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NSE IPO: Market dominance vs regulatory risks; what investors should know from the RHP

By Sohail Khan 12 September 2026, 9:48 am

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NSE IPO: Market dominance vs regulatory risks; what investors should know from the RHP
Synopsis

In its red herring prospectus (RHP), NSE has highlighted its market leadership, scale, profitability, technology infrastructure and cash generation as key strengths. The exchange, however, has also flagged several risks, including dependence on trading volumes, regulatory changes and increased scrutiny.

NSE IPO: Market dominance vs regulatory risks; what investors should know from the RHP<br>

After years of anticipation, investors may finally get an opportunity to own a stake in the National Stock Exchange of India (NSE), with its proposed initial public offering (IPO) set to open for subscription on Thursday, September 17, 2026. Valued at Rs 22,561.57 crore, the IPO comprises an offer for sale of up to 12.64 crore equity shares.

In its red herring prospectus (RHP), NSE has highlighted its market leadership, scale, profitability, technology infrastructure and cash generation as key strengths. The exchange, however, has also flagged several risks, including dependence on trading volumes, regulatory changes and increased scrutiny.

Market leadership and scale

NSE said it has been India's largest stock exchange in terms of total turnover in the cash market and total turnover in equity derivatives, based on notional turnover for equity options, from FY01 to FY26 and for Q1FY27.

As of June 30, 2026, NSE had 261.36 million registered investor accounts, 1,328 trading members, 132.37 million unique registered investors and 3,005 listed entities. The market capitalisation of listed entities stood at Rs 474.08 trillion.

NSE was also the largest multi-asset-class exchange among leading listed stock exchange groups globally by the number of trades in cash equities and contracts traded in equity derivatives in FY26 and Q1FY27, according to the RHP.

Its global market share stood at 11.38% by the number of trades in cash equities and 51.18% by contracts traded in equity derivatives in FY26.

Positioned to benefit from India's structural growth

NSE said its scale and market position leave it well placed to benefit from India's structural growth. Total fund mobilisation on the exchange stood at Rs 6.19 trillion in Q1FY27 and Rs 20.33 trillion in FY26.

Fresh listings and offers for sale across the Mainboard and SME board accounted for Rs 0.06 trillion and Rs 1.78 trillion, respectively, during Q1FY27 and FY26.

The exchange said it was among the top three exchange groups globally by the number of new listings through IPOs from FY23 to FY26, and among the top five exchange groups globally during Q1FY27.

Brand, trust and market infrastructure

NSE has highlighted its role across trading, clearing, settlement and market supervision. It said its role as a first-level regulator covers investor protection, market surveillance, issuer oversight and intermediary supervision.

Its trading infrastructure is designed to handle large volumes. On March 24, 2026, NSE's platform processed 21.89 billion peak order messages in a day, when 201.00 million trades were executed. On June 4, 2024, the platform processed 293.85 million peak trades in a single day.

Technology platform built for scale and resilience

NSE said its technology infrastructure has been designed around scale, resilience and security.

The exchange has been designated as a critical information infrastructure by the National Critical Information Infrastructure Protection Centre. It said it has built an infrastructure focused on continuous technology upgrades and security enhancements.

Its systems use a combination of fault-tolerant servers with built-in redundancy and commodity servers. Critical telecom links are maintained at a 4:1 ratio to ensure persistent connectivity.

Profitability and cash generation

NSE has highlighted its combination of scale, growth, profitability and sustained cash generation.

Total income rose to Rs 187,133.70 million in FY26 from Rs 163,520.62 million in FY24. For Q1FY27, total income stood at Rs 52,521.74 million, compared with Rs 47,984.50 million in Q1FY26.

According to the RHP, NSE had one of the lowest non-volume-linked expenses, the highest adjusted operating EBITDA margin and one of the highest profit-after-tax margins among leading listed stock exchange groups globally in FY26.

Experienced management and corporate governance

NSE said its management team has significant experience across the securities industry, client service, regulatory supervision and technology.

The exchange described its management team as dedicated and experienced, with expertise spanning the securities industry, client service, regulatory supervision and the technology sector.

