Category Archives: current-topic-views
In May this year, markets regulator Sebi had issued show-cause notices to a number of officials and OPG Securities, a Delhi-based broker, which allegedly enjoyed preferential treatment in NSE’s colocation facility.
Among NSE officials who had been show-caused by Sebi were the exchange’s former managing directors Ravi Narain and Chitra Ramkrishna, and Suprabhat Lala, one of its current top officials.
Under the Sebi-approved co-location (also called co-lo) facility, a bourse can allow its brokers to place their trading servers in close physical proximity to the exchange’s trading server so that the data dissemination from the exchange’s servers to the brokers’ servers take a minimum amount of time.
A source in the tax department said the searches were conducted “after getting spe-
The market grapevine linked the tax searches to NSE’s co-location case, in which OPG Securities and other brokers had enjoyed preferential access to the bourse’s trading servers which was used to book profit by getting trade- related information a few seconds ahead of others
cific information” and were not a result of Sebi’s investigations in the matter. NSE officials confirmed that there were no searches at the exchange’s premises. Another IT department source said that there was “no action on NSE…our action is on a broker”. The I-T department didn’t disclose the names of the broker and exchange officials who were searched. Narain denied any IT searches at his place. Ramkrishna, Lala and Sanjay Gupta, MD, OPG Securities, didn’t reply to messages for their comment on the searches.
Market players said that the I-T department’s action against the broker was in connection with its tax evasion during the co-lo case. Searches had started on Wednesday and were continuing till late on Thursday. I-T officials had recovered documents, computers, etc during the searches.
In NSE’s co-location case, OPG Securities and some other brokers had allegedly enjoyed preferential access to the bourse’s trading servers which was used to make extra profit by getting trade-related information a few seconds ahead of other brokers. Using high-end computers, brokerages develop thousands of trading strategies every second and use these to profit, mainly due to price discrepancies on the exchanges. In these types of trading systems, called algorithmic (algo) trading in market parlance, access to sensitive information even a second earlier could lead to huge profits for traders who can access such information.
In the co-location case, NSE on its part is trying to settle the matter with Sebi through the consent mechanism, where it could pay a penalty without admitting and denying any wrongdoing, and close the case. Sebi is yet to respond to NSE’s request for settlement.
Earlier this week, NSE had also submitted to Sebi a forensic audit report on the algo trading case, which was prepared by EY, a leading accounting firm. An audit by Deloitte had earlier pointed out several lapses with NSE’s systems but did not confirm any illegality, something that did not go down well with the market regulator.
The co-location case had also forced NSE to defer its plans for listing while BSE, its biggest competitor went public in January, without facing any major hurdle during the IPO process.
A significant amount of specified bank notes (SBNs, or demonetised notes) flowed into special types of accounts such as ‘basic savings bank deposit accounts’, Pradhan Mantri Jan-Dhan Yojana (PMJDY) accounts, dormant or inoperative accounts, cooperative banks’ accounts with scheduled commercial banks (SCBs), bullion trader/ jewellers’ accounts as well as loan accounts.
The total cash deposits in these accounts with 52 banks during November-December 2016 were estimated at Rs 4.36 lakh crore. Cash deposits in these accounts during September-October 2016 were Rs 2.7 lakh crore. “Thus, the variation of Rs 1.657 lakh crore can be assumed to be the increase in cash deposits under these accounts due to demonetisation, given that there is a lack of noticeable activity in such accounts during normal times,” the RBI said.
Interestingly, the detection of fake notes doubled after demonetisation.
In a freewheeling interview at Instagram’s headquarters in Menlo Park, California, the 31-year-old spoke to TOI exclusively about how India has emerged as a key market for the company as it chalks out its path from the 800-million to 1-billion monthly user mark, the Facebook leverage, its cloning of features from Snapchat, and hot button issues like immigration in Silicon Valley. Edited excerpts:
You’ve had a great run last year or so, especially after the launch of Instagram Stories in 2016. How important has India been in this journey?
We grew from 700 million to 800 million monthly active users, or MAUs, just in a space of 100 days. India is a huge contributor to that growth. We think of it as a market with a lot of promise and excitement. So as we draw up the path from 800 million to 900 million to a billion users, we see India as being a very key market for us. India would be a primary component of in that journey.
