NSE knocks SEBI door again for all-important NOC for proposed IPO

NSE, while making a fresh appeal for a NOC, has responded to all the observations in the SEBI communique.

The National Stock Exchange (NSE) has once again written to the Securities and Exchange Board of India (SEBI), seeking a No objection Certificate (NOC) from the capital market regulator that would allow it to take further steps towards listing of its shares, according to sources familiar with the matter.

The NOC is an important document required for proceeding with NSE’s IPO, which has been stuck for more than eight years. NSE filed the draft red herring prospectus (DRHP) for its IPO way back in December 2016.

“... we hereby submit this request letter to SEBI for seeking NOC/permission to take further actions towards listing of shares of NSE including filing the DRHP with SEBI,” stated the NSE letter dated March 28.

The letter has been addressed to VS Sundarasan, Executive Director, Market Regulation Department, SEBI.

Incidentally, this is not the first time that NSE, which is the country’s largest exchange in terms of market share, has written to SEBI for an NOC for its IPO. NSE had written to SEBI with a similar request in November 2019, twice in 2020 and thereafter in August 2024 as well.

Late last month on February 28, the capital markets regulator responded to NSE’s letter seeking an NOC, highlighting certain observations on issues like technology, key management personnel (KMP), ownership of clearing corporations, and ongoing cases related to the colocation matter.

NSE, while making a fresh appeal for a NOC, has responded to all the observations in the SEBI communique.

One of the more important points raised in the SEBI communique was related to the majority holding of the exchange in its clearing corporation, NSE Clearing Ltd (NCL). According to SEBI, clearing corporations need to be seen as independent of exchanges, especially when interoperability is allowed between exchanges.

NSE, on its part, has said that its holding in NCL is in compliance with the existing regulatory framework and there are already two listed exchanges – BSE and MCX – that have clearing corporations as their wholly-owned subsidiaries. It further said that any potential changes in the ownership rules can be disclosed as part of the risk factors in the DRHP.

NSE is of the view that if the clearing corporation is diversified then the exchange will no longer have to support the entity with capital infusion, and it will improve exchange’s reserves, as per the sources.

SEBI has not yet framed the final rules for demerger of clearing corporations from exchanges.

Meanwhile on the technology part, NSE has responded that the exchange has taken numerous steps to strengthen its technology infrastructure and improve resiliency during the last few years. It has highlighted the fact that there has been no major outage in last four years.

In its letter to SEBI, it has further stated that out of 82 initiatives suggested by McKinsey in 2022, 65 have been implemented and nine dropped by exchange’s technology expert panel while the remaining eight initiatives are in the pipeline.

On the KMP issue, NSE has replied that the overall manpower of exchange has increased from 1,115 in FY23 to 1,673 in FY25 (till date). The number of employees in critical operations has increased from 332 in FY23 to 590 in FY25 while the number of staff in regulatory, compliance, risk management and investor grievance related vertical has increased from 486 in FY23 to 710 in FY25.

On the question of ongoing cases, NSE has stated that it is keen to resolve all pending matters amicably through a settlement mechanism. It further said that its governing board has re-affirmed the intent of settling all the matters amicably and a letter was sent to SEBI in August last year for settlement of all the pending matters pending before SEBI and all judicial forums.

Moneycontrol has written to SEBI seeking comments on the latest communication by NSE and the reply is awaited, NSE, in an emailed response, said that it will not comment on the issue.