Self-Listing Buzz: SEBI's Conflict Concern Or Conservative Regulatory Model?

The debate over whether Indian stock exchanges should be allowed to list their own shares is back in focus, just days after the National Stock Exchange (NSE) made its market debut on rival BSE.

Markets regulator SEBI is likely to form a committee to examine regulations governing self-listing by exchanges, CNBC-TV18 reported on September 28. The rules, if changed, could also apply to exchanges that are already listed, the report said. The review is expected to look at issues including conflict of interest and governance, while the first level of oversight could remain with the primary exchange.

The timing is significant. NSE Chairman Srinivas Injeti said on September 25 that SEBI should reconsider allowing exchanges to list on their own platforms, a day after NSE's shares debuted on BSE at a valuation of about $47 billion.

NSE Managing Director and CEO Ashish Chauhan, meanwhile, clarified last week that the exchange would not seek SEBI approval to trade its shares on its own platform. That means NSE is set to remain listed only on BSE under the existing framework.

The renewed discussion therefore goes beyond NSE's listing. At its core is a regulatory question: can an exchange simultaneously act as the operator of a market, the regulator of trading activity on that market and a listed company whose own shares trade there?

The Current Self-listing Buzz

India's regulatory framework currently draws a clear line between an exchange becoming a listed company and an exchange listing itself.

NSE's IPO is a case in point. The exchange can become publicly listed, but its shares have to be listed on another recognised stock exchange. NSE's listing on BSE creates institutional separation between the exchange operating the market and the platform on which its own shares are traded.

That distinction has become more visible following NSE's debut. With NSE accounting for about 93% of India's cash-market trading and nearly 75% of options, the governance implications of any change to its listing framework would extend beyond a conventional corporate listing.

“NSE trades on BSE. Nasdaq trades on Nasdaq. HKEX trades on HKEX,” said Abhisek Banerjee of IQRA Analytics.

“With NSE now listed, its Chairman has asked SEBI to revisit the self-listing ban, and SEBI is reportedly forming a panel to look at it.”

Banerjee said the central concern is straightforward: exchanges regulate their own markets. A self-listed exchange could potentially monitor its own stock, enforce rules affecting itself and make decisions concerning its inclusion in its own indices.

That is the conflict that India's framework has historically sought to avoid through institutional separation.

The Listing Rules

SEBI's framework for market infrastructure institutions (MIIs) dates back to 2012. At its April 2, 2012 Board meeting, the regulator said stock exchanges could be permitted to list, provided they put in place appropriate mechanisms to tackle conflicts of interest.

But there was one explicit restriction: stock exchanges would not be allowed to list on themselves.

The provision was subsequently incorporated into the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012. Regulation 45 provided that a recognised stock exchange could apply to list its securities on another recognised stock exchange, subject to SEBI's conditions and approval, but not on itself or its associated exchange.

The same principle continues under Regulation 45(1) of the SEBI Stock Exchanges and Clearing Corporations Regulations, 2018.

In practical terms, this creates three separate situations. A stock exchange becoming a listed entity is permitted. A stock exchange listing its shares on another recognised exchange is also permitted, subject to regulatory requirements. But an exchange listing its own shares on its own platform remains prohibited.

That framework explains NSE's current structure: BSE provides the listing platform, NSE operates its own exchange, and SEBI retains statutory regulatory and supervisory authority.

The arrangement is designed to reduce the possibility that an exchange could control the marketplace where its own securities are traded.

SEBI Has Considered Self-Listing Before

The issue is not new. SEBI revisited the question in 2015 after receiving representations seeking permission for stock exchanges to list.

The regulator considered safeguards around shareholding, fit-and-proper criteria and conflicts of interest. However, the restriction on self-listing remained in place.

SEBI also examined how other jurisdictions approached the issue. A SEBI committee noted that exchanges in some countries were permitted to list their own shares, but highlighted that the market structures in those jurisdictions were different from India's.

The underlying concern is linked to the unusual nature of an exchange itself. It is not simply a commercial company. A stock exchange makes and enforces trading rules, monitors market activity and operates the infrastructure through which securities are traded.

If its own shares are traded on that platform, the exchange could potentially find itself dealing with decisions concerning its own stock while simultaneously being responsible for overseeing the market.

The Exchange Listing Control Mechanism introduced by SEBI in 2017 was another attempt to address the conflicts that can arise when one stock exchange is listed on another. The mechanism provides for monitoring of the listed exchange by the listing exchange, along with independent oversight and a Conflict Resolution Committee to deal with potential conflicts between the two exchanges.

