SEBI's NSE settlement raises questions on enforcement delay

India's market regulator accepted the National Stock Exchange's application to settle the co-location and dark fibre cases, with the exchange paying ₹1,491 crore. The co-location case, investigated by multiple agencies for over two decades, alleged that certain brokers got preferential access to market data. The dark fibre matter involved preferential connectivity through the exchange's fibre network.

The prolonged delay in closing such cases by investigating agencies, the regulator, and the judiciary makes penalties appear less stringent than the crime, legal experts said.

Sonam Chandwani, Managing Partner at KS Legal & Associates, said there is a legitimate concern that the deterrent value of enforcement may be diluted when matters involving significant market impact remain unresolved for years and are settled on terms that appear modest compared with the alleged gains or the scale of the violation. A delayed resolution coupled with relatively low monetary consequences can create a perception that regulatory risk is manageable and may inadvertently embolden non-compliant market participants, she said. The larger issue is whether the enforcement framework ensures violations are detected swiftly, wrongdoers are deprived of economic benefit, and sanctions are stringent enough to outweigh potential gains from misconduct, she added.