The National Stock Exchange of India, the country's largest bourse, is looking to settle the co-location issue with the Securities and Exchange Board of India, and has filed an application under settlement regulations with the regulator for the same.
NSE is being probed by the markets regulator with regards to issues at its co-location facilities and high-speed algorithmic trading practices, which were first disclosed by a whistleblower through a letter to Sebi in 2015.
The application filed with SEBI on Thursday is seen as a bid to work with the regulator for an early resolution of the matter and comes just three days after Vikram Limaye formally took charge as the new MD and CEO of the NSE.
The very first day in office, Limaye, formerly the MD and CEO of infrastructure lender IDFC, had stated the immediate priority was to sort out the regulatory issues at the exchange.
“NSE has filed an application today with SEBI for settlement of the co-location issue under the consent process. This application has been filed under the settlement regulations of Sebi,” the exchange confirmed on Thursday.
Under SEBI's consent mechanism, a case can be settled and the party absolved of the charges, by paying a penalty to the regulator. The company may neither admit nor deny the guilt.
The regulator now has to review the application and get back to NSE on the future course of action.
NSE launched co-location services in 2010 for a fee, to help in faster data movement as the server of the particular broker is located within the premises where the exchange's datacentre is situated.
Last year, NSE hired Deloitte to conduct an independent review in the matter and the accounting firm found several lapses. These included certain periods where a few stock brokers appeared to be the first to connect to specific servers significantly more often than others. Deloitte's review had also pointed out to preferential treatment given out to a few members.
The regulator recently issued show cause notices to the exchange and 14 officials, including Chitra Ramakrishna the former MD and CEO of the exchange and Ravi Narayan, who recently quit as the vice-chairman, in the co-location issue.
The exchange stepping up its efforts to settle the matter could also be seen in the wake of its planned initial public offering, which is yet to be approved. The NSE could raise as much as $1 billion and the exchange had filed papers for the same in December 2016.
However, the IPO has not been cleared by Sebi in the wake of the co-location issue. Ajay Tyagi, the chairman of Sebi, had said recently that the exchange may need to refile its application for an IPO amid the ongoing probe.
Limaye said on Monday that the IPO remains a key priority, but would only happen once the regulatory issues were addressed.