The National Stock Exchange of India Ltd (NSE) is set to significantly accelerate its share transfer process, reducing it from months to just a few days. This move comes as the exchange prepares for a potential initial public offering (IPO).
Starting March 24, NSE Ltd shareholders will be able to transfer shares in a shorter time, eliminating the existing delay of 2-4 months. The development is in line with a directive from the Securities and Exchange Board of India (SEBI) issued on October 14. The directive mandated changes in share transfer rules for market infrastructure institutions. Though initially set for a January implementation, the reforms were delayed till March.
In comparison with other unlisted entities that do not face similar restrictions, NSE shares are currently less liquid.
Simplified Transfer Mechanism
In a communication to shareholders on Friday, NSE confirmed that transfers would no longer require the existing two-stage approval system.
“In view of the SEBI circular dated October 14, 2024, the ISIN (International Securities Identification Number) of the National Stock Exchange of India Limited (NSE) will be activated/unfreezed w.e.f. Monday, March 24, 2025. Accordingly, from Monday, the shares of NSE can be transferred through the DIS (delivery instruction slip) mechanism without following the existing stage 1/stage 2 process," NSE said.
With the streamlined process, transaction costs are expected to reduce in the NSE unlisted market for shares. Previously, the two-stage process involved obtaining a no-objection certificate from NSE, which required multiple documents and a fee of Rs 5 lakh plus service tax. A SEBI registration application was then submitted for approval. Investors are expected to benefit from the elimination of these steps, particularly smaller participants who had previously been discouraged by the high costs and complicated procedures.
Central Depository Services Ltd has been appointed as NSE Ltd’s designated depository participant. As per the new system, a seller will notify their depository participant (DP), who will then ensure compliance with SEBI's rules before facilitating the transfer.
NSE's largest shareholders include Life Insurance Corporation of India (10.72 per cent), Aranda Investments (5 per cent), Stock Holding Corporation of India (4.44 per cent), and SBI Capital Markets (4.33 per cent). The exchange has a total of 20,444 shareholders.
As of January 31, NSE held a 94.2 per cent three-month rolling share in cash segment equities and 85.1 per cent in equity options. The latest move to simplify share transfers is expected to enhance market participation and improve the exchange’s attractiveness ahead of its much-anticipated public listing.
