The Securities and Exchange Board of India (SEBI) has agreed to settle the National Stock Exchange's (NSE) long-pending co-location and dark fibre cases, paving the way for the closure of two of the biggest regulatory proceedings involving India's largest stock exchange.
The markets regulator communicated its decision to the exchange on July 30, agreeing to settle the two matters for a total payment of Rs 1,491.21 crore under the regulator's settlement mechanism.
NSE, in its results filing, said the regulator has in principle agreed to accept the settlement terms and, demanded payment of Rs 714.74 crore, in addition to the deposit of Rs 776.47 crore already made by the stock exchange with SEBI, which will be adjusted against the total settlement amount of Rs 1,491.21 crore.
The settlement covers both the co-location and dark fibre matters, which have remained under regulatory scrutiny for several years and have been among the biggest legal overhangs for the exchange.
The co-location case relates to allegations that certain brokers received preferential access to NSE's trading infrastructure, enabling them to access market data ahead of other participants. The dark fibre matter pertains to allegations of preferential connectivity through the exchange's fibre network.
The development comes weeks after NSE disclosed in its draft red herring prospectus (DRHP) that it had submitted revised settlement applications to SEBI, offering to pay Rs 1,491.21 crore to resolve the two matters. The proposal comprised Rs 1,223.56 crore for the co-location case and Rs 267.65 crore for the dark fibre case.
With SEBI agreeing to the settlement, the regulator and NSE are expected to jointly approach the Supreme Court to seek permission to withdraw the pending appeals related to the two matters, people aware of the development said. Once the court permits the withdrawal and the settlement process is completed, the long-running litigation is expected to come to an end.
The settlement removes one of the most significant regulatory hurdles for NSE as it progresses with its proposed initial public offering, although certain other legal proceedings, including a compensation claim filed by the Metropolitan Stock Exchange of India Ltd., remain pending.
Merchant bankers are expecting the IPO approval by next month. The Exchange has already started the road shows for the upcoming issue.