The Securities and Appellate Tribunal (SAT) has set aside the Sebi order that asked the National Stock Exchange to disgorge Rs 624.89 crore for its role in the alleged co-location scam.

The SAT said the direction of the Securities and Exchange Board of India (Sebi) issued almost four years ago in April 2019 was ''patently erroneous’’ since the tribunal did not find any unethical act on the part of the NSE.

The tribunal, however, said the exchange did not do adequate due diligence on the entities who got preferential access to NSE facilities — imposing a penalty of Rs 100 crore on the exchange.

The SAT also gave a reprieve to Chitra Ramkrishna and Ravi Narain who had served as the MD and CEO of the exchange, respectively.

It set aside Sebi’s direction they disgorge 25 per cent of their salaries drawn during a certain period.

The direction prohibiting them from associating with any listed company or a market infrastructure institution or any other intermediary for five years was also set aside and substituted for the period undergone by them.

The case relates to alleged lapses in high-frequency trading (HFT) offered through NSE’s co-location facility, where some entities allegedly got preferential access. The exchange allowed stock brokers to rent specific racks and co-locate their servers and systems within the exchange premises.

''NSE has not indulged in any unethical act nor has unjustly enriched itself as a result of any wrongful act. The direction to disgorge must be in relation to any transaction or activity which is in contravention of the provisions of the Sebi Act or its regulations.”

Due diligence

The SAT pointed out to a lack of due diligence on the part of NSE while allocating internet protocol (IPs) on various ports and that there was inequitable distribution of IPs. Besides, there was failure to monitor frequent connections to the secondary server by certain trading members.