The debate, therefore, is not simply about whether exchanges should be allowed to access their own markets. It is about who should supervise an exchange when its commercial interests and regulatory responsibilities overlap.

Self-listing In Global Markets

India's approach is more restrictive than that of several major global markets, where exchange groups have their own shares traded on markets they operate.

Nasdaq Inc, which operates the Nasdaq Stock Market, is itself listed on Nasdaq. Hong Kong Exchanges and Clearing (HKEX) is listed on the Hong Kong Stock Exchange, which is operated by its wholly owned subsidiary, The Stock Exchange of Hong Kong.

London Stock Exchange Group is listed on the London Stock Exchange, while Euronext N.V. is listed on Euronext's own markets in Amsterdam, Brussels, Lisbon and Paris. Singapore Exchange is also listed on its own market.

The United States provides another prominent example. The parent of the New York Stock Exchange, Intercontinental Exchange, is itself listed and traded on the NYSE.

But self-listing in these markets does not necessarily mean the absence of safeguards. Different jurisdictions use mechanisms such as independent committees, regulatory oversight, disclosure requirements and external intervention to manage potential conflicts.

The Australian Securities Exchange is another example. ASX has arrangements with the Australian Securities and Investments Commission (ASIC) to address the conflict between its role as a listed company and market operator. ASIC has powers relating to matters including the exchange's admission to, or removal from, the official list and the quotation, suspension or stopping of trading in its securities.

Singapore and Hong Kong have similarly put in place committees and other safeguards around conflicts involving their exchanges' commercial and regulatory roles.

For India, this raises a broader question: is the prohibition on self-listing itself the necessary safeguard, or could stronger independent oversight allow the model to work?

Why It Matters To NSE

For NSE, the issue is not simply about where its shares are traded. Self-listing could potentially affect trading liquidity, index inclusion and derivatives activity involving the exchange's own shares.

Banerjee said the direct revenue benefit for NSE from trading its own shares would be relatively limited. Even at a daily turnover of ₹1,500-2,000 crore in NSE shares, he estimated that cash-market transaction fees could amount to roughly ₹20-30 crore a year, or less than 0.2% of NSE's FY26 operating revenue of ₹16,601 crore.

“The real value is strategic,” Banerjee said.

At a market capitalisation of about ₹4.5 lakh crore, he said, a self-listed NSE could qualify for the Nifty 50 and potentially for single-stock futures and options on its own platform. That could create additional liquidity and passive flows into the stock.

For BSE, meanwhile, NSE's debut highlighted the commercial significance of hosting its rival's shares. Banerjee said NSE's debut generated about ₹9,500 crore of turnover on BSE, nearly half of BSE's cash-market volume that day.

The issue therefore has implications for both exchanges as well as investors.

But the governance question remains more fundamental than the potential commercial gains.

“Self-listing could be an important development for Indian investors, giving them direct exposure to the economics of market infrastructure and greater transparency through public disclosures,” said Abhishek Bhatt, Founder of SimplyAB.

“But the bigger question, in my view, is governance.”

Bhatt said an exchange would effectively become both the referee and a listed player, creating potential conflicts around surveillance, compliance, disclosure, enforcement and access to sensitive market information.

“The risk is manageable, but only if the regulatory framework is designed upfront,” he said, adding that SEBI should retain independent oversight while surveillance and compliance relating to the exchange's own shares could be ring-fenced.

Bhatt suggested independent committees, strict conflict-of-interest protocols, enhanced disclosures and periodic external reviews as possible safeguards. The objective, he said, should be to allow investors to benefit from self-listing without creating doubts over whether the exchange could give itself an advantage.

That is also where the debate over India's regulatory model becomes more nuanced. Global exchanges demonstrate that self-listing can coexist with market operation, but those models depend on the institutional safeguards surrounding them.

For India, the question is therefore not simply whether NSE or another exchange should be allowed to list on its own platform. It is whether independent oversight can be strong enough to separate the exchange's role as a market operator from its interests as a listed company.

As Banerjee put it, “Self-listing isn't the reform. Independent oversight is.”

If SEBI's reported committee does take up the issue, the eventual debate is likely to centre on precisely that balance - whether India's existing separation-based model should remain, or whether a ring-fenced governance framework could bring Indian exchanges closer to global practices without compromising market integrity.