The National Stock Exchange (NSE) has significantly expanded its “permitted to trade” universe this year, adding 250 securities to a segment that had seen little activity in recent years. The expansion comes at a time when NSE is moving closer to its long-awaited listing and considering whether its own shares could eventually trade on its platform.
NSE added 106 securities with effect from April 20 and another 144 from August 17. The last addition to the category was in 2022. BSE currently has 30 companies under its permitted-to-trade (PTT) category.
Trading frenzy
The first batch has already seen a sharp increase in trading activity, with average daily turnover rising from about ₹92 crore on the BSE to around ₹400 crore across the NSE and BSE after the securities became available for trading on both exchanges.
The jump in volumes shows the potential liquidity benefit of allowing a security listed on one exchange to trade on another. Under NSE’s PTT framework, securities can trade on NSE without being formally listed there, while their primary listing and existing compliance obligations remain with the original exchange.
The framework, however, is not directly applicable to a stock exchange seeking to trade its own shares. NSE has approached the markets regulator on whether its shares could be admitted for trading on NSE under the PTT route after being formally listed on the BSE.
Two weeks ago, SEBI Chairman said the regulator was yet to decide on the matter and that it would require a detailed assessment and could take time. Last Friday, SEBI gave NSE final approval to proceed with its listing, which is expected by September 25.
Eligibility criteria
While PTT allows securities to trade on NSE without listing, companies need to meet NSE’s eligibility criteria for a direct listing. Of the 250 securities added, only 25 appear to meet the exchange’s existing direct-listing criteria.
Around 110 companies do not meet the ₹10-crore paid-up capital requirement, while 234 do not meet the revenue criterion and 47 do not meet the positive-EBITDA criterion. On market capitalisation, 214 companies were found ineligible.
Meanwhile, the trading activity of the scrip is subject to all surveillance measures like any other listed scrips. As many as 127 of the 250 securities have been subject to measures such as the Additional Surveillance Measure (ASM) or Graded Surveillance Measure (GSM).
The expansion of the PTT universe and the liquidity it has generated come at a time when NSE is seeking permission to trade its own shares on the platform, potentially strengthening the case for the proposed arrangement.