Summary of this article
Sebi approved NSE's Rs 1,491-crore settlement in co-location and dark fibre cases
NSE will pay Rs 714.74 crore after adjusting its earlier Sebi deposit
Settlement clears a major regulatory hurdle ahead of NSE's proposed IPO
The Securities and Exchange Board of India (Sebi) has given its in-principle approval to settle the National Stock Exchange's (NSE) long-running co-location and dark fibre cases, clearing one of the biggest regulatory hurdles before the country's largest stock exchange proceeds with its initial public offering (IPO).
NSE informed investors in its June quarter earnings, released on July 30, that Sebi has accepted the broad contours of the exchange's revised settlement proposal, subject to payment of the agreed amount under the regulator's settlement mechanism.
The exchange disclosed: "Sebi vide email dated July 30, 2026 has in principle agreed to accept the terms of the settlement and has made a demand of Rs. 714.74 crore, in addition to the deposit of Rs. 776.47 crore made by NSE with Sebi, which will be adjusted towards the settlement amount of Rs. 1,491.211 crore."
The board approved payment of the balance Rs. 714.74 crore at its meeting on July 30.
The co-location case was about allegations that some brokers got faster access to NSE's trading systems than others, giving them market data a fraction of a second earlier. The dark fibre case involved similar allegations that a few brokers got better connectivity through the exchange's fibre network. Sebi took action in both cases, after which NSE challenged the orders before the Securities Appellate Tribunal (SAT). The matter later reached the Supreme Court through appeals filed by both sides.
The legal battle began after Sebi issued three show-cause notices to NSE in 2017 and 2018 covering the co-location facility, dark fibre connectivity, and governance and conflict-of-interest issues. In April 2019, Sebi's Whole-Time Member directed the exchange to disgorge hundreds of crores in alleged unlawful gains, imposed restrictions on the exchange and passed several non-monetary directions. Separate adjudication orders later imposed monetary penalties.
NSE challenged those orders before SAT. In a series of rulings delivered between 2023 and 2024, the appellate tribunal set aside Sebi's disgorgement directions in both the co-location and dark fibre matters while also quashing the related adjudication orders. However, SAT directed NSE to contribute Rs 100 crore to the Investor Education and Protection Fund in the co-location matter for lack of due diligence. Sebi subsequently appealed the SAT rulings before the Supreme Court, where the matters are still pending. Interim orders had also directed Sebi to refund Rs 300 crore in the co-location case and Rs 31 crore in the dark fibre case to the exchange.
Unlike the other two matters, the governance and conflict-of-interest proceedings have already been substantially resolved. NSE withdrew its appeals in July 2024, paid the monetary penalty and complied with the applicable non-monetary directions.
The exchange first approached Sebi under the Settlement Regulations in June 2025 with a cumulative offer of Rs. 1,387.39 crore to settle the co-location and dark fibre proceedings. It revised the proposal in March 2026, increasing the settlement amount to Rs. 1,491.21 crore. Of this, Rs. 1,223.56 crore relates to the co-location case and Rs. 267.65 crore to the dark fibre matter.
NSE had already recognised a provision of Rs. 1,391.21 crore in its financial statements for the year ended March 31, 2026. That was in addition to the Rs. 100 crore provided in FY23 following SAT's directions.
The regulator's in-principle approval is expected to pave the way for withdrawal of the pending appeals before the Supreme Court after completion of the settlement process. According to a Moneycontrol report, citing people familiar with the matter said Sebi and NSE are likely to jointly seek the court's permission to withdraw the cases, bringing one of the longest-running regulatory disputes in India's capital markets closer to a conclusion.
The exchange filed its draft red herring prospectus last month and has already begun investor roadshows. Merchant bankers are expecting regulatory approval for the public issue in the coming weeks.
The settlement brings the co-location and dark fibre cases closer to an end, removing one of the biggest obstacles to NSE's proposed IPO.
