Strong grounds to contest Sebi order in co-location case, says NSE

The National Stock Exchange (NSE) believes it has “strong grounds” to contest orders passed by the Securities and Exchange Board of India (Sebi) in the co-location (co-lo) case. The country’s largest stock exchange plans to move an appellate body challenging the three orders passed by the markets regulator directing it, among other things, to disgorge over Rs 1,000 crore.

“The company (NSE) has received the orders passed by Sebi and has sought legal advice thereon. Having regard thereto, the company believes that it has strong grounds to contest the above orders including monetary liability (including from adjudication proceedings) raised by Sebi. The company intends to file appeals before the Hon’ble Securities Appellate Tribunal (SAT) against the orders passed by Sebi,” said Vikram Limaye, managing director and chief executive of NSE, in its board meeting notes.

The NSE’s board of directors held a meeting on Thursday to announce the financial results FY19, where Sebi’s action in the co-lo case was discussed. On April 30, Sebi passed multiple orders against the NSE and some of its current and former employees for lapses at its co-lo facility that granted unfair access of data feeds to certain brokers. 

In one order, Sebi directed the bourse to disgorge Rs 625 crore, along with an interest of 12 per cent per annum from April 1, 2014, till the actual date of payment. The regulator has also barred the exchange from raising funds from the market for a period of six months from the date of the order. 

In a separate order, Sebi asked the exchange to deposit Rs 63 crore along with 12 per cent interest from September 11, 2015. In a third order, Sebi gave remedial directions to the NSE to improve governance. Experts said SAT might take up the plea next week.

The tribunal has already granted interim relief to NSE’s employees and brokers in the matter. SAT has imposed a stay on the Sebi order and asked the regulator to submit its reply within three weeks.

The exchange said no provision was required to be made pertaining to the orders issued by Sebi. This is because following Sebi’s directives, the NSE has already set aside revenues generated by its co-lo facility since September 2016.

“Sebi had directed that pending completion of the investigations, all revenues emanating from the co-location facility with effect from September 2016 be transferred to a separate bank account. Accordingly, as on March 31, 2019, an amount of Rs 2,259 crore was transferred to a separate bank account and has been invested,” the exchange said.

Meanwhile, the exchange reported net profit of Rs 1,708 crore for FY19, a 17 per cent rise from the Rs 1,461 crore posted in the last financial year. Total income grew 16 per cent to Rs 3,515 crore in FY19.

COLO case: a timeline

April 30
  • Sebi passes multiple orders against NSE in colo case
  • Asks exchange to disgorge over Rs 700 crore, along with interest
  • Bars exchange from fund raising for six months
May 04
  • NSE defers scheduled board meeting following regulator’s order
May 17
  • NSE board decides to challenge Sebi order based on legal advice
  • Says has strong grounds to contest the monetary liability 
  • Will soon move SAT