NSE IPO Gets Key Supreme Court Clearance As ₹31,000-Crore Issue Moves Closer

The Supreme Court on Thursday accepted the settlement terms reached between the Securities and Exchange Board of India (SEBI) and the National Stock Exchange of India (NSE) in the co-location and dark fibre cases. The development removes a key regulatory hurdle for NSE as it prepares for its proposed initial public offering (IPO).

NSE filed its draft red herring prospectus (DRHP) on 18 June. The proposed issue comprises an offer for sale of 148.91 million shares by existing shareholders.

SEBI Chairman Tuhin Kanta Pandey had said last week that the regulator was "close" to approving the NSE IPO.

NSE IPO: Key Details

The settlement covers regulatory proceedings arising from alleged lapses in NSE's co-location facility, where certain traders and brokers were accused of receiving preferential access to exchange systems.

What Is The NSE Co-Location Case?

NSE introduced its co-location facility in 2009, allowing traders and brokers to place their IT servers within the exchange's premises for a fee. The arrangement was designed to reduce the time taken to transmit trading orders.

The case centred on allegations that some entities received preferential access through the facility.

SEBI had accepted NSE's settlement application in July for ₹1,491 crore. This comprised:

• ₹1,224 crore to settle the pending Supreme Court appeal in the co-location case.

• About ₹268 crore for the separate dark fibre matter.

The Supreme Court has now disposed of SEBI's appeals against Securities Appellate Tribunal (SAT) orders in the two matters.

What Happens To The Former NSE Officials?

The settlement does not close the proceedings against NSE's former managing director and chief executive officer** Chitra Ramkrishna and others**.

A bench led by Justice JB Pardiwala said those proceedings would continue and be decided separately.

The regulatory history dates back to Sebi's 2019 order, which imposed a ₹625-crore disgorgement on NSE. SAT subsequently set aside that disgorgement order in January 2023 and imposed a ₹100-crore penalty on the exchange for failing to exercise due diligence while operating the co-location facility.

SAT had also noted that there was no finding that NSE made an illicit gain in the co-location matter, or that it had committed fraud, an unfair trade practice or collusion.

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