Introduction: The Exchange That Lists Everyone, except Itself:
The National Stock Exchange (NSE) is India’s largest securities exchange. As such, it is not a struggling or new start-up; it was created to provide India the type of exchange system that has been implemented in many other countries. The NSE opened in 1992 and immediately changed the way equity and derivatives are traded in India. This was done by providing full electronic trading, access nation-wide, and transparent order matching and advanced risk management systems. As a result, the NSE has become one of the world’s largest derivatives exchanges based on volume. In addition, all major IPOs (Initial Public offerings) in India use NSE as their exchange.
In 2016 the NSE submitted its IPO filing to the regulatory body but did not list the IPO. In fact, the IPO was placed on hold for almost ten years. However, as of 2026; the NSE intends to go public after many years of being under the microscope of various regulatory bodies not to mention the multiple lawsuits that have been filed against it. The primary reason the IPO was delayed for so long was due to a technical issue that occurred in 2010 when co-location services began.
Section I: Understanding Co-Location, the Infrastructure of Speed
What Is Co-Location?
Co-location refers to NSE’s (National Stock Exchange) initiative that allows HFT (High Frequency Trading) broker-dealers to collocate their market-making systems at the NSE facility by installing their servers within the NSE’s data centre in 2010. The trading desks of these brokers can respond quickly to price changes; thus, they will have: An opportunity to buy before other traders have a chance to react or sell before other traders have an opportunity to respond to price changes or take advantage of arbitrage opportunities (the reason those who want to get filled first need to be able to send their orders in before anyone else). Even a few microseconds can make a difference! There are a number of technical methods which could be used to accomplish the objective of creating equal access for all participants, but the design of the NSE’s architecture used: same data feed sources, same “tick” price feeds, and etc. to assure that every Broker accessing the co-location facility would receive the same data at the same time. But a technical nuance changed everything.
Section II: The Technical Loophole
Hidden Vulnerability: Sequential Broadcasting
A tick-by-tick system (system that transmits electronic market data, e.g., bids, offers, and trades) will not transmit the same data simultaneously to all users connected to it. A sequential method for broadcasting tick data has been created for this.
Data packets will be transmitted in order, so the first broker that is connected to a given dissemination server will receive its first tick data before any other connected brokers. All other connected brokers will receive their tick data several milliseconds thereafter.
In regular stock market conditions, that will not make much difference. However, this particular methodology represents a “The First-to-Connect” strategy for brokers.
Subsequent investigations revealed that some brokers were:
- Searching for the least congested servers from which they could access tick data.
- Logging into those servers using multiple Internet Protocol (“IP”) addresses.
- Ensuring that they connected to the dissemination server first.
By employing the above-described methodologies, those brokers would receive their price feeds fractions of a second before the rest of the brokers that connected to that same server.
In the world of high-frequency trading, it is possible for a broker to earn substantial profits on his trades with as little as a 50 microsecond (0.000050 second) advantage over the same opportunities available to their competitors.
Section III: The Dark Fibre Allegation
If the server access issue raised concerns, the “dark fibre” matter deepened them.
What Is Dark Fibre?
Unutilised infrastructure composed of fibre optics that can be activated to form ultra-high-speed private lines for communication is known as dark fibre.
In this case, some brokers had received:
- Direct fibre connections
- Quicker dedicated routing
- Less latency than other regular routing connections
Connections to fibre network equipment were able to provide some firm’s access to quote information faster than firms located in the same building as them.
The primary issue in these circumstances was not co-location; rather, it was unequal speed within an environment that is supposed to be equal among all participants.
Section IV: The Whistle-blower and Regulatory Action
Concerns over preferential treatment within the NSE co-location system were first raised in 2015 by a whistle-blower. This led to:
– Reviews by technical advisory committees
– Forensic audits
– A complete investigation by the SEBI (Securities and Exchange Board of India).
Findings from these investigations indicated that:
– Some brokers had been given unfair early access
– Oversight mechanisms were inadequate
– Governance failures occurred at senior levels
The problem escalated into a governance crisis from being an originally technical issue.
Section V: Why the IPO Was Halted in 2016
NSE submitted a Draft Red Herring Prospectus (DRHP) in 2016 but was unable to proceed with an IPO due to ongoing investigations into the co-location facility by SEBI, pending legal proceedings at the Securities Appellate Tribunal and Supreme Court, governance issues identified in operational processes and decision-making procedures by senior management, and issues of regulatory credibility if NSE were permitted to list for an IPO prior to resolving issues regarding the fairness of the way that NSE previously conducted business and operated.
Section VI: The Financial Overhang
Throughout the 10 years that the listing was delayed:
- NSE made a profit every year
- NSE private market continuing increasing in value
- The institutional stake-holders continue to hold their ownership with no liquidity
Government-owned institutions own approximately 31% of NSE
Major stake-holders include:
- Life Insurance Corporation of India (~10.72%)
- State Bank of India (~7.56%)
Total amount are in multi-tens of thousands of crores
However, the increases in value for the stake-holders will remain unrealised until listing occurs.
Since the last listing, total amount of capital has been frozen for 10 years.
Section VII: The Settlement, Clearing the Path
Following extended litigation and negotiations with regulators, the NSE chose to terminate its operations.
On 18 January 2026, SEBI granted preliminary approval for a settlement of ₹1,388 crore to resolve the issue.
This resolution includes:
– Settling regulatory penalties
– Stopping ongoing disputes
– Clearing away the legal issues
But we still have one last step to take:
The Supreme Court must approve the settlement before we can proceed with the IPO.
The NSE will only file updated IPO documents after this approval.
NSE management expects that it will take four months to do so after receiving approval.
Expected to list: Q4 FY26 or Q1 FY27.
Conclusion: A Decade Defined by Trust
The delayed IPO by NSE is not about business failure; it is about governance experiences (the lack of poor) and infrastructure experiences (the lack of poor). The failure in the areas of co-location, sequential data transmission to trading system and dark fibre connectivity helped to expose how weak NSE was in the areas of:
- System design
- Oversight
- Transparency
Only after settlement and regulatory alignment could the exchange move forward.
So now, NSE can move forward with their listing by preparing to become listed not just because they are the largest exchange, but also because they have demonstrated for 10 years that they deserve to be a publicly held company
Bibliography
- National Stock Exchange of India. History and Corporate Overview. Official website publications and annual reports, various years.
- Securities and Exchange Board of India (SEBI). Orders in the Matter of NSE Co-location and Dark Fibre Cases. SEBI Adjudication and Settlement Orders, 2019–2026.
- Business Today. “NSE IPO Timeline: From DRHP Filing in 2016 to Regulatory Clearance.” 2025.
- NDTV Profit. “SEBI Grants In-Principle Approval to NSE for IPO after Settlement.” January 2026.
- The New Indian Express. “SEBI Clears NSE IPO After Nearly a Decade.” January 2026.
- “Explained: NSE Co-location Controversy and Its Impact on IPO Plans.” 2024–2026 coverage.
- “India’s NSE Moves Ahead With IPO After Settling Long-Pending Cases.” 2026.
- The Times of India. “NSE Board Approves IPO via Offer-for-Sale Route.” 2026.
- Life Insurance Corporation of India. Shareholding disclosures and investment portfolio reports.
- State Bank of India. Public filings and investment disclosures relating to NSE stake
