In Ashishkumar Chauhan, NSE Gets A Minesweeper To Clear Path To IPO

Ashishkumar Chauhan is not new to the National Stock Exchange of India; he was part of the core team that set up the exchange back in 1992-1993. Chauhan spent eight years at NSE before he left to join Reliance Industries Ltd.

Yet, Chauhan's return to NSE, at a time when the exchange's relationship with the regulator is seen to be at an all-time low, poses the biggest challenge for a veteran who was instrumental in setting up screen-based trading and launching the benchmark Nifty index.

To be clear, NSE in 2022 is not the same exchange that Chauhan had left in 2000 when it was in the hands of colleagues who today face regulatory and multi-agency probes.

In the second half of these two decades away from NSE, Chauhan has strategised and led a competitive battle against the dominance of the National Stock Exchange, as the CEO of the Bombay Stock Exchange. Despite that enhanced competition and even with all the regulatory troubles it has faced over the same years, NSE has been able to consolidate its market share in some key market segments and grew its revenue and profit three-fold in the five years that Vikram Limaye was CEO.

NSE's Tech Strengths And Weaknesses

A systemically important market infrastructure institution as the country's largest stock exchange, NSE has been able to consolidate its market share in equity capital markets, equity derivatives and currency derivatives. Soon, it will also transition the Nifty Futures traded on the Singapore Exchange to NSE IFSC Ltd., the international exchange platform set up at GIFT City in Gujarat. This would bring trading volumes—that were hitherto overseas—onshore to India, a move that Chauhan was a signatory to when NSE, BSE, and MSEI released a joint statement in February 2018 to end all licensing deals that involved sharing of product prices with overseas exchanges. The idea was to bring over volumes from Singapore and Dubai and is now a step away from reality.

The tech-savvy Chauhan will bring expertise that would be welcome in the process of upgrading NSE's technology platforms. While NSE has its own technology arm that handles core operations. Chauhan will need to ensure a reduction in the technical snags that the NSE has faced frequently in recent years. At BSE, Chauhan ran a low-latency network but that did not prevent NSE from consolidating its position in various segments. Now, NSE gets an insider who knows both exchanges inside-out.

Cleaning Up A Minefield

NSE's biggest challenge today is finding a resolution to the co-location and dark fibre probe. The multi-agency investigation has put NSE and its operations and, as a result, whoever has to run the institution in such times, in a constant state of flux.

Taking the top job just months after recent orders by SEBI against the exchange's past leaders, would require Chauhan to use all his expertise to untie the knots NSE finds itself in.

Chauhan's eventual success would also be gauged on whether he can successfully steer NSE to a long-awaited initial public offering and listing. Five years ago, when Chauhan had applied for the NSE top post, he was in the middle of taking Asia's oldest stock exchange, BSE, public. In comparison, NSE's IPO is not going to be an easy process, as SEBI's confidence in the institution will have to be restored in good measure, for the regulator to allow the IPO to proceed. That appears difficult with the investigations that are underway and in the immediate aftermath of SEBI's recent orders.

Chauhan has to mend NSE's image with the regulator and other authorities not just for its IPO, but also to let the exchange be allowed to introduce new cutting-edge products. Chauhan's team at BSE was credited for creating some of the most innovative products introduced at BSE like the BSE StAR MF platform.

In each of these aspects, Chauhan will need to deftly navigate the regulatory minefield that the exchange keeps getting caught in.