For years, investors have asked one question – When will NSE finally launch its IPO again after a failed attempt in 2016. Now even as that question gets answered, another one is making headlines. As investors await the IPO launch date, the question now is where will NSE list?
If you thought it was going to be NSE because it is India’s largest stock exchange, you are mistaken. In fact, NSE shares cannot be listed or traded on NSE at all.
Instead, the exchange is expected to list its shares on a rival stock exchange – BSE.
But why would India’s largest exchange choose its biggest competitor as the listing venue and what’s the rule that prevents NSE from hosting its own shares on its platform?
The answer lies in a little-known regulation that every investor should know before the much-awaited NSE IPO hits the market –
NSE cannot regulate itself
When investors buy shares of a listed company, the stock exchange plays an important role in monitoring trading activity. This ensures compliance and enforces listing rules.
Now imagine a situation where NSE’s own shares are listed on NSE.
In that case, the exchange would effectively be monitoring and regulating its own stock. It would be both the platform operator and the listed entity at the same time.
This creates what regulators consider as an unacceptable conflict of interest.
To avoid such situations, Indian regulations do not allow a stock exchange to list its own shares on its own trading platform.
The rule that prevents self-listing
According to NSE’s DRHP, the restriction comes from the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, commonly known as the SECC Regulations.
These regulations govern stock exchanges and clearing corporations. These kinds of regulations are classified as Market Infrastructure Institutions (MIIs).
Under these rules, a stock exchange cannot list its own securities on the platform it operates.
The objective is straightforward. The exchange must remain an independent regulator of listed entities and should not be placed in a position where it oversees itself.
So where will NSE shares trade?
Since NSE cannot host its own listing, the company has chosen its biggest competitor – BSE. Just like how BSE trades on NSE, once the IPO process is completed, NSE shares are expected to be listed and traded on the Bombay Stock Exchange (BSE), Asia’s oldest stock exchange.
Interestingly, BSE has already granted in-principle approval for NSE’s proposed listing.
The exchange will also act as the designated stock exchange for various IPO-related processes, including finalisation of the basis of allotment.
Why regulators insist on this separation
The logic behind the rule becomes clearer when one understands NSE’s role in India’s financial system.
Now what is different for NSE is that unlike any typical listed company, NSE performs regulatory functions. The exchange monitors trading activity, conducts market surveillance and ensures compliance among listed companies and market participants.
This means NSE is not just a business, it is more than that. Furthermore, it also a key part of the country’s market infrastructure.
Now if the exchange is allowed to supervise its own stock, it could raise questions about transparency, fairness and regulatory independence.
An unusual IPO with an unusual structure
As investors prepare for the much-awaited NSE IPO, the listing venue itself highlights how different the company is from most businesses entering the market.
While thousands of companies use NSE as their trading platform, NSE will list on BSE.
Disclaimer: The details regarding the National Stock Exchange (NSE) draft red herring prospectus (DRHP) filing and listing regulations are for informational purposes only and do not constitute financial advice, an offer, or a solicitation to subscribe to the proposed initial public offering (IPO). Investing in primary market offerings involves market risks, regulatory updates, and procedural changes. Readers are advised to consult a SEBI-registered investment advisor or financial expert before making any investment decisions based on this news. This disclaimer has been generated using AI to support user well-being and responsible content consumption.