Securities Exchange Board of India (SEBI): Dark Fibre/Leased Line connectivity allowed to certain Stock Brokers, the Adjudicating Officer In the matter relating to Dark Fibre/ Leased Line connectivity allowed to certain Stock Brokers, the Adjudicating Officer Suresh B Menon has who was CEO of NSE at the relevant time;observed some irregularities in respect of co-location and corporate governance at National Stock Exchange Limited (‘NSE’) for which it has been penalized with Rs. 7 crores fine. Chitra Ramakrishna, who was CEO of NSE at the relevant time; and Key Management Persons Subramanian Anand, and Ravi Varanasi were fined with Rs. 5 Crores each.

In 2015, a whistleblower approached SEBI alleging various irregularities in respect of Co-location and corporate governance at NSE. A Cross Functional team of SEBI Officials was formed to examine the issues. There were irregularities with respect to certain brokers getting Point to Point (P2P) dark fiber connectivity from Sampark Infotainment Private Limited (‘Sampark’).

The stock brokers and the person associated with the securities market violated the following provisions:

  1. Securities and Exchange Board of India Act, 1992 (‘SEBI ACT’)
  2. Securities Contracts (Regulation) Act, 1956 (‘SCRA’)
  3. Rules and Regulations made under SEBI (Stock Exchanges and Clearing Corporations) Regulations, 2012 (‘SECC Regulations’)
  4. SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (‘PFUTP’)
  5. SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 (‘Stock Broker Regulation’)


The NSE’s employees were investigated for the illegal relation with the stock brokers on the basis that they were benefiting from preferential access to the exchange system. Sampark illegally arranged the cabling in the co-location rack of NSE that other stock brokers suffered with lower latency compared to other trading members connected to Sampark. Several other identities indulged in fraudulent and unfair trade practices related to the securities market.

The Court observed:

  1. The mode of communication adopted for making changes to the existing circulars violated the principle of transparency.
  2. Preferential treatment was shown by NSE by allowing Sampark to provide P2P connectivity.
  3. W2W had a lower latency advantage due to the manner in which P2P connectivity was provided through Sampark
  4. NSE facilitated the arrangement between Sampark and Reliance in an attempt to give post facto legitimacy to an unauthorized activity of Sampark.
  5. NSE acted fraudulently, without any verification of license facilitated an arrangement to regularize and give ex post facto legitimacy to an unauthorized activity of Samaprk and thereby NSE failed in ensuring fair, equal and transparent access to all its members.
  6. NSE did not maintain and preserve the books of account and document.
  7. W2W and GKN, in collusion with the employees of NSE and Sampark made significant profit due to unfair latency advantage available with them.

Noticing that the act on the part of the Noticees had a huge impact on the market, the Court observed,

“Stock Brokers like W2W and GKN made unfair gains at the cost of other stock brokers who had complied with the guidelines and circulars of NSE, in this regard.”

Order and Penalty:

The Court, exercising the powers conferred upon it under Section 15-I of the SEBI Act, 1992 read with rule 5 of the Adjudication Rules, imposed monetary penalties on all the Noticees.

NSE Limited was penalized Rs 5 Crores charged under Section 15-HA of the SEBI Act, 1992, Rs. 1 Crore charged under Section 15-HB of the SEBI Act, 1992 and Rs. 1 Crore under Section 23-H of the SCRA, 1956. Chitra Ramakrishna, Subramanian Anand and Ravi Varanasi were fined with Rs. 5 Crores each. Remaining Noticees have been fined with penalties ranging from R. 10 Lakhs to Rs. 6 Crores.

The Noticees have been directed to pay the said amounts within 45 days of the receipt of the order by the way of Demand Draft in favor of “SEBI- Penalties Remittable to Government of India”.

[Dark Fibre/Leased Line connectivity allowed to certain Stock Brokers by NSE, In re, ADJUDICATIONORDER Ref. No. ORDER/SBM/ASR/2022-23/17390-17407, order dated 28.06.2022]

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