SEBI disposes of co-location case against NSE and others without any further action

Mumbai (Maharashtra) [India], September 13 : The Securities and Exchange Board of India (SEBI) has disposed of proceedings against the stock exchange NSE, its former Vice Chairman Ravi Narain, former Chief Executive Officer Chitra Ramakrishna, former Group Operating Officer Anand Subramanian, and others in the co-location case.
In an order released on Friday, September 13, the market regulator says, "There is no dispute to the fact that NSE did not have a detailed defined policy for the use of Colo (co-location) facility. It even failed to monitor the use of the secondary server by TMs without having sufficient reason.
"The defence put forward by NSE about the issuance of welcome email in the form of 'registration enablement mail' at the time of providing Colo facility to TMs, can't be said to be justifying its role as a first-level regulator. The issuance of guidelines without proper monitoring demonstrated a lack of due diligence."
However, the order clarified that these findings do not address whether there was collusion between OPG Securities
Private Limited and its directors with NSE and its senior management.
"it is held that due to the absence of sufficient material/evidence/objective facts on record in this case, the test of 'preponderance of probability' fails to produce enough justification for the establishment of collusion/connivance between OPG and its directors with Noticees."
The case began in April 2019, with a SEBI order which addresses issues related to NSE's co-location facility. It was a system under which trading members were allowed to co-locate their servers at the exchange's data center.
SEBI order was challenged before the Securities and Appellate Tribunal (SAT). In January 2023, SAT set aside the order of the market regulator against NSE which was the basis of recent proceedings at the regulator.
While hearing appeals by NSE, Chitra Ramakrishna, Ravi Narain, and other SAT suggest in its January 2023 order of lack of evidence for any kind of systemic malpractices.
The SAT found that NSE's system provided fair and transparent data access but identified issues with the allocation of IPs and a failure to adequately monitor server connections. But despite all these shortcomings, SAT did not find any kind of violations of SEBI's regulations.
SEBI's current order reaffirms SAT's findings, noting that no new evidence had emerged that would substantiate allegations of collusion or conspiracy.
With these findings, the market regulator has decided to close the case without issuing any new directions. The order of SEBI may also facilitate to end of the pending case at the apex court.
This order of SEBI may also be seen as the end of the block for the Initial Public Offer (IPO) of NSE which is pending because of this co-location case.