The National Stock Exchange (NSE) has raised concerns about potential impacts on its business from regulatory changes, technology failures, cybersecurity threats, and risks related to artificial intelligence (AI) as it progresses with its initial public offering (IPO). In its draft red herring prospectus (DRHP) submitted to the Securities and Exchange Board of India (SEBI), NSE emphasized its reliance on trading revenues, particularly from the derivatives segment.
Transaction charges constituted a significant portion of NSE’s operating revenue in FY26, with options trading alone contributing a substantial percentage to total revenue. The exchange highlighted that recent regulatory measures by SEBI aimed at strengthening the equity derivatives framework have led to a decrease in trading activity across cash and derivatives segments, resulting in lower trading revenues.
NSE cautioned that further regulatory changes, transaction tax hikes, shifts in investor behavior, or a move towards alternative asset classes could negatively impact trading volumes and profitability. The stock exchange also noted the rigorous regulatory oversight it operates under, including continuous inspections, examinations, and enforcement actions by SEBI.
The exchange disclosed in the DRHP that it has faced substantial settlement costs in recent years, including payments related to proceedings concerning its Trading Access Point (TAP) architecture and network connectivity. Additionally, NSE mentioned unresolved legal and regulatory matters, such as those linked to co-location and dark fiber cases, which could have reputational and financial implications for the exchange.
Technology failures and cyberattacks were identified as major operational risks due to the fully electronic nature of stock market operations. NSE acknowledged past technology-related incidents and flagged risks associated with AI-powered cyber threats, deepfake-based impersonation, data leaks through AI tools, and vulnerabilities introduced by AI-assisted software development. The exchange also highlighted concentration risks among its top 10 trading members, emphasizing the potential vulnerability of its earnings to disruptions or declines in activity among these key participants.
