The National Stock Exchange (NSE) has filed a consent application with the Securities and Exchange Board of India (SEBI) to settle the co-location matter that has been under regulatory probe for more than two years.
Consent mechanism refers to a settlement procedure wherein entities are directed to pay an amount without admission or denial of any wrongdoing. NSE has used this mechanism to end the more than two-year long co-location matter.
What is this co-location case?
To read in detail about the case, read this: National Stock Exchange’s Co-location Case.
Co-location refers to the facility where brokerages can house their servers inside the exchange to get better speed for trade execution. Since the broker’s server is placed closed to that of exchange, the latency is reduced.
NSE started this facility in February 2010.
In 2015, the SEBI received three complaints against the exchange alleging that certain brokers with co-location servers were getting access to market data before others who also had such facilities within the NSE. The complaint also alleged that the employees of the NSE were also involved in the irregularities.
Since then, the watchdog – SEBI – is investigating the case.
Recently, the watchdog’s chairman – Ajay Tyagi – termed the co-location case as “a serious matter” and said that the NSE may have to refile papers for its Rs. 10,000 crore IPO after addressing issues related to alleged preferential access given to some brokers. The exchange had, in December, filed its draft paper with SEBI for Rs. 10,000 crore IPO and was awaiting approval.
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