraud period. Palak Shah could justifiably take some credit for this public service.

Some recent developments involving multiple investigation agencies include the following-

  • The Central Bureau of Investigation (CBI) on February 25, 2022, arrested Anand Subramanian, a former top official of the NSE, in connection with alleged favour given to certain traders.

The development comes as authorities pressed ahead with an investigation into the NSE scam case where certain private individuals and unknown NSE and SEBI officials were accused of preferential access to the NSE’s server architecture and misuse of the colocation facility.

  • A Delhi court has rejected the anticipatory bail plea of former NSE head Chitra Ramakrishna, who faces arrest by the Central Bureau of Investigation (CBI) for allegedly sharing confidential information relating to the NSE
  • Special CBI Judge noted that bail matters regarding economic offences have to be approached differently as they involve conspiracies that are deep-rooted towards losses of public funds.

“This kind of co-location swindle could not have been possible without the knowledge and active connivance of all the functional heads of the NSE at the relevant time, this period can be considered a dark period in the history of NSE,” the Court said.

  • The income tax department conducted searches at the Mumbai residence of Ramakrishna on February 17, 2022. The CBI also visited the Sebi office and collected documents pertaining to the case.
  • It is reported that the CBI, which arrested Chitra Ramakrishna, former MD & CEO of NSE on March 6, 2022, has questioned Ajay Shah, board member of CMIE, besides focusing on the alleged role of one Infotech Financials and brokers such as OPG Securities in the colocation scam between 2009 and 2013. The investigative agency alleged Chitra facilitated the passing on of NSE’s “confidential” trading data to Shah and Infotech Financials, knowing the latter provided algorithmic software to brokers on NSE2.
  • News reports suggest that Anand Subramanian, the former group operating officer and advisor to former managing director Chitra Ramakrishna, has also been held. 

It is hoped that the investigation will be thorough and will be completed in a reasonable time period.

First published at MyIndMakers, titled, Book Review: Market Mafia – How India’s Two Stock Exchanges, Finance Ministry and Regulators were compromised, on April 6th 2022

Read more by Mukul Asher Union Budget 2022-23: Valid Economic Reasoning and Social Policies. But is that What India Needs?, on IMPRI Insights

About the Author

passport size Photo Mukul Asher edited

Mukul Asher, Former Professor, Lee Kuan Yew School of Public Policy, National University of Singapore



    IMPRI, a startup research think tank, is a platform for pro-active, independent, non-partisan and policy-based research. It contributes to debates and deliberations for action-based solutions to a host of strategic issues. IMPRI is committed to democracy, mobilization and community building.

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