MUMBAI : The Securities Appellate Tribunal (SAT) Wednesday asked the National Stock Exchange of India Ltd (NSE) to continue transferring revenue from its co-location service to an escrow account as directed by the Securities and Exchange Board of India (Sebi) in an interim step in September 2016, even though the regulator has issued final orders in the co-location case.

The amount in the co-location revenue escrow account stood at 2,344 crore as of 21 May 2019, as per NSE’s pleas reviewed by Mint. The exchange had requested the release of this money since the final orders have been announced.

In partial relief for NSE, SAT said the exchange would not need to pay the entire 1,200 crore—which included principal and interest—as ordered by Sebi. It will need to pay only the principal amount of 687 crore (principal amount of two orders) to Sebi within two weeks. NSE can withdraw this amount from the escrow account.

NSE had moved SAT against Sebi’s 30 April orders calling them “unsustainable, arbitrary, and disproportionate."

NSE has filed separate petitions for interim relief and full relief. It had sought a stay of Sebi’s 30 April orders till the petition for full relief is heard as the “orders will cause grave and irreparable damage to the financials and reputation of NSE" and no additional interest is levied on the disgorgement amount.

NSE also assured the tribunal that it does not intend to raise funds or come out with any public offer in the next six months.

Sebi has been asked to file its reply to NSE’s petitions within six weeks and NSE can file rejoinders in three weeks after that. The matter will be heard next on 22 July along with the other co-location pleas. Sebi’s passed three orders against NSE on 30 April, directed it to disgorge and deposit 1,200 crore in an investor fund and barring it from accessing capital markets for six months, besides clawing back a chunk of salaries from two of its former chief executive officers, for lapses in its algorithmic trading systems and co-location services.

In a second order the same day, Sebi said NSE was a party to fraud on its trading platform as it had allowed preferential treatment to two trading members. These members were allowed to use services of an unauthorized “dark fibre" vendor, Sebi said, levelling a disgorgement of nearly 80 crore (including interest) on the exchange.

In September 2016, Sebi had asked NSE to deposit revenues from its co-location service in an escrow account pending investigations. NSE had asked Sebi to withdraw these directions but this was not done.

NSE’s counsel Somasekhar Sundaresan argued that the revenues in escrow account did not have any correlation with the wrongdoing alleged in the Sebi orders, as the period of alleged wrongdoing was 2010 to 2014 and the revenues being set aside belong to September 2016 to May 2019.

Senior Sebi counsel Rafiq Dada, however, countered the argument saying the money in the escrow account was safe and would help recover the interest on the disgorgement amount and any penalties from the proceedings that are still pending. He also said there was a vacuum in NSE’s policy (on co-location).

NSE counsel also argued that it cannot initiate inquiry against its two officials Deviprasad Singh and Mahesh Soparkar.

“How can NSE initiate inquiry against them when NSE is claiming that there was nothing wrong," the counsel asked.

SAT asked NSE to initiate an inquiry and submit a report to the regulator in a time-bound fashion. However, there will be no coercive action against the employees pending a final hearing by SAT.