The Securities and Exchange Board of India (SEBI) could issue a formal settlement order to the National Stock Exchange (NSE) to resolve the ongoing co-location and dark fibre cases, within the first week of October, said sources in the know.
This will clear the procedural path for the regulator’s No Objection Certificate (NoC) to NSE for its mega initial public offer (IPO).
SEBI’s high-powered advisory committee (HPAC) examined NSE’s settlement proposal and have sent recommendations to the final committee comprising two whole-time members (WTMs) of SEBI.
“The math was done by SEBI’s internal team. The HPAC has closely looked at other concerns too. The WTMs will approve it based on monetary and non-monetary merits,” a source said.
Ashish Chauhan, the chief executive of NSE had earlier stated that the exchange’s listing could occur in around 9 months after receiving the NoC, which involves preparation and submission of DRHP, and subsequent SEBI scrutiny and approval.
Settlement details and payment structure
Of the settlement amount of Rs 1100 crore earlier deposited with SEBI, Rs 300 crore was returned in 2023 as directed by the Supreme Court (SC). The total proposed settlement amount of around Rs 1400 crore – split between colocation and the dark fibre case, would need NSE to pay another Rs 600 crore.
“Even after this settlement, the cases will continue for some erstwhile senior executives of NSE and some brokers associated,” said a senior lawyer empaneled with SEBI.
IPO prospects and legacy cases
Post IPO, NSE will be among top-10 firms in the Indian listed universe at current valuations. The NoC from SEBI is vital for NSE to appoint legal and investment bank advisors to file its IPO prospectus (DRHP).
NSE had recently paid Rs 40 crore to settle a case related to compliance failures after SEBI passed a settlement order. This case dates back to SEBI scrutiny of NSE in 2022. The co-location saga dates to 2015 after a whistle-blower alleged preferential access was given to some traders in the form of early log-in or access to servers with low trading loads, which helped them reap massive profits.
SEBI had imposed penalties on NSE and its former executives, after it found that the exchange allowed unauthorised vendor to install dark fibre used in high-frequency trading. Sampark Infotainment, without approval or authorisation, established dark fibre connections for Way2Wealth Brokers and GKN Securities.