The National Stock Exchange (NSE) is waiting for a signal from the market regulator, Securities and Exchange Board of India (SEBI), to initiate its Initial Public Offering (IPO) process, Managing Director and Chief Executive Officer, Ashish Kumar Chauhan, said on Thursday. He also advised that only informed investors should go for derivative trade.

As on December 31, 2023, 55.51 per cent of NSE’s shareholding is with public, while the rest is owned by non-public.

Chauhan said: “Once SEBI indicates, we will file revised Draft Red Herring Prospectus (DRHP).”  NSE’s competitor BSE (Bombay Stock Exchange) floated its IPO on September 2016 and is now listed on both exchanges. Interestingly, Chauhan was the CEO of BSE when it got listed. He has also been the founder-member of the NSE and this is his second innings with the exchange.

The listing of NSE has been postponed for several years due to a series of corporate governance issues. These concerns include the involvement of its former chief executive officer Chitra Ramkrishna in the 2015 co-location scam and problems related to various technological failures. In 2021, the NSE faced a trading suspension for several hours when its mainframe and disaster recovery sites experienced malfunctions, attracting scrutiny from SEBI.

Derivative Trading

Meanwhile, Chauhan felt that derivative market is not for everyone but for informed investor. “Derivative has a utility. However, if an investor is not fully understanding or losing money, he should not invest. Those who can manage risk and understand, they should be given opportunity,” he said. It may be noted that NSE is the world’s largest derivative exchange by trading volumes (contract), per the statistics maintained by Futures Industry Association (FIA) for calendar year 2023.

Last July, a study by Department of Economic Policy and Analysis of SEBI, found that 9 out of 10 individual traders were making losses in the F&O (Future and Options) segment. They made an average loss of ₹1.1 lakh during financial year 2022. As high as 90 per cent of active traders incurred an average loss of ₹1.25 lakh. According to SEBI, samples from only the top 10 brokers showed that in FY22 there were 45.2 lakh unique individual traders in the F&O segment — up from just 7.1 lakh in FY19. Of this, 88 per cent were active traders, who were making consistent losses during FY22.

Commodities trading

Talking about commodities trading, Chauhan said that effort would be to focus on commodities where liquidity is high and investors are finding it easy to trade. NSE is also the largest shareholder of commodity exchange, NCDEX. When asked whether NSE will take over this exchange, Chauhan said: “We will not take over NCDEX.” It may be noted that NSE has 15 per cent shareholding in NCDEX, while LIC and NABARD have 11.10 per cent. IFFCO and Oman India Joint Investment Fund own 10 per cent each. Remaining shareholdings are with institutions and individuals.

NSE reported an 8 per cent year-on-year rise in its net profit for the December quarter to ₹1,975 crore. Consolidated revenue from operations grew 25 per cent on-year to ₹3,517 crores for Q3.

(The writer was in Mumbai on NSE’s invitation)