The Indian capital markets regulator has put on hold its earlier proposal to require structural independence of clearing corporations from stock exchanges, citing feasibility issues. However, chairman Tuhin Kanta Pandey said that regulatory clearance for the National Stock Exchange (NSE) public debut was not contingent upon meeting the proposed norms.

Addressing questions over past regulatory expectations regarding NSE’s IPO, Pandey pushed back against media interpretations that separating the clearing corporation into a distinct subsidiary was ever a formal condition. When asked if this requirement no longer applies to NSE, he said, “It was not a condition. You were not given to understand. It was your speculation.”

“There was a consultation paper which was trying to push the debate on whether this is possible. And you probably linked it—now this is a condition. It was a consultation paper,” he clarified.

Incidentally, the Securities and Exchange Board of India (Sebi) flagged potential conflicts of interest arising from the National Stock Exchange’s dominant ownership of its clearing arm, NSE Clearing Ltd (NCL), in a letter on 28 February.

Sebi had emphasised that “CCs need to be, and need to be seen to be, truly independent of exchanges, particularly in such interoperable segments, so that there is a level-playing field across market infrastructure institutions (MIIs) with no perception of any conflict of interest.”

Yet, it may be recalled that Pandey had linked this very issue to delays in NSE’s much-anticipated public listing. “Before it goes public, it (NSE) will need to be cleared from different angles, which we must carefully examine. Some issues have already been identified… and additionally, there is the clearing corporation issue,” he had said at the Mint India Investment Summit and Awards 2025 in Mumbai.

Separation not feasible

Speaking on the sidelines of the press conference on Wednesday, Pandey said that the proposed plan to separate clearing corporations from exchanges is no longer on the table. “But now, we don’t find it feasible or practicable to go ahead with any separation of the clearing corporation,” he said.

Instead, the regulatory and policy machinery is pivoting towards a more immediate issue: the bundling of charges that make it unclear how clearing corporations—key entities that handle trade settlement—are funded. “A working group is being created to look into this issue of unbundling of charges. But there is no structural change that we are looking at,” Pandey added.

Sebi proposed sweeping changes in a consultation paper in November 2024. The paper called for reducing exchange ownership in clearing corporations to below 15% in an effort to address potential conflicts of interest and improve governance. Currently, clearing corporations are majority-owned by exchanges, with regulations requiring that at least 51% of their paid-up equity be held by one or more exchanges.

However, those ideas now seem shelved. “It was basically a consultation paper. We have received comments, and we have also got data from around the world,” Pandey clarified, noting that models vary globally. “Many exchanges own the clearing corporation. The crux of the matter is that the clearing corporation should be independently funded either through clearing members or, if there is ownership of the exchanges, there should be a guarantee that that kind of money would always be flowing in order for the clearing to always be clear.”

Unbundling costs

The focus now is on unbundling transaction charges to bring greater transparency in how clearing corporations are funded.

To be clear, currently, charges are bundled, meaning the fees charged by exchanges include both trading and clearing without specifying how much goes to the clearing corporation.

Unbundling is not expected to impact transaction costs. Sebi whole-time member Ananth Narayan explained that charges are being taken at a bundled level at the exchange. “The charges which are being taken at the top level are perfectly enough to fund both or to keep both the clearing corporation and the exchange healthy.”

So, unbundling only determines how much belongs to which particular entity. Narayan added that it should not theoretically increase the cost at all.

The WTM emphasised that the unbundling process is now under expert review. “That is why we have got a bunch of experts, very respected experts, to go into this matter. They are completely objective. They are impartial. They will have a discussion with the relevant parties, including the exchanges and the clearing corporations,” he said, stating that the process may take a couple of months.