Co-location: NSE knocks on SAT’s door

The National Stock Exchange (NSE) has filed an appeal in the Securities Appellate Tribunal (SAT), challenging the recent orders by the Securities and Exchange Board of India (SEBI) in the co-location matter. While the exchange has challenged all three orders — one each in co-location, dark fibre and corporate governance matters — the SAT is expected to hear the appeals against the co-location and dark fibre matters on Wednesday. On April 30, SEBI barred NSE which has the largest market share in equity segment and almost a monopoly in equity derivatives, from accessing the securities’ market for six months. The regulator further ordered the exchange to disgorge around ₹1,100 for its alleged failure to exercise proper due diligence while offering co-location facility thereby affecting market fairness and integrity. “NSE has committed a fraudulent and unfair trade practice as contemplated under the SEBI (PFUTP) Regulations, I find that it is established beyond doubt that NSE has not exercised the requisite due diligence while putting in place the TBT architecture,” SEBI had stated in its 104-page order. While PFUTP refers to Prohibition of Fraudulent and Unfair Trade Practices rules, TBT is tick-by-tick data feed. Co-location refers to the system wherein a broker’s server is kept on the exchange premises to reduce latency, or delay in computing terms, while executing trades.