SAT gives relief to NSE, allows the exchange to release co-location income from escrow account

Securities Appellate Tribunal (SAT) has allowed National Stock Exchange (NSE) to release Rs 6,085 crore from escrow account which the exchange earned by providing co-location facility. However, NSE has to keep money worth Rs 420 crore in interest bearing account.

NSE moved SAT with modified application to release co-location income from escrow account which exchange is submitting from September 2016. As per NSE financial, cumulative income has crossed Rs 6,085 crore-mark, which SAT today allowed to release.

A source confirmed the SAT decision but the order copy is still awaited. Moneycontrol reached out to NSE, Sebi for an official confirmation but did not get a response till the time of writing this report.

In January 2010, NSE began offering co-location facility. In this service, members can place their server in exchange premises and for that exchange charges fee. This facility gives the market participants faster access to the exchange platform.

In 2016, the capital and commodity market regulator Sebi had asked NSE to deposit income generated from providing co-location facility into escrow account. Sebi had found in their investigation that co-location facility gave preferential access to some brokers due to which they made unlawful gain. Sebi had ordered to keep all earnings from co-location in escrow account.

NSE’s around 70 percent income is generated through co-location. Till March quarter, income reached Rs 6,085 crore level. Out of which, around Rs 2,749 crore has been generated in the last one year.

In 2019, Sebi passed order against NSE and asked to disgorge amount worth Rs 624 crore. Sebi had put penalty of Rs 62 crore also. NSE had challenged this order in SAT in June 2019 and SAT told NSE to deposit this amount with Sebi, which NSE has submitted.

However, hearing of this matter was not concluded post this. So, NSE moved SAT to allow it to withdraw the amount.

Sebi has started investigation against NSE and former management of NSE after whistleblower complaint to Sebi. In this co-location matter, former managing director Chitra Ramkrishna was asked to leave exchange. Not only Sebi, other investigation agencies including Central Bureau of Investigation (CBI) and Income Tax department also commenced probe into the matter.