NSE Pays Rs. 40 Crore to Settle Data Handling
• Regulatory Woes: NSE Clears Deck with SEBI Settlement
• Sprouts SIT: NSE’s Data Breach & Dark Fibre Exposed
• Insider Access & TAP Flaws Haunt NSE’s Past
Unmesh Gujarathi
Sprouts News Exclusive
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- NSE Pays Rs. 40 Crore to Settle Data Handling
- Settlement Over Regulatory Lapses Marks Strategic Reset
- SEBI Flags Multiple Violations and Insider Trading Risks
- Long-Pending Colo & Dark Fibre Cases Near Settlement
- ₹643 Crore Paid to Settle TAP Violation Case Involving Former Executives
- IPO Hopes Revived but SEBI Nod Still Pending
The NSE has paid ₹40.35 crore to SEBI to settle multiple regulatory lapses, including mishandling sensitive data and breaching insider trading norms. The Sprouts News Investigation Team highlights deeper systemic failures. This settlement may clear the path for NSE’s long-delayed IPO, as it faces parallel settlements in co-location and TAP access cases.
Settlement Over Regulatory Lapses Marks Strategic Reset
The National Stock Exchange (NSE) has paid ₹40.35 crore to the Securities and Exchange Board of India (SEBI) to settle enforcement proceedings tied to significant compliance lapses. The settlement—approved on 31 July 2025—closes an investigation into NSE’s operational irregularities for the period between February 2021 and March 2022. This includes lapses in outsourcing practices, mishandling of sensitive trade data, and failures in internal oversight mechanisms.
The exchange filed a suo motu settlement application under SEBI’s 2018 Settlement Proceedings Regulations. While not admitting to the violations, NSE agreed to monetary and non-monetary penalties, including submitting system audit reports and compliance action plans. According to SEBI, NSE outsourced critical data storage to a third-party vendor without a valid agreement, violating confidentiality norms and data protection protocols.
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SEBI Flags Multiple Violations and Insider Trading Risks
Among the most serious issues flagged by SEBI was the unauthorized sharing of unpublished price-sensitive information with NSE Data and Analytics Ltd (NDAL), which then forwarded the data to third-party vendors before public disclosure. This breach triggered concerns over insider trading vulnerabilities. Additionally, NSE waived penalties under its own MCSGFC policy without formal committee approvals and permitted client code modifications between unrelated institutions without due diligence.
SEBI also found that NSE lacked frameworks for monitoring high-frequency client code modifications, failed to define error trade review rules, and didn’t verify the authenticity of trade changes. Following meetings with SEBI’s internal advisory committee in January 2024, NSE revised its settlement proposal and agreed to non-monetary terms along with the ₹40.35 crore payment.
As part of the process, NSE submitted internal audit and compliance reports. Its disciplinary committee concluded that the failures were institutional rather than individual, a stance later ratified by the NSE board and nomination committee. SEBI accepted this position and, upon receiving the settlement amount on 25 June 2025, formally closed the matter.
Long-Pending Colo & Dark Fibre Cases Near Settlement
Sprouts News Investigation Team (SIT) reported in June 2025 that NSE had proposed a ₹1,388 crore out-of-court settlement to SEBI to resolve two high-profile cases—Co-location (Colo) and dark fibre. The exchange earlier deposited ₹1,100 crore with SEBI, of which ₹300 crore was refunded in 2023 following a Supreme Court verdict. The net payable now stands at ₹600 crore after interest adjustment.
According to people familiar with the matter, NSE offered ₹1,165 crore for the Colo case and ₹223 crore for the dark fibre issue. If SEBI accepts this proposal, it would remove major hurdles to NSE’s IPO plans, long delayed due to regulatory bottlenecks and unresolved legal battles. Sprouts News reported that NSE renewed its IPO pursuit soon after Tuhin Kanta Pandey took over as SEBI chairman in February 2025.
₹643 Crore Paid to Settle TAP Violation Case Involving Former Executives
In a related development, NSE and nine others, including former MD & CEO Vikram Limaye, collectively paid ₹643 crore to settle a separate case related to the bypassing of the Trading Access Point (TAP) system. SEBI’s investigation found that NSE failed to prevent misuse of TAP infrastructure, leading to potential manipulation risks.
TAP, introduced in 2008, facilitated trading member connections to NSE systems. Despite alternatives like ‘trimmed TAP’ and ‘direct connect’, NSE continued using TAP until 2020, raising systemic integrity questions. Former top executives, including CTOs Umesh Jain and GM Shenoy, CISO Narayan Neelakantan, and CRO VR Narasimhan, were directed to perform 14 days of pro bono community service during FY 2025–26.
Sprouts News Investigation Team (SIT) highlighted that SEBI found no direct accountability mechanisms in NSE’s governance during the relevant period. This underscores the need for reforms in how institutional accountability is enforced in India’s capital markets.
Also Read: Axis Mutual Fund Front‑Running Scam Shocks Markets: Ex‑Manager Arrested.
IPO Hopes Revived but SEBI Nod Still Pending
Despite the closure of several long-running regulatory cases, NSE’s IPO journey remains incomplete. Its annual report indicates that the exchange has sought SEBI’s no-objection certificate to refile the Draft Red Herring Prospectus (DRHP). While the earlier IPO attempt was stalled due to unresolved legal challenges, the recent settlements are expected to provide the necessary regulatory clearance for market listing.
Sprouts News Investigation Team (SIT) will continue monitoring the case, which reflects broader issues in Indian market infrastructure regulation, especially in handling technological infrastructure, data transparency, and corporate accountability. The NSE’s settlements may help restore market confidence, but the final word rests with SEBI’s top brass.
