Sebi Clears NSE's ₹1,491-Cr Co-location Settlement, Removing Major IPO Hurdle

The Securities and Exchange Board of India (Sebi) has given in-principle approval to the National Stock Exchange's (NSE) ₹1,491.21-crore settlement proposal in the 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 disclosed in its June-quarter earnings that Sebi had accepted the broad contours of its revised settlement proposal, subject to payment of the agreed amount under the regulator's settlement mechanism.

According to the exchange, Sebi has demanded an additional ₹714.74 crore, over and above the ₹776.47 crore already deposited by NSE, which will be adjusted against the total settlement amount of ₹1,491.21 crore.

"Sebi vide email dated July 30, 2026 has in principle agreed to accept the terms of the settlement and has made a demand of ₹714.74 crore, in addition to the deposit of ₹776.47 crore made by NSE with Sebi, which will be adjusted towards the settlement amount of ₹1,491.211 crore," the exchange said in its filing.

Long-running Legal Dispute Nears End

The co-location case centred on allegations that certain brokers received faster access to NSE's trading systems, enabling them to obtain market data fractions of a second ahead of other participants. The dark fibre matter involved allegations that some brokers received preferential connectivity through the exchange's fibre network.

Sebi initiated proceedings through three show-cause notices issued in 2017 and 2018, covering the co-location facility, dark fibre connectivity and governance-related issues.

In April 2019, Sebi directed NSE to disgorge alleged unlawful gains, imposed monetary penalties and issued several non-monetary directions.

NSE challenged the orders before the Securities Appellate Tribunal (SAT), which between 2023 and 2024 set aside Sebi's disgorgement directions in both the co-location and dark fibre cases and quashed the related adjudication orders.

However, SAT directed NSE to contribute ₹100 crore to the Investor Education and Protection Fund (IEPF) in the co-location matter, citing a lack of due diligence. Sebi subsequently challenged the SAT rulings before the Supreme Court, where the appeals remain pending.

Settlement Process

NSE first approached Sebi under the Settlement Regulations in June 2025, proposing to settle the two matters for ₹1,387.39 crore. It revised the proposal in March 2026, increasing the settlement amount to ₹1,491.21 crore.

Of the total amount, ₹1,223.56 crore relates to the co-location case, while ₹267.65 crore pertains to the dark fibre matter.

The exchange had already recognised a provision of ₹1,391.21 crore in its FY26 financial statements, in addition to the ₹100 crore provision made in FY23 following SAT's order.

IPO Path Clears

The in-principle approval is expected to pave the way for Sebi and NSE to jointly seek permission from the Supreme Court to withdraw the pending appeals after completion of the settlement process, according to a Moneycontrol report.

The development removes one of the biggest regulatory overhangs for NSE's long-awaited IPO. The exchange filed its draft red herring prospectus (DRHP) last month and has already begun investor roadshows, with merchant bankers expecting regulatory approval for the public issue in the coming weeks.

The settlement brings the co-location and dark fibre disputes closer to a conclusion, significantly clearing the path for what is expected to be one of India's largest public offerings.