What has worked for you in India and other emerging markets?
There have been a couple of milestones. In 2012, we launched on the Android platform, which opened up the market for us internationally. Five years ago, we were still an even split between the US and international, and now it is 70% international, if not more.
How did you start focusing on countries outside of the US?
About three years ago, we were at 500 million monthly users. We started thinking how the product was getting in the way of those wanting to use Instagram. We identified a few things. Our app was using a lot of data, so it was difficult to use if you did not have a perfect LTE connectivity. We put an engineering team in New York and had them focus on how Instagram would work as well, no matter what phone or network you were on. I spent a lot of time with that team and they looked at offline mode and optimising for data usage. Also, we thought of videos on Instagram.
How much of the product development was based on insights coming from places like India?
The engineering and product teams are actually in India right now doing ground research, talking to people on what’s working well and what’s not. Another issue which was raised was of people who were not sure about installing Instagram on their phones, and for them we started building our mobile web experience. We were very mobile-focused and till about a year and half ago we had a very basic website. But then in the last year we let users post pictures on the web, we are even trying to test Instagram Stories (a feature launched in 2016, which lets users share videos and posts that disappear after 24 hours) on the mobile web. We have invested a lot in mobile web based on the feedback we have gotten from users in emerging markets like India. We try and be very problemcentric at Instagram. The biggest issues like our app uses too much data, takes too much space — we thought if we solve these two problems then we get more people to try us.
What role did Facebook play in Instagram going for growth in markets like India?
One of the most important things that has come up from talking to the Facebook teams is the opportunity size in markets. India is a huge market for Facebook, even knowing what the benchmark is can be really helpful. And then there is a ton of research they’ve done over the years on data usage, and on ways one can think of countries in a more nuanced way and treat people as people and not as a country. They have been able to bring that nuance because their infrastructure has the ability to figure the network connectivity, the device the person is using, rather than targeting by country which is too broad.
You started Instagram in 2010, two years later it was acquired by Facebook for $1billion. What’s the last five years been like?
The amount of output that we had and the size of the community we supported was totally disproportionate to the team size then. For the first 2.5 years of being here (Facebook), it was about growing the team and the management to support the community. It is kind of scary — in 2012 we were growing a lot, but had only six engineers, we were very slow at hiring. We had no management experience. I can easily imagine us, if we could not have the ability to grow the team like we did while being at Facebook, having a lot of scaling issues. We could take two years and build out an engineering team and infrastructure, learn a lot — both Kevin (Systrom) and I — on managing and growing a team, and then you saw us getting into gear in 2015-16. We are now shipping products at a cadence which is much better than in 2013-14.
What has been the most significant transition for the company after the sale to Facebook?
A big part of the transition has been thinking about the company as much as about the product — they are both related. For the first few years, we were 100 miles prior going on the product part and the company part was just enough to let us get by, but it was not sustainable for the long run. We were putting ridiculous hours and it would not have lasted very long. It’s been great last few years, I’ve spent a lot of time thinking about the team culture and who we are hiring. It’s less immediate gratification than shipping a product, but it is the only way you will sustain the growth in the long run.
Was it the right move then to sell so early on?
Yes, and more so for hiring. We went from those six engineers in September of 2012 when we arrived here to 24 by the end of the year. That was a big cultural thing but we brought in good people, and now we are at 300. We could have built that team independently but with a lot more challenge, especially at that early stage. I call it the recruiting cycle of death — when your team is so busy to recruit which makes them busier and then you spiral downwards. That’s where we were. I was trying to keep the site up with 30 million people using it and also recruiting, but was unable to do either enough.
What made you and Kevin decide to say yes to Facebook?
All of the issues around hiring, scaling up, but also because of the alignment of values and mission with the Facebook leadership. We spent a lot of time talking to Mark (Zuckerberg) and Mike Schroepfer (Facebook CTO). Our engineering cultures were very aligned — empowering engineers, letting them move quickly and not insisting on building a perfectly crafted code that no one uses. So we balanced pragmatism with quality. Also, they thought Instagram had a big, interesting path ahead of it. We had their buyin to let it scale, which was important. So it was not the end of the journey but the next chapter for us.
