The Securities and Exchange Board of India (Sebi) has rapped on the knuckles of the National Stock Exchange (NSE) in the co-location case in its order released on Tuesday, The market regulator observed that the exchange did not exercise the requisite due diligence. The NSE was ordered to 'disgorge' Rs 625 crore with 12 percent interest from April 2014.

Though the regulator has barred the NSE from securities market for six months, it did not find the exchange guilty of fraudulent and unfair trade practices.

According to former Sebi official and founder of Thinking Legal Vaneesa Agrawal, the regulator is mindful of the fact that the NSE plays an important role in the financial market and there is no intention to disrupt the market’s functioning.

“The order is only restricting the NSE’s access to the capital market since they were planning an IPO. They have also been asked not to launch any new derivative product. So the implication is only in terms of expansion of business or of listing. It is not to do with any day-to-day operations,” she pointed out.

“There is also a separate order in which Sebi has found fraudulent activities committed by the exchange for four months when they allowed access to two brokers preferentially. In that order also there is a disgorgement of an amount of around Rs 60 crore. However, the sum and substance is that it is a penalty. They are aware of the fact that the NSE has violated certain regulations. But It is possible that the exchange may also appeal to the Securities Appellate Tribunal to challenge these orders,” Agrawal noted