MC EXCLUSIVE NSE to pay additional Rs 600 crore to SEBI before the IPO, files settlement application with regulator

NSE to pay additional Rs 600 Cr before the IPO to SEBI, files settlement application with regulator

NSE has filed a settlement application before market regulator Securities and Exchange Board of India (SEBI) for settlement of the co-location and other cases. As per people familiar with the matter, NSE has agreed to pay around Rs 1,400 crore as the settlement amount for the co-location and dark fiber cases. The settlement application was filed on Friday evening.

In the co-location case, it was alleged that some brokers exploited NSE’s facility by placing their servers physically closer to the exchange’s servers for faster data access and gained unfair edge over others. Similarly, SEBI alleged that NSE  provided preferential access to certain brokers through the use of dark fibre for faster connectivity to co-location facilities

The people cited said that after multiple rounds of negotiations an amount of close to Rs 1,400 crore has been arrived at.  The final amount may vary as interest at the rate of 12 percent will be charged till the date of settlement. The talks were on since March this year.

The settlement may be finalised by end of next month once approved by a panel of SEBI’s whole-time members. Moneycontrol had reported on May 26 that SEBI and NSE are in talks to settle and NSE may be asked to pay close to Rs 1,300 crore. The amount to be paid as settlement has the approval of NSE’s board.

As per the people cited , NSE had deposited Rs 1,100 crore with SEBI and, out of that, Rs 300 crore was returned following a direction of the Supreme Court in 2023. Thus, around Rs 800 crore, along with interest earned along with the principal deposit amount is lying with SEBI. So, additionally, around Rs 600 crore may be paid by SEBI making the total payout Rs 1,400 crore.

SEBI and NSE both did not reply to emails seeking comments on the issue.  The amount of Rs 1,388 crore was first reported by the Economic Times on June 25.

Though legal experts say that as NSE had won the case before SAT and the Supreme Court did not give any relief in favor of SEBI, the case could eventually have gone in favour of the exchange if pursued. But, probably the exchange’s shareholders wanted the matter to be closed.

Recently, at an event in Mumbai, SEBI Chairman, Tuhin Kanta Pandey said, “I have said before that there is no obstacle that will remain in case of NSE IPO”. The pace of NSE IPO gathered momentum after Tuhin Kanta Pandey joined SEBI as Chairman in March this year.

Also read: NSE may get go ahead to file IPO papers by July-end, listing likely by Q4FY26, say sources

Background: Co-location order and SAT’s reprieve

In April 2019 order Sebi had directed NSE to disgorge Rs 625 crore, along with 12 percent annual interest from April 1, 2014, for a range of violations. However, in 2023, SAT partially overturned the ruling.

The appellate tribunal found SEBI’s disgorgement demand unwarranted. It noted that NSE had not violated the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations and that no fraud had been committed by the exchange or its employees.

SAT observed that “it is only a case of non-adherence of a circular to some extent” and concluded that NSE’s conduct didn’t breach the SEBI Act or its regulations.