Ravi Narain steps down as NSE vice chairman even as SEBI probe continues

Ravi Narain, vice chairman of the National Stock Exchange (NSE) has stepped down from the board of the company. According to sources, Narain resigned because he doesn’t want to be a hindrance in a Sebi investigation that is affecting the reputation of the exchange. The exchange has been charged of favouring certain brokers by giving them co-location facility for hi-frequency trading that allowed them faster access to prices much before the rest of the market players.

Narain’s resignation has come six months after Chitra Ramkrishna, unexpectedly quit as the managing director and CEO of the exchange in December 2016 after a 24 year career at the exchange. Narain is the ex-CEO and founding member of NSE. The investigation wants to look deeper into his role and he felt that it is best to step down so that SEBI is able to look at the case in a fair manner.  

The NSE plans a listing of its shares this year. Industry experts feel that the co-location case might affect or delay the listing process.  While the case has affected the reputation of the exchange, the stock exchange has not lost any market share. It still holds almost 100 percent market share in the derivatives business and an 85 percent market share in the cash segment.

Experts who understand the stock exchange business say that exchanges are sticky businesses and once they get the customer share, they are able to retain their market share without any new investment. NSE is one of the most profitable stock exchanges in the world. The NSE has maintained a high return on equity of around 15 percent for many years.

Ravi Narain, 62, is the man who built the business model and made NSE into a leading stock exchange of India. He is an economist from Cambridge and has completed his MBA from Wharton. Narain was pursuing a career as a policy consultant in the US before deciding to return to India in 1981. He applied to many public sector bodies and got picked up by Industrial Development Bank of India (IDBI). More than a decade later, he joined the team of legendary financial sector maven, R.H. Patil, to set up NSE. Narain succeeded Patil as NSE’s MD & CEO.