The Securities and Exchange Board of India (SEBI) is on the verge of resolving the long-standing co-location and dark fibre cases involving the National Stock Exchange (NSE), with a settlement expected to reach approximately Rs 1,400 crore by early October. This development marks a significant step towards clearing regulatory hurdles for NSE's much-anticipated initial public offering (IPO).

Settlement Details

The settlement proposal, which has been reviewed by SEBI's High-Powered Advisory Committee, is now awaiting final approval from a committee comprising two whole-time members. The resolution of these cases is crucial for NSE as it would enable SEBI to issue the No Objection Certificate (NoC) required for the exchange's listing process.

Financial Breakdown

The settlement amount breaks down as follows:

NSE had previously deposited Rs 1,100 crore with SEBI. Following a Supreme Court order in 2023, Rs 300 crore was returned to the exchange, leaving a balance of Rs 600 crore to be paid as part of the settlement.

Background of the Co-location Case

The co-location controversy emerged in 2015 when allegations surfaced that certain traders were granted preferential access to NSE's trading systems. This preferential treatment allegedly involved early log-ins and access to servers with lower loads, potentially giving these traders an unfair advantage in high-frequency trading.

Impact on NSE's IPO

The resolution of these regulatory issues is expected to have a significant impact on NSE's plans to go public. NSE CEO Ashish Chauhan has indicated that the exchange's listing could take place approximately nine months after receiving the NoC from SEBI. Industry experts anticipate that post-listing, NSE could rank among India's top 10 listed firms by market capitalization, underscoring the importance of this settlement in the broader context of India's financial markets.

The imminent resolution of the co-location case not only addresses a major regulatory concern but also sets the stage for what could be one of the most significant IPOs in India's financial sector. As the situation develops, market participants and investors will be keenly watching for further announcements from both SEBI and NSE regarding the final settlement and subsequent steps towards the exchange's public listing.

The National Stock Exchange (NSE), India's leading stock exchange, is experiencing a significant decline in its unlisted share value amidst regulatory challenges and ongoing preparations for its initial public offering (IPO).

Sharp Decline in Unlisted Shares

NSE's unlisted shares have seen a substantial drop of 17% from their May high of Rs 2,400.00 to the current price of Rs 1,995.00. This decline comes in the wake of increased regulatory scrutiny, particularly focused on weekly options trading.

Regulatory Concerns and Trader Losses

The regulatory spotlight on weekly options trading has revealed concerning trends:

• Average losses for traders increased from Rs 86,728.00 to Rs 1.10 lakh
• Approximately 87 lakh traders were affected by these losses
• Only 1.7% of NSE's 11.9 crore registered investors traded exclusively in equity derivatives

Market-Wide Pressure on Exchanges

The downward trend is not limited to NSE alone. Other major exchanges are also feeling the pressure:

• BSE shares have fallen 33% from their June high
• MCX has dropped 13% from its July peak

NSE's Market Dominance and Valuation

Despite the recent challenges, NSE maintains a commanding position in India's equity markets:

• 92.6% share of India's equity cash market
• Current valuation of approximately Rs 4.70 lakh crore

IPO Progress and Timeline

NSE is moving forward with its plans to go public:

• Filed for settlement with Sebi
• Expects to require 4-5 months to prepare the draft prospectus after receiving clearance
• Anticipates an additional 4-5 months for regulatory review

The recent decline in NSE's unlisted share value highlights the complex interplay between regulatory scrutiny, market dynamics, and the exchange's preparations for its much-anticipated IPO. As NSE navigates these challenges, its dominant market position and progress towards public listing continue to be key factors for potential investors to watch.