SAT sets aside Rs624 crore disgorgement order against NSE

The Securities Appellate Tribunal (SAT) set aside SEBI’s order on disgorging gains worth Rs624 crore again NSE and its former top executives in the colocation case. SAT has noted that the National Stock Exchange had not indulged in any unethical act nor had the exchange unjustly enriched itself. This disgorgement amount was based on notional losses since April 2014 along with interest at 12% per annum. SEBI had flagged violations of Stock Exchanges and Clearing Corporation (SECC) Regulations due to colocation lapses. 

 

Instead, the SAT set aside the penalty and directed the NSE to deposit Rs100 crore for not conducting due diligence in following its own norms and circulars. However, NSE has already paid more than that amount so the same would be adjusted and SEBI has been asked to refund the excess amount in 6 weeks. SAT also underscored that there was no evidence of either Chitra Ramkrishna or Ravi Narain making wrongful gains. Even SEBI directive to disgorge 25% of the salary from Ravi Narain and Chitra Ramkrishna was set aside by SAT.

 

The issue dates back to the colocation facility launched by NSE in 2009. It allowed traders and brokers to establish their IT servers within the premises of the NSE data centres for a fee. This enabled them to access stock prices faster, resulting in quicker trade execution. However, there were allegations of market manipulation by a handful of brokers using the facility. SEBI has been given 4-month time to recalculate disgorgement. The issue was about early login and use of lower-load secondary servers to get better execution than competition.

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