Key risks flagged in the RHP

Dependence on trading volumes

A significant decline in the volume or value of transactions executed on its platform could pose a risk to NSE, the exchange said.

NSE generates revenue from trades executed on its platform, listing fees from listed entities and ancillary services such as data feeds and terminal services, data-centre-related services and licensing.

Transaction charges are principally driven by trading volumes across the cash market, futures, options, mutual funds platform, commodity derivatives, currency derivatives, wholesale debt market and interest-rate futures.

According to the RHP, revenue from transaction charges declined 4.24% in FY26, primarily due to a decrease in average daily traded value across the cash market, equity futures and equity options products.

Revenue from transaction charges from futures declined 14.31% in FY26 from FY25.

Macroeconomic and regulatory risks

NSE said adverse macroeconomic developments in India and globally could weigh on investor confidence and participation in the country's securities markets.

The RHP identifies risks including slower GDP growth, rising inflation, higher interest rates, currency depreciation and a downgrade in India's sovereign credit rating. Global recessionary conditions, supply-chain disruptions, commodity-price fluctuations and geopolitical tensions could also affect capital flows, it said.

NSE pointed to regulatory measures introduced by SEBI in October 2024 and May 2025 covering the equity index derivatives framework. These included mandatory upfront collection of option premiums, higher minimum contract sizes, restrictions on permissible weekly expiries and enhanced risk-monitoring requirements.

The exchange also noted that securities transaction tax rates were increased from April 1, 2026. The rate on the sale of futures in securities rose from 0.02% to 0.05% of contract value, while the rate on the sale of options in securities increased from 0.10% to 0.15% of premium value.

Concentration among top trading members

NSE has flagged its dependence on a relatively concentrated group of trading members.

The exchange derived 47%, 45.60%, 46.78%, 44.48% and 45.26% of revenue from operations from its top 10 trading members in Q1FY27, Q1FY26, FY26, FY25 and FY24, respectively.

The loss of, reduced activity by or financial distress at one or more key trading members could reduce trading volumes and hurt revenue, NSE said. Migration of such members to competing exchanges or alternative trading venues could further amplify the risk.

Regulatory scrutiny and enforcement actions

NSE operates in a highly regulated industry, primarily overseen by SEBI, and is also subject to oversight by the Reserve Bank of India, IFSCA and other statutory authorities. The RHP states that NSE itself was not subject to enforcement actions pursuant to SEBI inspections during Q1FY27 and the last three FYs.

However, SEBI initiated enforcement actions against two of its subsidiaries during Q1FY27 and the last three FYs.

Technology and operational disruption

Software malfunctions, connectivity failures, order-matching errors, cyberattacks, phishing, distributed denial-of-service attacks, human error, insufficient capacity, natural disasters, power outages, telecommunications disruptions and problems involving third-party service providers could disrupt operations, NSE said.

The exchange cited a disruption on February 24, 2021, when issues with links to telecom service providers affected its Storage Area Network system.

While the trading system itself was not impacted, the outage of risk, clearing and settlement systems at NSE Clearing, along with index and surveillance systems, resulted in a complete halt in all trading segments for nearly five hours and 24 minutes.

Dependence on new listings and capital formation

NSE has also identified its ability to attract new listings and capital-raising activity as a risk.

The exchange earns listing-related revenue through listing fees, processing fees and book-building fees. According to the RHP, these revenues are influenced by total fund mobilisation, the market capitalisation of listed entities and the number of IPOs.

The number of IPOs on NSE declined to 219 in FY26 from 242 in FY25. Listing-services revenue, however, increased 12.30% to Rs 3,524.36 million in FY26 from Rs 3,138.21 million in FY25.

For Q1FY27, listing-services revenue increased 0.92% to Rs 783.59 million from Rs 776.42 million in Q1FY26.

NSE said a sustained decline in listings could eventually reduce the growth of securities available for trading on its platform, constrain secondary-market activity and adversely affect trading revenue.

This article has been written by Kumar Gaurav, who is not a SEBI-registered Research Analyst or an Investment Adviser. Gaurav and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.

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