In its Draft Red Herring Prospectus (DRHP) filed on Wednesday for its proposed initial public offering (IPO), India’s largest stock exchange said transaction charges contributed 78.65% of its operating revenue in FY26, with options trading alone accounting for 60.22% of total revenue from operations.
The exchange noted that recent measures introduced by the Securities and Exchange Board of India (Sebi) to strengthen the equity derivatives framework have already moderated trading activity across both cash and derivatives segments, resulting in lower trading revenues during FY26.
NSE cautioned that any further regulatory tightening, increases in transaction taxes, shifts in investor behaviour, or migration toward alternative asset classes could adversely affect trading volumes, revenues and profitability.
Regulatory and legal risks
The exchange highlighted its continued exposure to regulatory oversight, inspections and enforcement actions by Sebi. According to the filing, NSE has received various show-cause notices, warning letters, deficiency letters and advisory communications related to operational, governance, technology and compliance matters.
NSE disclosed that it has incurred significant settlement costs in recent years, including a payment exceeding ₹643 crore in October 2024 related to proceedings concerning its Trading Access Point (TAP) architecture and network connectivity. It also paid ₹40.35 crore in July 2025 under a settlement order linked to regulatory inspection findings.
The exchange further stated that ongoing legal and regulatory proceedings, including those related to the co-location and dark fibre cases, remain unresolved and could have financial as well as reputational consequences.
Technology and cybersecurity concerns
Given the fully electronic nature of its operations, NSE identified technology failures and cybersecurity incidents as major operational risks.
The exchange said it has experienced several technology-related disruptions in recent years, including website outages, market data dissemination issues, login interruptions and errors in derivatives-related information systems.
NSE also recalled the February 2021 trading disruption, when technical issues impacted critical risk management, clearing, settlement and surveillance systems, leading to a market-wide trading halt across all segments for more than five hours.
On the cybersecurity front, the exchange revealed that its website was targeted by a high-volume distributed denial-of-service (DDoS) attack in May 2025, involving nearly 395 million hits within 11 minutes. While the attack did not materially affect operations, it slowed access to certain webpages.
AI emerges as a new risk area
NSE identified artificial intelligence and machine learning as emerging areas of operational and regulatory risk.
While AI is increasingly being deployed across surveillance, risk management, analytics and customer service functions, the exchange warned that flawed data sets or algorithms could generate inaccurate, biased or misleading outputs, potentially resulting in operational failures, financial losses or regulatory non-compliance.
The bourse also cautioned that the growing adoption of AI-driven and algorithmic trading strategies by market participants could amplify market volatility, contribute to sudden price dislocations and create new forms of market manipulation that may be difficult to detect.
According to the DRHP, AI-powered cyberattacks, deepfake-enabled impersonation, data leakage through third-party AI tools and vulnerabilities introduced through AI-assisted coding could create additional operational and cybersecurity challenges.
NSE further noted that evolving regulations governing AI may increase compliance obligations, with regulators potentially introducing stricter requirements around governance, transparency, explainability and auditability of AI systems used in financial markets.
Revenue concentration risk
The exchange also flagged concentration risks among its trading members. Its top 10 trading members accounted for 46.78% of operating revenue in FY26, according to the filing. Any disruption in their operations or reduction in trading activity could negatively affect exchange volumes and earnings.
IPO marks key milestone
On Wednesday, NSE filed preliminary papers with Sebi for its long-awaited IPO, estimated at around ₹30,000 crore. The offering is expected to become the largest public issue in the history of India’s capital markets.
The IPO will consist entirely of an Offer for Sale (OFS) of 14.89 crore shares, with existing shareholders collectively divesting nearly 6% of their stake in the exchange.
According to the DRHP, NSE has received Sebi’s no-objection certificate for listing its shares, subject to the completion of the listing process before January 30, 2027.
The filing represents a significant milestone for the exchange, whose listing ambitions had remained stalled for nearly a decade due to regulatory challenges, including the high-profile co-location controversy.
