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All You Need To Know About NSE's Co-Location Case


On Tuesday, the Securities and Exchange Board of India (SEBI) passed five seperate orders on National Stock Exchange of India Ltd (NSE) in relation to the co-location case. Besides the fine imposed, the regulator also banned two former managing directors (MDs) of the stock exchange from the market for a period of five years each. Here is what happened:

The case

The case

Back in 2015, a whistle-blower wrote to SEBI alleging that NSE was giving preferential access to its trading platform to a few high-frequency traders and brokers.

It was informed that between 2011 and 2014, some brokers who were trading from the same premises where NSE's algorithmic trading servers were located (under the co-location services) were allowed faster access to the exchange's trading systems, giving them an unfair advantage over other brokers in a way that they were able to connect to the server first.

SEBI's order

SEBI's order

On 30 April 2019, SEBI passed five separate orders running into 400 pages which said that NSE failed to ensure equal and fair access to its algorithmic trading platform and co-location services to all its members.

It said that NSE has committed a fraudulent and unfair trade practice as contemplated under the SEBI PFUTP (Prohibition of Fradulent and Unfair Trade Practices) Regulations.

The regulator has now dropped the allegations of fraudulent and unfair trade practices but the disgorgement order remains. 



  • NSE has been asked to "disgorge" profits worth Rs 624.89 crore from co-location services with an interest at the rate of 12 percent to the Investor Protector and Education Fund (IPEF). The fine is estimated to add up to Rs 1,000 crore with the interest.
  • NSE is barred from introducing any new derivative product in stock or commodities market for the next 6 months.
  • Orders have been issued against 16 individuals that includes former managing directors and CEOs Ravi Narain and Chitra Ramakrishna. They are required to disgorge 25 percent of their salaries from FY2011 to FY2014, that is the period when the co-location scam occurred, to the IPEF in the next 45 days.
  • These former officials are also barred from associating themselves with any listed company or a market infrastructure institution or market intermediary for the next 5 years.
  • Three brokers have been banned from the market for up to 5 years and ordered to disgorge all illegal gains with interest (that aggregated to around Rs 51 crore).
  • Ajay Shah, a former finance ministry official and a professor of economics, has been banned from associating himself with any listed company for two years, for using confidential trading data for personal gains.
  • NSE has been directed to audit its systems more frequently.


An NSE statement on Wednesday said that SEBI's order will not affect its functioning as a recognized stock exchange. Normal trading will continue in all segments.

The order will, however, further delay NSE's Rs 10,000-crore IPO (initial public offering) as it cannot be issued during the 6-months ban period imposed on the exchange.

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