The National Stock Exchange (NSE) is pressing ahead with a proposed ₹30,000 crore initial public offering — potentially the largest share sale in Indian history — but the path to listing is shadowed by a decade-long regulatory standoff and a sharp decline in derivatives revenue that has raised fresh investor concerns, according to a Value Research report.

The Co-location Controversy That Froze the IPO

NSE's listing ambitions were derailed by the co-location controversy spanning 2010 to 2014, in which certain brokers allegedly connected first to a backup server inside NSE's data centre, allowing them to receive market data milliseconds ahead of competitors. A forensic audit confirmed the pattern, prompting a Securities and Exchange Board of India (SEBI) investigation.

When NSE filed its draft prospectus in 2016, the regulatory case remained unresolved — enough to stall the listing entirely. The matter then wound through years of SEBI penalties, tribunal proceedings, and the Supreme Court. The exchange has now proposed a revised settlement of ₹1,491 crore with SEBI, which is reportedly nearing resolution.

How NSE Got Back on Track

The return of Ashish Chauhan as chief executive in 2022 proved pivotal. A member of NSE's founding team who later steered BSE's own listing in 2017, Chauhan is credited with restoring regulatory credibility and reviving the long-delayed IPO process.

During the decade NSE remained unlisted, its scale grew dramatically. Revenue expanded roughly nine times, and the income mix shifted decisively toward transaction charges — from 49.5% of total income in FY16 to 78.7% by FY26, driven almost entirely by the boom in derivatives, particularly options.

The Options Dependence Problem

Options trading now contributes roughly 60% of NSE's operating revenue, making it the exchange's single largest income driver. That concentration has drawn increasing regulatory attention. According to SEBI data, 91% of retail futures and options traders incurred net losses in FY25, collectively losing approximately ₹1.1 lakh crore.

In response, SEBI introduced a series of curbs from 2024 onwards: weekly expiry events across both exchanges were reduced from seven to one per exchange, with NSE's Nifty assigned a Tuesday expiry and BSE's Sensex a Thursday expiry. Contract sizes were also increased, and additional margins were imposed near expiry dates.

FY26: The First Full Year Under the New Rules

FY26 was the first complete financial year in which NSE operated under the revised regulatory framework — and the numbers reflected the strain. Revenue from operations declined approximately 3% year-on-year, while adjusted profit after tax fell 17% to ₹9,101 crore from ₹10,978 crore in FY25.

NSE's market share in equity options also contracted sharply, sliding from 97% in FY24 to 75% in FY26. The decline exposed the exchange's structural dependence on a single segment, with no other business large enough to absorb the shortfall. The remaining 21% of NSE's revenue comes from data feeds, listing fees, index licensing, and co-location charges — recurring, less volatile streams that continue to grow but cannot yet compensate for the options slowdown.

What Lies Ahead

The IPO's timing will hinge on the final resolution of the SEBI settlement and market conditions. Investors will be watching whether NSE can diversify its revenue base before listing, or whether the offering prices in the risk of continued regulatory tightening in derivatives. The exchange's long-awaited debut on its own boards remains one of the most closely tracked corporate events in Indian capital markets.