The Securities Appellate Tribunal (SAT) on Wednesday dismissed a SEBI order levying a Rs 1 crore penalty on the National Stock Exchange (NSE), reported BQ Prime. The order was part of SEBI’s investigation into the co-location case. The appellate tribunal also set aside a Rs 25 lakh fine imposed on the former exchange chiefs Ravi Narain and Chitra Ramkrishna, as per the report.
This is the second SEBI order concerning the co-location scam that SAT has reserved. As per the report in January 2023, the appellate panel overturned the markets regulator’s ruling ordering the NSE to disgorge the Rs 624 crore in illegal earnings and to pay a Rs 100 crore penalty for due diligence violations.
Earlier in March, the Supreme Court ordered the SEBI to repay the NSE Rs 300 crore that it had deposited under disgorgement orders. The Supreme Court also rejected to stay the Securities Appellate Tribunal’s (SAT) ruling, which had overturned SEBI’s disgorgement judgment and ordered the NSE to pay Rs 625 crore plus interest.
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During the hearing, as per the report, the NSE argued that the previous ruling had already served the objective of a punishment, which is to prevent future offences. Because the regulatory goal is already covered by the previous order, the penalty must be set aside. Ex-NSE CEO Ravi Narain’s lawyers also made similar submissions.
According to them, the present order was made under the Stock Exchanges and Clearing Corporations Regulations, which were not operational at the time of the violation, as per the report. The tribunal had earlier held that it was not applicable to the present case.
However, SEBI said that the penalty was imposed for distinct offenses and should not be included in the current instance.
As per the report, another similar appeal is ongoing before SAT in the co-location case. The exchange was fined Rs 90 crore by the markets regulator for providing preferential treatment to some brokers over dark fiber connections.
The co-location scam dates back to 2015 when the NSE was accused of giving preferential treatment to some brokers. Co-location is the practice of putting a broker’s server in the exchange’s data centre to speed up data transfer and order execution. The NSE allegedly gave a few brokers faster access to the exchange’s systems, giving them an unfair advantage in trading.