The Madras High Court has issued notice to SEBI on a plea seeking a direction to it to take action against employees of National Stock Exchange of India (NSE) for alleged fraud in collocation services, resulting in loss of several crores of rupees to customers.

A collocation service is a data centre facility in which a business can rent space for servers and other computing hardware.

Admitting the plea from A Kumar, Justice T Raja ordered notice to the Securities Exchange Board of India, returnable by two weeks.

The petitioner submitted that such action should be initiated irrespective of the criminal proceedings initiated by the CBI.

NSE introduced the facility to facilitate small and medium-sized members, who otherwise found it difficult to use the facility owing to various reasons, including high cost and lack of expertise in maintenance and troubleshooting. The petitioner alleged that NSE introduced the colocation service without SEBI's approval.

In 2015, various illegal practices of NSE employees, including grant of preferential access to data determination server give to select stock broker, came to light.