Mumbai: The National Stock Exchange (NSE) has cautioned investors that regulatory changes, technology failures, cybersecurity threats and emerging risks associated with artificial intelligence (AI) could materially impact its business operations and financial performance, as the stock exchange moves ahead with its long-awaited initial public offering (IPO).
In its draft red herring prospectus (DRHP) filed with the Securities and Exchange Board of India (SEBI), NSE highlighted its significant dependence on trading revenues, particularly from the derivatives segment.
The exchange said transaction charges accounted for 78.65 per cent of its operating revenue in FY26, with options trading alone contributing 60.22 per cent of total revenue from operations.
The exchange noted that recent regulatory measures introduced by SEBI to strengthen the equity derivatives framework have already resulted in moderation in trading activity across both cash and derivatives segments.
This, in turn, led to lower trading revenues during FY26. NSE warned that any further regulatory tightening, increase in transaction taxes, changes in investor behaviour or a shift toward alternative asset classes could adversely affect trading volumes and profitability.
The stock exchange also underscored the extensive regulatory oversight under which it operates.
It disclosed that it remains subject to continuous inspections, examinations and enforcement actions by SEBI and has received show-cause notices, warning letters, deficiency letters and advisory communications related to governance, operational, technology and compliance matters.
NSE revealed that it has incurred substantial settlement costs in recent years. In October 2024, the exchange paid more than Rs 643 crore in connection with proceedings related to its Trading Access Point (TAP) architecture and network connectivity.
It also paid Rs 40.35 crore in July 2025 under a settlement order linked to regulatory inspection findings.
The exchange further stated that several legal and regulatory proceedings remain unresolved, including matters related to the co-location and dark fibre cases.
According to the DRHP, these proceedings could continue to have reputational and financial implications for the bourse.
Given the fully electronic nature of stock market operations, NSE identified technology failures and cyberattacks as major operational risks.
The exchange acknowledged experiencing multiple technology-related incidents in recent years, including website outages, market data dissemination issues, login disruptions and errors involving derivatives-related information.
Additionally, the bourse flagged risks associated with AI-powered cyberattacks, deepfake-based impersonation, data leaks through third-party AI tools and vulnerabilities introduced by AI-assisted software development.
NSE also highlighted concentration risks among its trading members. The exchange said its top 10 trading members accounted for 46.78 per cent of operating revenue in FY26, making its earnings vulnerable to any disruption or decline in activity among these key participants.
(IANS)