You’re a Brazilian. How do you react to the present situation around immigration in Silicon Valley?
It’s a full journey for me. I came here as a student, worked on an H-1B for a few years. During the Obama administration, I was pretty much in communication with them about what worked for me in my immigration journey and what could get better. Kevin and I almost didn’t start Instagram together because I wasn’t able to get a visa to be his co-founder. When you are founding a company, you have to move at a startup pace and you can’t wait for months to get the status of your visa. Kevin had raised seed money of $500,000 because we needed to show that we had the capital and I couldn’t be shown on the capitalisation table or cap table. There was an element of luck — it could have gone the other way. Kevin raised the seed money before I signed on but there was a condition from Steve Anderson (of Baseline Ventures), who was one of our two early investors, that he had to get a technical co-founder. So I was talking to the Obama administration and hoping for a forward progress on a few of these things, like Immigrant ‘Startup Visa’ and other interesting ideas.
…which has (Startup Visa) now been blocked…
It is a setback. It’s now almost like playing defence. We need to now say that there’s a lot of good things that have come off immigrants here, which create jobs and grow the economy. I have been fairly vocal on when there have been moves to limit that and create uncertainty in the immigration process. As difficult as my process was, I knew there were steps to get there, the uncertainty is very problematic. A friend of mine directed a film “For Here Or To Go” about Indian immigrants — it’s all about that uncertainty. As a Brazilian, I didn’t have to go through that while getting my Green Card, but for a lot of folks from India it takes years. It’s a whole challenge. People talk about entrepreneurs as risk takers, but to take risks you need to start from a really stable base and that’s what I worry most about with immigration. We need to provide clear rules that incentivise good entrepreneurs to come here and start businesses so that they can become risk takers then.
What do you say to Instagram cloning Snapchat, but still being behind in getting new users in the US, although you’re ahead in international markets?
There is a tremendous power of network effects, you won’t just switch to an identical product. Just being good enough isn’t enough, you need to provide something novel and new. There are some countries where we’ve had runaway success like in Spain with Instagram Stories. There is no longer only one Instagram anymore. Every country has different composition of ages and other subtleties, which is very interesting as we grow.
As for the US, Snapchat is still strong and that’s a great thing to internalise for our teams. It’s an interesting competition. For us the path forward is what’s the Instagrammy version of Stories, which is integrated with our product and brings our own ideas to the table. We launched the polling sticker because feedback and comments have been part of Instagram since the beginning.
The key is that if we would have brought it (Stories) and stopped there, then it would have been the only narrative and people would have said, ‘Look at Instagram, they copied Snapchat and it didn’t work’. But instead, we have continued to iterate and done a bunch of work. One of the biggest things we have focused on around Stories is performance and that has helped in it being used.
Does it work for you to not face Snapchat outside of the US?
It does make a lot of sense. But for us, we are such a visual platform that since we started we always thought we could reach all across the world. For me, it’s awesome to see that people who were not using the Story format are adopting it to share their life-on-the-go.
Recently, you doubled your advertising base to 2 million. What’s the monetisation plan for emerging markets?
I have seen this closely in Brazil, where we are not thinking only of big advertisers but the long tail of small businesses. I saw owners of, say, a doughnut store, or a fashion designer selling products through Instagram. A lot of the products we are building now is to help enable these small businesses. We are also working on Instagram Direct (which lets users send messages to one or more people) to help business owners. As we look to the future, monetisation and commerce are not only for generating revenues but our role in the world is towards empowering local businesses and giving them tools to grow.
Wrestling Federation of India (WFI) president Brijbhushan Sharan Singh said it was Sushil Kumar’s own decision and added no wrestler could be compelled to participate in national events before heading for international competitions.
Indian captain Virat Kohli has asked the public to contribute in their own way to reduce pollution in the national capital. In a short Twitter video with the hashtag #Delhi, we need to talk! #MujheFarakPadtaHai, Kohli posted a video of himself describing measures Delhiites could take to improve the situation.