Striking Reasons NSE's Business Model Is Excellent

With a standalone net profit accounting of Rs. 1,810 crore and a net YOY growth of 19%, the National Stock Exchange has been earning good returns in the March quarter of the financial year 2023. A 32% growth in YOY in operating income and the company's net profit margins were maintained at 51%. These financial reports of the stock exchange put up a good show concerning the revenue and the profit figures by the end of the financial year.

The future projections predict a relatively prosperous future for the exchange. How does the stock exchange earn and make money to bag such massive profits? What mechanism does the exchange board use to stay ahead of its game? Before diving into the answers pertaining to the revenue and business model of the National Stock Exchange, it is necessary to know about the organisation briefly.

An Introduction To The National Stock Exchange

Incorporated in 1992, the organization was recognized as an exchange board by SEBI in 1993. This leading stock exchange is one of India's most recognized and trusted market infrastructure institutions that holds international importance. The National Stock Exchange offers a secure and standardized platform for investors to buy and sell stocks regulated by the central authorities. The National Stock Exchange functions to provide investors with a safe haven to earn returns and bring about changes in India's capital markets.

Money Making Mechanism NSE Debunked

Let's cut to the chase and decode the business model on which the National Stock Exchange functions and how it makes money. NSE offers various services to investors like trading, clearing and settlement, indices, exchange listing, financial education and other offerings.

1. Transaction and Trading Charges

The largest share of NSE’s revenue is generated through charges applied on trades executed across the exchange.

Whenever the investor exchanges/trades a commodity via the exchange board, there is an "exchange transaction" that is supposed to be paid. These fees aim to eliminate/minimize the risks associated while undergoing a transaction. NSE charges 0.00335% (on turnover), 0.00195% for futures (on turnover), and 0.053% for options (on premium value).

With the Indian market witnessing high derivative volumes and increasing retail participation, transaction-based revenue continues to scale rapidly and remains the strongest contributor.

2. Clearing and Settlement Services

Clearing operations ensure smooth completion of trades through risk and collateral management. As trading volumes expand, clearing revenue increases proportionately.

3. Listing Fees

Companies looking to raise public capital list on the exchange and pay listing fees. Annual listing charges provide steady recurring income and grow along with the rise of IPO activity.

According to the official website of the exchange board, the listing fees applicable from April 1, 2012, are:

4. Data Services and Index Licensing

NSE licenses benchmark indices and market data to institutions, fintech, traders and analytics platforms. With algorithmic and automated trading rising, data monetization has become a major growth opportunity.

5. Technology and Infrastructure Services

Co-location hosting, advanced API connectivity and high-speed server access generate recurring infrastructure-based revenue, widely used by institutional traders.

6. Investment and Treasury Returns

Returns from surplus funds and investments act as a stabilizer when market activity slows.

Revenue contribution by segment 

The National Stock Exchange also makes money by providing data to analyst firms for further analysis. The company uses various educational programs and other certification courses to generate a part of the revenue.

Generating Funds Via Unlisted Shares

Underrated, yet an essential source of funds for the National Stock Exchange comes from the unlisted market. The National Stock Exchange unlisted share has been a good source for the company to add up to the profit and growth margin of the exchange board. The NSE share price today is Rs. 3499 per share of equity, giving the investors an excellent margin to earn, and a fair share of profits are earned by the exchange as well.

You can buy unlisted shares to generate significant ROI only if you invest in the right shares via buy and sell unlisted shares platform

This is how the National Stock Exchange makes money and stays ahead of its competitors, generating good returns and maintaining significant profit figures with each passing year. A few points add up to this business model of the exchange board, making the exchange board ahead in the race.

What Makes NSE's Business Model Ahead In The League

There is no need for huge capital investment in the stock exchange's business model except for timely technology upgrades and including new indices and companies. The low capital utilisations ensure that more profits are accumulated.

The efficient utilisation of the "network effect" makes NSE profitable. As the volume of buyers and sellers increases, the overall profits and revenue figures boost automatically.

This is a sticky business, i.e. once the customer enters, the chances of retention are higher, which can make the stock exchange profitable in the long run. A lower transaction cost leads to higher liquidity, which leads the investor to stay in the trading game for longer.

This is what makes the NSE's business model distinct and a notch higher than the rest. The stock exchange not only helps in making the investors earn better profits, but it functions in a way to make trading a profitable business for itself.

Frequently Asked Questions:

Q1. How does NSE make money?

NSE uses different methods to make profits. A few of them are

• Transaction Charges

• Listing Fees

• Selling Data To Analysts

• Clearing Charges

• Other Income Sources

Q2. Can I invest in NSE unlisted shares?

Anyone can invest in NSE unlisted shares by using online trading platforms like Stockify. You can access a variety of shares from different industries on Stockify.

Q3. Is the NSE IPO released?

The National Stock Exchange is in the process of making it public, but there is no specific information regarding the date of the IPO release. For more updates, you can visit Stockify.

Q4. How can I buy NSE unlisted shares?

Select the share you want to buy, select the payment option, fill in your details, and the unlisted share will be transferred to the account.

Q5. What is the NSE share price today?

The current NSE stock price is Rs. 3499 per share. For recent updates, you can visit Stockify.