SEBI Returns NSE’s Settlement Plea In Co-Location Probe

The market regulator returned the National Stock Exchange of India Ltd.'s plea seeking to settle a probe into alleged preferential treatment to high-frequency traders, said three people aware of the development. The probe has delayed the initial public offering of India's largest bourse.

Securities and Exchange Board of India returned the application to NSE and its 12 current and former executives late last week, said the people cited above. NSE had filed the consent petition on behalf of all 13 entities including itself. The exchange didn't respond to emailed queries. BloombergQuint is in the process of seeking a comment from SEBI.

The regulator asked them to file the consent plea afresh once SEBI completes the probe against brokers allegedly involved in the co-location case, said the people. The regulator may issue fresh show-cause notices on alleged nexus between brokers and the exchange and its executives, one of the people quoted above said.

The exchange had filed for a settlement by paying fine to avoid litigation two days after Vikram Limaye took over as its managing director and chief executive officer in July 2017. The probe against it stems from a whistleblower's allegations that the bourse allowed preferential access to certain brokers and traders through its co-location service. It allows them to place servers in the exchange building and directly connect with its systems.

The regulator had issued show-cause notices to the exchange and 14 others, including former managing directors Ravi Narain and Chitra Ramkrishna. While Ramkrishna resigned in December, Narain stepped down later.

SEBI is probing co-location trades between 2010 and 2015. The exchange has been directed to transfer revenue generated from the service since Sept. 1, 2016 to a separate bank account.