NSE undisputed leader, but new boss Ashish Chauhan has problems to fix

Ashish Kumar Chauhan

Life has come full circle for Ashish Kumar Chauhan. Twenty-one years after leaving the National Stock Exchange of India – he was part of the founding team – Chauhan is set to return as the chief executive officer of the bourse.

The Securities and Exchange Board of India approved the appointment of Chauhan, 54, presently MD and CEO of BSE, on July 17.

Friends and critics of the well-networked and ambitious Chauhan say the role is something he had set his sights on for a while now.

A mechanical engineer from the Indian Institute of Technology Bombay and alumnus of the Indian Institute of Management Calcutta, Chauhan first joined the NSE in 1993, when the bourse was being set up as a counterweight to the Bombay Stock Exchange.

RH Patil, an Industrial Development Bank of India veteran, Ravi Narain, who completed his MBA from Wharton and returned to India from the US, and Chitra Ramkrishna, a rank-holding chartered accountant, formed the core team tasked with getting the NSE up and running. The trio was joined by Raghavan Puthran, Chauhan and Kumar K.

As assistant vice-president, Chauhan’s primary responsibility was to oversee trading operations, surveillance and ensure that the technology was up to scratch. Former colleagues recall him as being highly competent and approachable to juniors.

Cool guy

Once when Chauhan was temporarily in charge of the settlement process, there was a mix-up resulting in one trading member not getting the shares for which he had paid. The team initially tried to fix the problem themselves and failing to do that, finally went to Chauhan, fearing the worst. Much to their surprise, Chauhan did not lose his cool.

“If there is a problem beyond your capability, flag it immediately. I shall help you resolve it then, but not afterwards,” he is said to have told the team.

Earthy, geeky, with tousled hair that lent an air of an absent-minded professor, Chauhan nevertheless was politically astute and ambitious even back then, according to those who interacted with him in those days.

And he could be a hustler too if the situation required it. In 1994, a team of engineers from the US had flown down to India to set up NSE’s technology infrastructure. When a plague broke out in Surat around that time, the engineers insisted on flying back to the US immediately. Chauhan is said to have convinced them to handover their passports for some embassy process and then delayed returning them on some pretext or the other till the work was completed.

He was well-liked by his team, and Chairman Patil too was supportive, but Chauhan was kept at bay by the rest of the senior management, who undermined him frequently, allege NSE insiders.

“The pecking order was already defined – it was a given that Narain would succeed Patil. A subtle power struggle was already under way between Ramkrishna and Puthran. Further competition was unwelcome,” a former NSE employee claimed.

With Patil’s tenure set to end soon, Chauhan did not see any future for himself in the new scheme of things, and quit in March 2000.

Back at the bourse

After an eight-year stint at Reliance Industries as chief information officer of Reliance Infocomm, Reliance group CIO, and CEO of the IPL team Mumbai Indians, Chauhan returned to the stock exchange arena as deputy CEO of the BSE. By then he had wised up to the ways of the corporate world, proved himself professionally and was no longer a pushover.

The comeback had a hue of controversy, though. While appointing Chauhan as deputy CEO, the BSE also acquired a software firm called Marketplace Technologies, in which Chauhan’s wife owned a stake. The price that BSE paid for Marketplace had tongues wagging.

When Madhu Kannan stepped down as CEO of BSE in 2012, Chauhan got the job. The BSE continued to gradually lose market share in the cash market on Chauhan’s watch. He tried to boost volumes in the derivatives segment by offering incentives to trading members to act as market makers. The move flopped and there were accusations of certain big brokers having benefitted from the scheme.

The BSE’s equity derivatives turnover has improved in the past couple of years, but they are still nowhere close to the numbers clocked by the NSE.

Still, Chauhan got a few things right as well. The BSE went public in 2017 and investors still holding on to the shares have more than doubled their money.

The bourse’s mutual fund distribution platform, Star MF, started in 2009 and has been a massive success, now processing almost 20 million transactions in a month. So too has been the platform for trading in the shares of small and medium enterprises, which now boasts of 382 listings (148 have migrated to the main board). Also, technologically, the BSE is ahead of the NSE in terms of speed of execution of trades, and also updating of prices on its websites.

In 2013, the BSE upgraded its technology platform on the lines of Deutsche Börse’s trading architecture, making it the fastest trading platform in the country. Two years later, the BSE said it had become the world’s fastest stock exchange by clocking a median response time of six microseconds for a trade. Today, the median response time is 4 microseconds for a trade.

All along, Chauhan continued to cultivate friends in the corridors of power and policy circles.. While it would not do wonders to BSE’s trading volumes, it at least ensured that the BSE did not suffer because of some new rule.

The learnings of all these years could be put to good use in the NSE, where Chauhan can implement ideas on a much larger scale. The NSE reported revenue of Rs 9,500 crore in FY22 and profit after tax of Rs 5,198 crore, which works out to a net profit margin of over 54 percent.

Co-location controversy

The NSE’s market leadership is not under any threat, but the bourse has been making the headlines for all the wrong reasons recently. The exchange is yet to put the ghosts of the co-location server controversy to rest, which in turn is delaying its initial public offering plan.

The market, though, seems hopeful of the issue being resolved at the earliest, as seen from the hectic trading in NSE shares among high net worth individuals. But with investigative agencies having taken a renewed interest in the case, there is no saying when closure will be reached.

Besides, NSE is in hot water with SEBI over technical glitches in its trading system. In the past five years, there have been about 10 such instances, with two—in 2017 and in 2021—halting trading for three hours. Troubles with the regulator apart, such incidents also undermine the NSE’s standing among the participants using its platform. The BSE’s trading volumes may be much lower, but then one does not hear of trading glitches either.

“Technology issues are something that Chauhan should be able to resolve at the earliest, given that he understands the space very well. As for the IPO, that is something beyond his control at the moment,” said a market observer.

The other accusation against the NSE is that it has not been innovative enough and has been content with its dominant position in the equity and equity derivative segments.

In an interview to a business publication last year, Chauhan said the BSE was a fintech company in the guise of a stock exchange, and that it was getting into newer businesses. The NSE could well do with such an approach and Chauhan’s challenge would be to show that he can pull off ideas and fix issues at scale.

Corrigendum: The earlier version of the article inadvertently mentioned that Chauhan had denied links to Marketplace Technologies.