National Stock Exchange of India Ltd (NSE) paid Rs40.35 crore to settle enforcement proceedings related to lapses in data handling, outsourcing practices, and compliance failures. The settlement order, passed on 31 July 2025 by market regulator Securities and Exchange Board of India (SEBI) brings closure to a case stemming from SEBI’s inspection of NSE for the period 1 February 2021 to 31 March 2022. As reported by Moneylife in June 2025, NSE has filed a settlement application with the market regulator offering to pay nearly Rs1,400 crore to resolve the long-pending co-location (Colo) and dark fibre cases. The move is seen as a major step toward clearing regulatory roadblocks ahead of its much-anticipated initial public offering (IPO).
According to SEBI's latest order, NSE filed a suo motu settlement application under the SEBI (Settlement Proceedings) Regulations, 2018, proposing to settle the matter without admitting or denying the regulator’s findings. The violations cited by SEBI included outsourcing the storage of media tapes containing historical trade data to a third-party vendor without a legally binding contract, thereby failing to safeguard sensitive trade-related and market information.
The regulator also found that NSE’s internal committee had waived penalties under the member and core settlement guarantee fund committee (MCSGFC) policy without obtaining the committee’s approval. Further, the exchange was found to have outsourced and shared confidential, price-sensitive information of listed companies with NSE Data and Analytics Ltd (NDAL) for onward distribution to a third-party vendor without a binding agreement.
SEBI noted that NSE’s systems allowed unpublished price-sensitive corporate announcements to reach NDAL clients before being published on the Exchange’s website — a breach linked to insider trading prevention norms.
Other violations flagged by SEBI included permitting client code modifications between unrelated institutional clients without due diligence, absence of a policy to identify brokers as frequent modifiers, failure to frame rules for reviewing error trades, and lack of mechanisms to verify the genuineness of client code changes.
After a meeting with SEBI’s internal committee on 17 January 2024, NSE revised its settlement proposal to pay Rs40.35 crore and agreed to certain non-monetary terms. These included submitting a compliance report on corrective measures and a system audit report. The high-powered advisory committee (HPAC) recommended accepting the terms, while advising NSE to conduct an internal review to identify officers-in-default and take appropriate action.
The Exchange submitted its audit and compliance reports in early 2024. NSE’s internal disciplinary committee later concluded that the lapses stemmed from decisions taken at the organisational or board level, and no specific individuals were found responsible. This finding was endorsed by the NSE board and its nomination and remuneration committee.
Following approval by SEBI’s panel of whole-time members (WTMs) on 16 June 2025, a demand notice was issued, and NSE remitted the amount on 25 June 2025. SEBI confirmed receipt, thereby closing the matter.
The settlement order means SEBI will not initiate enforcement action on the cited violations, though it retains the right to act if any representations made by NSE are later found untrue or if settlement conditions are breached.
Quoting people familiar with the matter, a June 2025
report from Moneycontrol says, NSE submitted the application proposing a total settlement amount of around Rs1,388 crore, Rs1,165 crore for the Colo case and Rs223 crore for the dark fibre matter. "The exchange had earlier deposited Rs1,100 crore with SEBI, of which Rs300 crore was returned in 2023 following a Supreme Court directive. After adjusting this amount and adding interest, NSE is expected to pay an additional Rs600 crore to settle the cases."
If approved by SEBI, this will pave the way for the IPO by the country's largest stock exchange, which has faced repeated delays due to regulatory and legal hurdles. According to a report from
Economic Times (ET), NSE had renewed its push to go public after Tuhin Kanta Pandey took over as SEBI chairman in February this year.
As reported by Moneylife in October 2024, NSE paid Rs643 crore for itself and on behalf of nine others, including its former managing director and chief executive officer (MD&CEO) Vikram Limaye, has paid Rs643 crore to settle a case related to bypassing trading access point (TAP) system. Securities and Exchange Board of India (SEBI) also directed seven, excluding NSE and GM Shenoy, to undertake pro bono community service of at least 14 days during the current financial year.
According to the SEBI order, those who settled the TAP case include: Umesh Jain, GM Shenoy, both former chief technology officers (CTOs), Narayan Neelakantan, former chief information security officer (CISO), VR Narasimhan, former chief regulatory official (CRO), and other former key employees Kamala K, Nilesh Tinaikar, R Nandakumar and Mayur Sindhwad.
SEBI's investigation into the TAP architecture and network connectivity revealed that NSE did not take remedial measures to prevent or discourage any possible bypass of TAP. TAP was a software application deployed by NSE in 2008 on the servers of trading members (TMs) for managing connections and messages for orders and trades. TMs, registered with NSE, connected to TAP to establish communication with the NSE trading system. While NSE introduced 'trimmed TAP' in December 2013 and 'direct connect' in February 2016 as an alternative to TAP, it continued with TAP until September 2019 in the equity segment and till November 2020 in the securities lending and borrowing segment.
Recent updates indicate that NSE has reignited its efforts to get listed. Despite the expiration of the previous restriction, NSE is still awaiting SEBI's response to its latest request. The Exchange has asked SEBI for a no-objection certificate to proceed with its IPO plans and to refile the DRHP. As stated in its annual report, "NSE has requested SEBI to convey its no-objection to enable it to proceed with its IPO plan and for filing the DRHP. Response from SEBI is awaited."
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The Colo case dates to 2015 when Moneylife first published a letter by a whistle-blower going by the name Ken Fong in June 2015. The whistle-blower alleged that NSE officials were selectively allowing a few brokers to reap massive profits through preferential access to its colo servers in the form of early log-in or access to servers with low trading loads. 
So, this is the system in India. Commit crime, genuflect to regulator, lick the regulator's balls (pay money, and get away with daylight robbery and, finally, tell taxpayers "You're the joke!"
As a taxpayer, I don't think SEBI deserves to exist at this point. It is a liability more than an asset.