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Mumbai:
The Securities and Exchange Board of India (Sebi) has returned the consent
application filed by the National Stock Exchange (NSE) and some of its
executives in the colocation case, delaying its share-sale plans.
The regulator wants to investigate the alleged preferential treatment to a few high-frequency traders and brokers to the exchange’s trading platform before considering the consent application.
Consent orders are similar to out-of-court settlements in securities law parlance. The entities involved seek to settle without admitting guilt. The Sebi move is expected to delay NSE’s initial public offering. Colocation is the positioning of servers in proximity with those of the exchange to reduce latency to the minimum.
“NSE is in receipt of a letter from Sebi returning the consent application filed by NSE in the colocation matter, on account of ongoing investigations relating to the same matter. NSE can file the consent application after the completion of the investigations. NSE intends to do the same in due course,” the bourse said in a release.
The exchange had filed its draft prospectus in December 2016 and originally planned to hit the market by 2017. It now expects the share sale to take place next year.
The regulator wants to investigate the alleged preferential treatment to a few high-frequency traders and brokers to the exchange’s trading platform before considering the consent application.
Consent orders are similar to out-of-court settlements in securities law parlance. The entities involved seek to settle without admitting guilt. The Sebi move is expected to delay NSE’s initial public offering. Colocation is the positioning of servers in proximity with those of the exchange to reduce latency to the minimum.
“NSE is in receipt of a letter from Sebi returning the consent application filed by NSE in the colocation matter, on account of ongoing investigations relating to the same matter. NSE can file the consent application after the completion of the investigations. NSE intends to do the same in due course,” the bourse said in a release.
The exchange had filed its draft prospectus in December 2016 and originally planned to hit the market by 2017. It now expects the share sale to take place next year.
“NSE
is committed to resolving the regulatory issues expeditiously,” it said. “As
stated earlier, the timeline for the IPO is dependent on the resolution of the
regulatory matters with Sebi and we are hopeful we will be able to do the IPO
in fiscal 2019.”
NSE
and its 12 officials — both former and serving — will have to refile their
application after the regulator completes its investigation against the brokers
who were allegedly involved in the colocation case. Sebi has initiated its own
probe to ascertain the nexus between brokers and the exchange and its
executives.
“Consent regulations prescribe for completing the fact-finding investigation before Sebi would consider an application. This is particularly true of complex cases and is rooted in logic,” said Sandeep Parekh, founder of Finsec Law Advisors. Arriving at a consent decree is difficult if the nature of the underlying violation is not known, he said. The case dates back to 2015, when a whistleblower wrote a letter to Sebi alleging that NSE gave preferential access to a few high-frequency traders and brokers to the exchanges' trading platform.
“Consent regulations prescribe for completing the fact-finding investigation before Sebi would consider an application. This is particularly true of complex cases and is rooted in logic,” said Sandeep Parekh, founder of Finsec Law Advisors. Arriving at a consent decree is difficult if the nature of the underlying violation is not known, he said. The case dates back to 2015, when a whistleblower wrote a letter to Sebi alleging that NSE gave preferential access to a few high-frequency traders and brokers to the exchanges' trading platform.
Last year in May, Sebi had issued showcause notices to the
exchange and its officials asking them to explain the alleged irregularities.
The NSE filed its consent application with Sebi in July last year, soon after
Vikram Limaye took charge as its CEO. Subsequently, the officials involved also
filed for a consent decree.
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