NSE’s Self-Trading Plan May Hit BSE: Will It Deliver Volume?

• Listing NSE shares on the BSE was expected to bring a huge volume surge.
• The latest report is that NSE may use the PTT mechanism to trade its own shares.
• The PTT mechanism lets securities trade on an exchange without formal listing.

The National Stock Exchange’s (NSE) upcoming IPO is one of the most closely watched events in India’s market sector. NSE has been preparing for a listing that could be worth around ₹1.5-1.8 lakh crore (roughly $15.67 billion to $18.81 billion), expected to move forward after SEBI (Securities and Exchange Board of India) gives the green light.

It was anticipated that NSE shares would be listed on BSE (Bombay Stock Exchange), bringing a big new wave of trading to it. However, the latest report that NSE might use the PTT (Permitted to Trade) mechanism to trade its shares on its own platform changes the picture entirely.

Why BSE Shares Reacted

The reason the above matters is because BSE investors have already been counting on at least some upside from NSE’s IPO.

If NSE shares end up being traded mostly or partly on NSE itself, some of the extra trading volume that investors thought would go to BSE might never leave NSE’s ecosystem.

This doesn’t mean BSE is about to lose its existing business, but it does mean the extra upside from the IPO has the potential to be smaller than investors originally thought.

How NSE Could Capture Trading Activity On Its Own Platform

The PTT mechanism is notable because it lets securities trade on an exchange without necessarily being formally listed there. Additionally, the NSE’s existing PTT framework doesn’t require a separate listing agreement or additional listing fees, although trading remains subject to surveillance and regulatory requirements.

In that case, NSE could list its shares on BSE while still allowing them to trade on its own platform through PTT. This would create an unusual setup, where NSE would be listed on BSE but may end up competing with BSE for trades in its own shares. However, this all depends on SEBI’s approval, so investors shouldn’t treat the PTT option as a done deal just yet.

Related: SEBI Digital KYC for NRIs: Could Easier Access Bring More Foreign Money Into India?

What Indian Investors Should Watch Before NSE’s IPO?

For starters, Indian investors should pay attention to SEBI’s approval, because the PTT plan doesn’t mean anything until regulators sign it off. Additionally, investors should keep an eye out on how NSE’s IPO is ultimately structured and priced, since it will give the first real market valuation of India’s top exchange.

Following that, BSE’s valuation is another important element. Analysts have already pointed out that BSE’s strong rally may have already factored in some of the benefit it could get from NSE’s IPO.

Lastly, the actual trading volumes following NSE’s listing matter more than the headline size of the IPO itself. In case the NSE shares get heavy action on BSE, the original thesis for BSE still holds up. Yet, if most trading stays on NSE through PTT, a lot of that expected upside might vanish.

Related: SEBI Warns Against Live Trading Tips: How Indian Investors Can Spot Risky Trading Advice