Why National Stock Exchange chooses to self-list, not cross-list

Knowing these terms is essential now that NSE may be willing to cross-list if disclosures are sent to Sebi

Market regulator Securities and Exchange Board of India (Sebi) has told the National Stock Exchange of India (NSE) that the present regulations do not provide for self-listing of a stock exchange. NSE has been lobbying hard for self-listing for some time now. We take a look at some terms associated with the listing of exchanges and why NSE has been reluctant to cross-list its shares:

What is self-listing?

When a stock exchange self-lists, it means it has listed on its own exchange. For example, if NSE self-lists, its shares would be available for trading on NSE and not on any other stock exchange such as BSE or Metropolitan Stock Exchange.

According to experts, self-listing is an accepted practice in certain developed markets, where the conflict of interest is in check because of segregation of regulatory functions of the self-listed stock exchange.

Self-listed stock exchanges include the Australian Stock Exchange (ASX). To ensure the integrity of trading in its securities, the ASX entered into an MoU (memorandum of understanding) with the Australian regulator, where the latter monitors and supervises ASX's compliance as a listed entity and exercises all powers regarding the admission or removal of ASX from the official list, and the granting, stopping or suspending of the quotation of ASX's securities.

What is the problem with self-listing?

Exchanges have twin roles: Commercial and regulatory. The commercial function includes providing a platform for listing, trading, and providing other services. The regulatory role involves regulating the listed entities and brokers and other intermediaries. According to experts, Indian exchanges are not ready for self-listing because of non-segregation of regulatory functions from commercial operations and due to conflicts arising out of the rigorous supervision of listed companies by Indian exchanges. Besides, current norms do not allow for self-listing.

What is cross-listing?

Cross-listing is the listing of a company's shares on a different exchange, rather than on its primary and original stock exchange. In the case of an exchange, this could mean BSE would list on the NSE and vice-versa.

Why is NSE opposed to cross-listing?

NSE feels its own exchange would offer better liquidity for trading its shares compared to rival BSE. Cross-listing would also involve sharing all compliance-related information to BSE. NSE believes it would be more comfortable if regulated or supervised by a regulator rather than by another exchange.

Are there any circumstances under which NSE would be willing to cross-list?

NSE has said that it will consider the option of listing on BSE if all compulsory disclosures are directly sent to either Sebi or another regulator.

Can NSE opt for listing abroad?

In 2013, the government had allowed unlisted companies to directly list on stock exchanges abroad without prior or simultaneous listing on Indian exchanges. However, current norms for listing of exchanges do not talk about listing abroad.