NSE awaits easing of SEBI escrow ruling on co-location fee

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26 Aug, 2025 12:21

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Tarun SharmaMoneycontrol BureauThe National Stock Exchange is awaiting SEBI’s nod for easing of the order requiring the bourse to set aside revenues from its co-location services in an escrow account.

Market regulator Securities and Exchange Board of India had ordered the exchange to set up an escrow account following a controversy over some trading members allegedly getting access to the exchange's trading engine.So far, the NSE has put Rs 145 crore in the escrow account for the December quarter.

The exchange will go ahead with road shows for its initial public offering (IPO) only once this issue has been resolved, sources familiar with the development told Moneycontrol.

Under the co-location facility, trading members can place their servers in the exchange’s data centre, giving them faster access to the price feed and swift execution of trades. NSE makes around Rs 5-6 crore every month by leasing out server space to its trading members. But it makes another Rs 40-45 crore every month on the fee from the trades done using this facility.

The exchange's contention is that only the charges earned on leasing server space should be put into the escrow. However, the plea has not cut ice with the regulator so far.Sources said that the regulator is in the process of investigating the issue of preferential access and is yet to take a final decision. 

“We have not given clean chit to exchange yet, so the money will have to be put into the escrow account till a conclusion is reached,” said a source.

Only 10 percent of NSE’s trading members use the co-location facility. However, fees earned from high-frequency trading using co-location facility accounts for a little over 40 percent of NSE’s annual turnover. But an NSE official clarified that such fees could be around 30 percent of the bourse's annual revenues.

That is key to the valuations NSE can command from prospective investors in its initial public offering.

Last week, rival BSE’s shares had listed at a hefty premium to the issue price, valuing the bourse way above what most experts had estimated. With NSE’s operating profit margins and revenues nearly twice that of BSE, it is expected that NSE should command an even better valuation.

Meanwhile, the NSE is planning to initiate action against OPG Securities, the broking firm at the heart of the controversy, sources said. A forensic audit by a SEBI-appointed committee and consultancy firm Deloitte has shown that OPG Securities was able to get faster access to the price feed in connivance with some officials in the IT department of the exchange. It is alleged that many other brokers too gained in this manner. However, the audit has only been able to pinpoint OPG Securities.Read: NSE's Power Exchange India to shut down.