Brokers who dealt with the crisis-hit National Spot Exchange (NSEL) are believed to have indulged in wide-spread client code modification to shift trades from the account of a particular client to another.
Sources say brokers — who are at the centre of the probe — made such modifications in trades amounting to nearly R4,000 crore. According to persons privy to the data, entities like Anand Rathi Commodities, Sincere Commodities & Derivatives Market, Way2Wealth Commodities and Vibrant Commodities Trading modified the client code in a significant number of trades.
The Economic Offences Wing (EOW) of the Mumbai police is already questioning officials of various brokerages that traded on the NSEL, embroiled in a R5,600-crore settlement crisis. The cops are also checking if proprietary trades were transferred to client accounts by way of code modifications.
Client code modification refers to a system where the client codes are changed after the execution of trades. Bourses — even in the equity segment — provide a facility to modify the code to rectify any error or wrong data entry done by the dealers at the time of punching orders. Regulators insist that such modifications should be used as an exception and not a routine. Sources, however, say it would be wrong to presume that every instance of client code modification would have been done with an ulterior motive, as many times, there is an inadvertent error by the dealer that needs to be rectified later.
“Unlike equities, the quantity of commodities was limited on NSEL and there were days the limit was exhausted within minutes of opening of the terminal. In such cases, brokerages used to key in large-sized single orders and, then, modify the client code as per the payment received from the investor,” said a senior official of Sincere Commodities, which saw client codes being modified in 17.35% of its trades.
In the case of Anand Rathi Commodities, nearly 21% of the trades amounting to R3,052 crore saw client code modifications. Incidentally, Anand Rathi Commodities has the largest exposure of R641 crore among all brokerages in the NSEL matter. “We have responded to