Clearing corporation ownership issue is delaying NSE IPO: Tuhin Kanta Pandey

The proposal to cut stakes held by stock exchanges in clearing corporations (CCs) is one of the key issues delaying the listing of National Stock Exchange (NSE), said Tuhin Kanta Pandey, chairperson, Securities and Exchange Board of India (Sebi), on Saturday.

The Sebi chief also pointed out other issues at NSE that need to be addressed first, including governance, tech, and litigation.

“Before it goes public, it (NSE) will need to be cleared from different angles, which we must carefully examine. Some issues have already been identified. There are pending issues like litigation, which is one part; the other part could involve governance and technology issues that may arise; and additionally, there is the clearing corporation issue,” Pandey said at the Mint India Investment Summit and Awards 2025 in Mumbai.

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In November 2024, Sebi proposed making clearing corporations more independent. The market regulator proposed to reduce the concentration of power held by stock exchanges over clearing corporations.

It proposed that 49% of a clearing corporation's shares could be distributed to existing shareholders of the parent exchange, while the exchange retains 51%. Over time, the parent exchange would gradually reduce its stake to below 15%, potentially by selling shares to other exchanges.

Currently, clearing corporations must be majority-owned by one or more stock exchanges, and at least 51% of the paid-up equity share capital must be owned by one or more stock exchanges.

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Sebi, in a letter dated 28 February, raised concerns about the potential conflict of interest arising from NSE's dominant ownership of NSE Clearing Ltd (NCL).

Sebi noted that "CCs need to be, and need to be seen to be, truly independent of exchanges, particularly in such interoperable segments, so that there is a level-playing field across market infrastructure institutions (MIIs) with no perception of any conflict of interest".

Sebi requested a detailed roadmap from NSE outlining how it intends to address these concerns before the initial pubic offering (IPO) proposal is further examined.

In a 28 March response, NSE maintained that its ownership of NCL is compliant with existing regulations, specifically the Stock Exchanges and Clearing Corporations Regulations.

NSE acknowledged that potential changes in CC ownership regulations could be disclosed as a risk factor in its draft red herring prospectus (DRHP). It also suggested a divestment of NCL could potentially improve the exchange's reserves position, as it would no longer need to provide capital infusions to the CC.

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“Some letters have been sent, and replies have been received. We will need to examine them and take the necessary steps to move forward,” said Pandey.

To be sure, there are two CCs in the equity market, one each owned by BSE and NSE. Others cater to commodity and debt markets. CCs help in the confirmation, settlement, and delivery of transactions for an exchange.