Supreme Court hears SEBI’s appeal against NSE in co-location, dark thread cases

Headquarters of NSE (National Stock Exchange) in India. File | Photo credit: ANI

Following a settlement of nearly ₹ 1,500 crore between the market regulator and the exchange, the Supreme Court on Thursday (September 3, 2026) disposed of a series of appeals filed by the Securities and Exchange Board of India (SEBI) against the National Stock Exchange (NSE) in co-location and dark thread cases.

A Bench of Justices JB Pardiwala and K. Vinod Chandran heard SEBI’s appeal against the Securities Appellate Tribunal (SAT) orders quashing the disgorgement directions issued by the regulator against the NSE in the two cases. The Bench disposed of the appeal after taking cognizance of the settlement between the parties.

In July, SEBI accepted two settlement applications filed by the NSE totaling about ₹1,492 crore. Of this, about ₹1,224 crore was for the co-location case, while ₹268 crore was for the dark fiber case, also known as the leased line connectivity case.

The cases stem from allegations that certain brokers were given preferential access to the NSE’s trading systems through its co-location, potentially allowing them to obtain market data before others. Allegations of misconduct first surfaced following a whistleblower complaint in January 2015.

Co-location allows brokers to place their computer servers in the exchange’s data center, reducing the time it takes to receive market data and execute trades. Dark fiber refers to a dedicated fiber optic connection that can facilitate faster data transfer between two points.

In a major co-location case, SEBI in 2019 ordered NSE to disburse ₹625 crore along with 12% annual interest from 1 April 2014. The regulator alleged that the exchange provided preferential connections to select brokers who accessed its tick-by-tick data dissemination servers, giving them an advantage over other market participants.

The NSE challenged the order before the SAT, which subsequently set aside SEBI’s disgorgement direction. The market regulator then appealed to the Supreme Court against the judgment of the Court of Appeal.

In a separate order in 2019, SEBI directed NSE to disgorge ₹62.6 crore along with 12% annual interest from 11 September 2015 in the dark thread case.

The regulator alleged that the NSE favored the two brokers by allowing them to use the services of an unlicensed telecom vendor to establish a point-to-point connection between their common switchboards on the NSE and the BSE.

The SAT subsequently quashed the disgorgement direction in this case as well, prompting SEBI to challenge the decision in the Supreme Court.

Both the appeals have now been disposed of following a settlement between SEBI and NSE.

The settlement comes as the nation’s largest exchange prepares for its stock market debut, nearly a decade after it first tried to list its shares, with its plans facing longstanding regulatory hurdles. The proposed initial public offering (IPO) is expected to raise around ₹30,000 crore, which would make it one of the largest IPOs in the history of the Indian capital market.

Published – 03 Sep 2026 23:08 IST