India’s premier financial marketplace, the National Stock Exchange (NSE), is seeking the involvement of the finance ministry to resolve a prolonged disagreement with the nation’s markets regulator regarding its long-awaited IPO. Since 2016, the NSE—recognized as the largest derivatives exchange globally—has faced hurdles in obtaining regulatory approval, primarily due to ongoing legal challenges and governance issues. Meanwhile, its key competitor, BSE Ltd, has successfully gone public.

The Standoff Intensifies

This recent plea to the government signifies a notable escalation in the ongoing tension between India’s leading exchange and its regulatory body. Approval of the IPO would not only benefit the NSE but also provide an exit strategy for significant investors like Life Insurance Corporation of India, State Bank of India, Morgan Stanley, and the Canada Pension Plan Investment Board.

• The NSE’s request to the finance ministry comes after its latest attempt in March to obtain a no objection certificate (NOC) from the Securities and Exchange Board of India (SEBI) was unsuccessful.
• Previously, similar requests were made in November 2019, twice in 2020, and again in August 2024.

Governance Concerns

In the letter sent to the finance ministry, the NSE urged the government to collaborate with the newly appointed SEBI Chairman, Tuhin Kanta Pandey, to address the concerns that have hindered its public offering. Pandey, who assumed his role in March, has emphasized that while SEBI aims to resolve these issues, it will not prioritize commercial interests over public welfare.

According to sources familiar with the matter:

• Various departments within SEBI have raised multiple issues regarding governance at the NSE, particularly the delay in appointing a chairman for its board.
• The NSE, however, has pointed fingers at SEBI for the slow approval of its recommended candidate for the chairman position in 2022.

A Call for Fairness

The letter to the finance ministry also highlights the NSE’s dissatisfaction with SEBI’s perceived bias in recent decisions that may have favored BSE over NSE. The exchange expressed concerns about new regulations affecting the futures and options market and a recent SEBI proposal that would require exchanges to divest their holdings in clearing corporations—an action the NSE argues could lead to increased costs and jeopardize market stability.

As the situation unfolds, the NSE’s appeal to the finance ministry marks a critical juncture in the exchange’s journey toward going public. The outcome could significantly impact not just the NSE but also the broader landscape of India’s financial markets.