After nearly ten years, NSE co-location case remains muddled, with unproven charges, regulatory contradictions, and eroded oversight

The Central Bureau of Investigation (CBI) has, at long last, filed its final charge sheet this week in the NSE co-location matter. ThePrint reports that the document names several brokers alleged to have “benefited” from NSE’s co-location setup under former MD & CEO Chitra Ramkrishna.

On the face of it, the charges raise serious questions—but dig deeper, and one finds just smoke and no fire. If this is justice, it has been served with a generous side of half-truths and deliberately ignored claims of defendants. The time has come to call it out: this travesty needs to stop.

What the Charge Sheet Alleges

1. Co-location setup: NSE allowed brokers to place their servers physically close to NSE’s servers so that their trades/data could be processed faster.

2. Secondary/Fallback (POP) server access: The charge sheet claims brokers were allowed unfettered access to a “secondary POP server,” which was supposed to be only a fallback. According to the CBI, brokers connected to this secondary POP server on many trading days in violation of rules.

3. Allegation of benefit: The basis of the CBI complaint is that by gaining faster access to data or secondary connections, these brokers obtained an “undue advantage.”

4. No political nexus found: Despite earlier speculation pushed by vested interests and multiple investigations (IT, ED, SEBI, CBI), no evidence ties any politician to any benefit from this trading arrangement. Shockingly, CBI has not even examined NSE’s shareholding, which could have revealed whether a politician benefited from attempts to maintain NSE’s monopoly.

Where the Case Breaks Down

1. No clear proof of benefit: The charge sheet alleges brokers benefitted from using the secondary server, but provides no quantitative demonstration of such financial advantage. Audits carried out by brokers themselves suggest that profits on “secondary-server days” are comparable to profits on “non-secondary” days. If profits are at par, the charge of undue benefit, and therefore the case itself, collapses. This evidence appears to have been deliberately suppressed.

2. Rehashed facts, no new revelations: The CBI has had knowledge of these facts for seven years. No fresh evidence has emerged. Despite repeated attempts, no political involvement has been demonstrated. The narrative of a politician’s nexus was assumed, never proven.

3. Contradictory conclusions: The CBI claims there was criminal collusion between NSE officials and brokers. SEBI, on the same facts, found no collusion. If both agencies studied the same evidence, how can their findings be opposite?

The Paradox of Co-location Itself

There is a basic contradiction that neither SEBI nor CBI has addressed. If faster access to data by any means is illegal, then how is co-location—which officially allowed brokers to place servers inside NSE premises for faster access—legal? Co-location was launched and sold to brokers precisely to reduce latency and accelerate data. If faster data automatically translates to undue profit at the cost of others, the entire co-location scheme is fraudulent by design. One cannot call one form of latency advantage “legitimate” and another “criminal” without exposing the regulatory framework as inconsistent and confused.

Weak Vigilance at SEBI

This contradiction also highlights the weakness of SEBI’s vigilance machinery. The regulator has an internal supervisory framework to identify conflicts, ensure consistency, and prevent regulatory capture. Yet, SEBI’s own orders on co-location differ completely from CBI claims and also contradict each other. This shows SEBI did not understand market dynamics of latency and data access, compromising its vigilance. The result is a regulator that passes orders without technical grounding, leaving room for contradictory narratives.

Wrong Experts, Wrong Lens

Another disturbing aspect is the involvement of many so-called experts, many of whom lacked understanding of markets or trading systems. Instead of relying on genuine market microstructure specialists, investigations were shaped by bureaucrats, generalist auditors, management school gurus, and agencies with no experience in high-frequency trading or exchange technology. This led to confusion, misplaced allegations, and charges that do not withstand scrutiny against hard data.

What’s at Stake

• Credibility of institutions: SEBI, CBI, ED, IT—all have been involved. If high-profile agencies cannot establish benefit, nexus, or wrongdoing, public faith erodes.

• Regulatory consistency: When SEBI clears a matter but the CBI later alleges collusion, markets are left uncertain about which rules truly apply.

• Brokerage industry’s voice: Bodies like ANMI (Association of National Exchanges Members of India) and BFF have been strangely quiet and ineffective, even as their members are falsely impugned. The industry deserves a stronger defence when charges are made without proof.

What Should Happen Now

1. Full disclosure of data: The government, SEBI, or CBI should publish raw trade and profit data for secondary-server versus non-secondary-server days.

2. Fix SEBI vigilance: SEBI’s vigilance must be robust, capable of reviewing technical issues in depth, and fully accountable for wrong calls.

3. Clarify legal standard of “undue benefit”: A precise technical and legal definition is urgently needed.

4. Separate narratives from facts: Investigations must be evidence-driven, not narrative-driven.

5. Strengthen industry bodies: Brokers need associations that defend them with facts, not sit silently while being treated as scapegoats.

Conclusion

This co-location case was always complex. After almost ten years, it is astonishing that findings remain muddled. Instead of clarity, we have a charge sheet that rehashes old facts, alleges benefits without proof, and contradicts SEBI’s conclusions.

This is not just about the NSE co-location matter. It concerns whether SEBI and its vigilance are capable, whether agencies can admit mistakes, and whether India’s markets can trust regulators to act competently and fairly. Unless SEBI’s internal vigilance is made accountable, and investigations guided by genuine market expertise rather than guesswork, contradictions will persist—where one regulator exonerates and another criminalizes, leaving the truth buried under institutional ego and shadow-play. This travesty needs to end.