SC Commands SEBI To Refund Rs 3 Billion To NSE

The supreme court of India ordered India’s national market regulator SEBI to refund Rs 3 billion ($36.3 million) to National Stock Exchange(NSE). The order comes as part of disgorgement in the case of alleged lapses in the bourse’s system filed by the SEBI back in 2019. However, this return is contingent on the agreement of the exchange to return the amount with interest if SEBI wins an appeal in the co-location scam case. 

NSE and SEBI are renowned bodies that play an important role in trading stocks. India’s market regulator, SEBI, has strict guidelines regarding the functioning of the stock exchange market. Based on the investigation, SEBI passed the order against the NSE and its officials in the case of giving unfair access to high-frequency traders. With the order of the Supreme Court of India, SEBI needs to refund the amount to NSE in a specific period that the lawyers do not publicly disclose. In this blog, let’s explore why SC directed SEBI to refund the amount.

Why Does the Supreme Court Pass This Order?

In order to understand the reason behind this SC’s decision, you must first know about the allegations passed by SEBI in 2019 against NSE. The largest market regulator passed a series of orders against the National Stock Exchange and its former executives, Ravi Narain and Chitra Ramkrishna, stating, “The exchange did not exercise the due diligence while setting a network that allowed high-frequency traders unfair access of some network servers at the exchange.”

After that, SEBI ordered NSE to deposit Rs 11 billion, including interest, in the investor fund. It also asks the market regulator to bar this fund from raising money from the securities market directly or indirectly in the next six months.

The lawyer of both parties said, “SC refused to stay on the tribunal order that ended SEBI’s ruling against the NSE completely.” During the order, the Supreme court of India also passed a notice to the market regulator in which it questioned the pace of the investigation.

Under the co-location scam, SEBI filed a complaint against NSE and asked it to disgorge Rs 624 crore. A bench led by Justice M.T. Joshi and Justice Tarun Agarwala said in its order, “Even though NSE has not indulged in any unethical act, the direction of disgorgement cannot be sustained.”

It is equally important for investors as any allegations against the national stock exchange can reduce trust. Whether SEBI’s allegations against NSE are true or not, the SC disgorgement order is a clean chit for the stock exchange. National Stock Exchange itself is a public company and has a large number of retail investors who trade NSE unlisted shares. This order not only reflected the weak investigation process of SEBI to prove allegations but also showed the transparency in the functioning of NSE.

About NSE Performance In Unlisted Share Market

The National Stock Exchange(NSE) is India’s largest stock exchange, incorporated in 1994 and the World’s largest derivative exchange by the number of contracts. It has a fully integrated business model comprising exchange listing, trading services, indices, market data feeds, clearing and settlement services, and more. 

NSE unlisted shares are available for trading and can be easily bought or sold by retail and institutional investors. The national stock exchange emerges as the market leader in India’s exchange business and has more than 93% capital market share. 

Apart from this, NSE’s primary revenue comes from its options trading, unlisted shares, and clearing & settlement services. Its Pre-IPO stock performance remains steady, and its price goes up and down. NSE’s unlisted share price majorly depends on market fluctuations, and it clearly shows in its performance. Let’s look at the details of the National Stock Exchange’s unlisted shares:

About NSE unlisted sharesDetails of shares
Lot Size5000 Shares
Face ValueRs. 1 per equity share
Total Availability of Shares10,000 equity shares
Current unlisted share priceRs 3400 per equity share

In addition, NSE’s overall performance in the Pre-IPO market in the past few years remains good. If we see the performance metrics of the national stock exchange, like revenue, it increases from Rs 6,202 crore in FY21 to Rs 9,500 crore in FY22. The company’s Profit After Loss(PAT) also increases to Rs 5,198 crore from Rs 3,573 crore. To understand it, here is the financials report of NSE:

Particulars (in cr)FY22FY22
Operating Revenue9,5006,202
EBITDA 7,0694,718

In the fiscal year 2021-22, NSE revenue and other performance metrics improved also reflected in its unlisted share price. In the Pre-IPO market, NSE’s unlisted share current price is Rs 3250. However, this share price may fluctuate and depends on the company’s current performance in the share market.

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