The National Stock Exchange (NSE) has taken a significant step in revitalizing trading activity by adding 250 new securities to its “permitted to trade” category this year. This move has already resulted in a four-fold increase in trading volumes for the first 106 securities admitted, raising the daily turnover significantly and aligning the NSE closer to its anticipated listing.
Expansion of the Permitted to Trade Universe
In a bid to enhance market liquidity, the NSE recently expanded its portfolio of securities that are “permitted to trade”, adding 250 new listings throughout the year. This inclusion is crucial as it comes after a prolonged period of stagnation in trading activity within this segment. The recent additions were implemented on April 20, when 106 new securities were introduced, and another 144 were added on August 17. In contrast, the Bombay Stock Exchange (BSE) currently has only 30 companies in its PTT category, highlighting the NSE’s aggressive strategy to attract trading activity.
Surge in Trading Activity
The first wave of these newly added securities has sparked a notable trading frenzy. Since their introduction, average daily turnover surged from approximately ₹92 crore on the BSE to around ₹400 crore when accounting for both exchanges. This substantial increase points to the potential benefits of dual trading, where a security can be available on multiple platforms, thereby enhancing its liquidity. Under NSE’s PTT framework, a security can be traded without conforming to the formal listing requirements specific to NSE, maintaining compliance with the exchange where it is principally listed.
NSE’s Listing Aspirations
While the expansion of the PTT list is underway, the NSE is also in conversations with the Securities and Exchange Board of India (SEBI) regarding the trading of its own shares on the platform post-listing on the BSE. The regulatory body has stated that a thorough assessment will be necessary before any decisions are made. As of last Friday, SEBI granted the NSE the final nod to proceed with its long-awaited listing, set to occur by September 25, further emphasizing the importance of these changes in India’s capital markets landscape.
What This Means
The addition of new securities to the PTT framework potentially transforms trading practices in India’s capital markets. By enabling takings from various exchanges, the liquidity generated can benefit not only investors but also contribute positively to market stability. The forthcoming NSE listing will likely enhance the credibility of the exchange, making it a more attractive option for both retail and institutional investors. However, while this growth trajectory is promising, investors must be cognizant of the stringent eligibility criteria that some securities must meet to transition from the PTT category to a full listing on the NSE.
Frequently Asked Questions
What is the “permitted to trade” concept?
The “permitted to trade” (PTT) concept allows securities to be traded on the NSE without being formally listed there, while retaining compliance obligations with their primary exchange.
What criteria must a security meet to be eligible for direct listing on the NSE?
A security must meet specific eligibility criteria, including paid-up capital requirements, revenue benchmarks, and positive EBITDA criteria to be eligible for direct listing on the NSE.
How has trading volume changed since the new PTT securities were added?
Average daily trading volume increased from roughly ₹92 crore on the BSE to around ₹400 crore across both the NSE and BSE following the addition of the new PTT securities.
When is the NSE expected to complete its listing?
The NSE’s listing is expected to be finalized by September 25, as per the latest approval granted by SEBI.
