NSE Questions SEBI’s Additional Penalty In The Co-Location Case

The National Stock Exchange, on Tuesday, questioned the necessity of an adjudication order by SEBI, levying a penalty on the exchange in the co-location case.

The facts of the matter are similar to the case where the Securities Appellate Tribunal ordered the exchange to pay Rs 100 crore in penalty, the NSE said.

The earlier order had already served the purpose of the penalty, which is to act as a deterrent, according to the exchange. "As the regulatory objective is already subsumed in the earlier order, this order needs to be set aside," Senior Advocate Somasekhar Sundaresan argued on behalf of NSE.

NSE’s former CEO, Ravi Narain, too, took a similar stand. His counsel, PN Modi, said the present order was passed under the Stock Exchanges and Clearing Corp. Regulations, which were not operational at the time of the case. The tribunal has also held that it's not applicable to the present facts and therefore should be set aside, Modi said.

The case pertains to a February 2021 order in which the Securities and Exchange Board of India imposed a penalty of Rs 1 crore on the National Stock Exchange and Rs 25 lakh each on Ravi Narain and Chitra Ramakrishna as part of its investigation into the co-location case. In the order, the market regulator found the exchange in non-compliance with the Stock Exchange and Clearing Corp. Regulations.

Counsels for NSE and Narain highlighted the April 2019 order by SEBI, in which the exchange was asked to disgorge illegal gains of Rs 624 crore. This was later set aside by the appellate tribunal, which in turn asked the exchange to pay Rs 100 crore for due diligence lapses.

In the 2019 order, SEBI found certain due diligence lapses on the part of NSE in the allocation of several co-location facilities. Some traders were able to access the data faster than others, according to the regulator.

SEBI has sought time to file short notes on the arguments. The matter will next be heard on July 3.