NSE Moves To Electronic System For Settling Unlisted Shares, Here's What It Means

This shift replaced the traditional manual process, with Central Depository Services India Ltd (CDSL) facilitating transactions. The exchange announced the change on Friday.

Unlisted shares refer to privately held shares of companies that are not available for trading on public stock exchanges.

Source : Wikipedia

The National Stock Exchange of India (NSE) transitioned to an electronic system for settling trades of its unlisted shares starting Monday. This shift replaced the traditional manual process, with Central Depository Services India Ltd (CDSL) facilitating transactions. The exchange announced the change on Friday.

Despite the adoption of an electronic settlement system, NSE clarified that its shares would remain unlisted and would not be publicly traded, reported Business Standard.

The move aimed to ensure compliance of off-market transfers with the Securities and Exchange Board of India’s (Sebi) Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (SECC Regulations).

Unlisted shares refer to privately held shares of companies that are not available for trading on public stock exchanges. These may include shares of startups, early-stage firms, large yet unlisted corporations like NSE, and companies that have been delisted.

Advantages of Electronic Transfers

The electronic settlement system was designed to significantly speed up trade settlements, reducing processing times from several months to just a few days. Previously, transactions required approvals from both NSE and SEBI, causing delays of up to four or five months.

The change is expected to boost activity in the grey market, where NSE’s unlisted shares have already attracted strong demand. Interest in these shares surged, particularly after BSE Ltd recorded an almost 5,000 per cent increase over the past five years, according to Bloomberg.

New Process for Share Transfers

Shareholders can now use a delivery instruction slip (DIS) via CDSL to transfer their unlisted NSE shares. With the activation of NSE’s international securities identification number (ISIN) from March 24, electronic transfers became possible, eliminating the need for the previously required two-stage manual process.

NSE confirmed that the earlier Stage I and Stage II share transfer application process had been discontinued, streamlining the overall procedure.

Regulatory Push and IPO Prospects

The introduction of electronic settlement followed a directive issued by the market regulator last year, advocating for a more structured framework for unlisted share transactions. While NSE has been considering an IPO since its initial filing in 2016, regulatory challenges have stalled the process.

However, a recent Sebi ruling cleared the exchange of any misconduct in a long-standing case involving unfair market access, removing a significant barrier to its potential listing.