The agencies probing the irregularities related to the National Stock Exchange’s colocation facility will try to unravel the ultimate beneficial ownerships (UBOs) of favoured brokerages and the big clients they served to find out who gained from the colocation system of India's largest bourse, The Economic Times reported.

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At present, the Central Bureau of Investigation (CBI) and the Income Tax Department are probing the colocation scam, while others could come in at a later stage if there were indications of money laundering.

According to reports, certain brokers benefitted from the preferential access on NSE's trading platform between 2010 and 2015. The investigating agencies would now try to identify the last person or investment entities whose money these brokerages were handling.

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The NSE had announced in 2009 that it would offer colocation facility to stock brokers who were willing to pay extra. As a result of this, some brokers could know the price feeds broadcast by NSE's trading system earlier than their peers.

In 2016, consultancy firm Deloitte carried out a forensic review of the NSE facility and the brokers who allegedly colluded with some officials from the exchange to receive price feeds and execute trades before others. However, identifying the beneficial ownership was not among the terms of reference given to the consultancy firm at the time.

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Last year, Deloitte had informed senior officials of a government agency that it was difficult to say exactly how much money a handful of brokers made during that period.

The CBI may try to look into the real beneficiaries to find out more about the Himalayan yogi, who has been at the centre of the investigation after former managing director Chitra Ramkrishna confessed to sharing confidential information with the said ‘Siddha Purusha.’

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"Who is this yogi? Who gained from the co-location scam? And, is the yogi connected to the co-location misuse? These are the three big questions before the CBI and I-T department and for this they would try to look into the real beneficiaries," The Economic Times quoted a source as saying.

Although a recent report by market regulator Securities and Exchange Board of India (SEBI) clearly states that the former NSE chief shared information with her mysterious spiritual guide, it does not establish a direct link between colocation trades and the 'yogi.'

The investigating agencies are set to face challenges in identifying UBOs in the case. Large investments are often routed through foreign portfolio investors (FPIs). Although FPIs share the information on the UBOs with the custodian banks, their true identities can be concealed through nominee structures.

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Another big hurdle for the agencies is the time lapse. Most of the service providers and banks do not save data beyond 7-8 years. It has been more than seven years since the irregular colocation trades scam took place. To get information, the agencies would have to establish a criminal angle and convince tax havens to share data.

(Edited by : Shoma Bhattacharjee)