Mumbai: The National Stock Exchange (NSE) has filed two applications with the Securities and Exchange Board of India (Sebi) to settle the long-standing co-location and dark fibre cases by offering to pay a total ₹1,388 crore, making it the highest amount offered by any entity till date.

If approved by the regulator, this will pave the way for the initial public offering by the country's largest stock exchange that's faced repeated delays due to regulatory and legal hurdles. NSE had renewed its push to go public after Tuhin Kanta Pandey took over as the Sebi chairman in February.

NSE has offered to pay ₹1,165 crore to settle the co-location case and ₹223 crore for the dark fibre matter, according to documents reviewed by ET. "The case can be settled as the people who had done the violations have all gone from the exchange," said a person close to the development.

An NSE spokesperson declined to comment; Sebi didn't respond to queries.

The co-location case dates back to 2015, when a whistleblower alerted Sebi to possible manipulation of NSE's trading system.

Matters Pending Before SC
Sebi's investigation found that certain brokers were given preferential access to NSE's secondary servers, allowing them to execute trades faster than others. Widely regarded as a landmark case in India's capital market history, the episode raised concerns about trading fairness and integrity of the exchange.

The regulator's investigation had highlighted that the exchange's tick-by-tick data system was prone to manipulation, giving an unfair edge to those on less congested ports while putting a large section of its members at a disadvantage. In April 2019, Sebi had passed multiple orders against NSE, its then senior management, broker OPG Securities, and others.

In a separate order in 2019, the regulator had penalised 16 entities including NSE and its former heads, for allowing an unauthorised vendor to install dark fibre that was used for high-frequency trading. Dark fibre typically refers to unused optical fibre lines that can be leased later.

In 2015, NSE allowed Sampark Infotainment Pvt Ltd to lay dark fibre for stock brokers Way2Wealth Brokers and GKN Securities. But Sampark was neither an authorised service vendor nor approved by the Department of Telecommunications. The regulator found that NSE officials didn't verify the eligibility of Sampark while granting it permission to put in the fibre for the brokers.

These cases were challenged before the Securities Appellate Tribunal, which granted partial relief. Following this, Sebi appealed against the tribunal's decision before the Supreme Court, where some cases are still pending.

If NSE and Sebi reach a settlement, the cases pending before the apex court will be withdrawn.

The settlement mechanism is an out-of-court agreement that allows those involved in regulatory breaches to settle cases without admitting or denying guilt, by paying a fee.