SEBI Closes Co-location Case Against NSE Without Further Action

The Securities and Exchange Board of India has officially closed its proceedings against the National Stock Exchange and other associated parties in the long-standing co-location matter. This decision, announced today, comes after a thorough review prompted by a series of appeals and orders issued by the Securities Appellate Tribunal.

The co-location case, which has been a long-standing issue, involved individuals such as Chitra Ramkrishna and Ravi Narain, who were among those at the helm of affairs when the alleged irregularities took place. These individuals, along with others, were scrutinised by the regulators as they investigated the matter, which centred on allegations of unfair access to the exchange's servers and systems.

It is interesting to know that this case became a roadblock for NSE's IPO approval.

The case began with SEBI’s order dated April 30, 2019, which addressed issues related to NSE’s co-location facility—a system that allows trading members to colocate their servers at the exchange’s data centre.

This order was subsequently challenged in appeals before the SAT, leading to the Jan. 23, 2023, SAT ruling, which was the basis for the recent proceedings.

In its January 2023 decision, the SAT evaluated several appeals, including those filed by NSE and individuals such as Narain and Ramkrishna. The Tribunal’s review also included OPG Securities Private Limited and its directors, challenging SEBI’s earlier sanctions.

The SAT’s ruling showed a lack of evidence for systemic malpractices, though it did point to human errors in IP allocation and system monitoring.

The SAT found that NSE’s system architecture provided fair and transparent data access but identified issues with the allocation of IPs and a failure to adequately monitor server connections. Despite these shortcomings, the SAT did not find violations of the market regulator's regulations.

SEBI’s recent review reaffirmed the SAT's findings, noting that no new evidence had emerged that would substantiate allegations of collusion or conspiracy. Reports from the Indian School of Business (ISB) and Deloitte, which were reviewed in the proceedings, did not contribute new insights or evidence of collusion.

As a result, SEBI has decided to close the case without issuing any new directives.