According to the Moneycontrol, Securities Appellate Tribunal (SAT) has allowed National Stock Exchange (NSE) to release Rs 6,085 crore from escrow account which the exchange earned by providing co-location facility.
What was Co-location facility issue?
- In January 2010, the National Stock Exchange (NSE) had started offering co-location facility service, under which members were allowed to place their server in exchange premises and for that exchange charges fee.
- This Co-location facility gave the market participants faster access to the exchange platform.
- Later, the Securities and Exchange Board of India (SEBI) found that that co-location facility gave preferential access to some brokers due to which they made unlawful gain. Consequently, SEBI had ordered to keep all earnings from co-location in escrow account.
What is an escrow account?
- An escrow account is a third party account where funds are kept before they are transferred to the ultimate party.
- In simple words, Escrow accounts are a financial instrument in which an asset or escrow money is held by a third party on behalf of 2 other parties that are in the process of completing a transaction. Escrow accounts can hold money, securities, funds, and other assets.
