Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

India's largest stock exchange is getting ready for a listing it has fought long and hard to avoid: its own.

While some long-time investors may be relieved to have an opportunity to exit, newer shareholders should be glad if the bourse uses the scrutiny of being a publicly held company to shed its outsize sense of exceptionalism. A descent into ordinariness would be quite welcome.

National Stock Exchange of India Ltd.'s $1.5 billion IPO will be the country's largest in more than six years. The share sale won't raise any new money, but it will give investors -- including Goldman Sachs Group Inc. and Singapore's Temasek Holdings Pte -- a chance to realize profits they've been forced to sit on for as long as a decade.

When investors pressured NSE for an out, it demurred by saying that listing on the rival Bombay Stock Exchange could compromise its competitive edge. But when the BSE filed its own draft prospectus -- suggesting the older bourse found it perfectly okay to list on NSE -- the business-confidentiality excuse lost all credibility. That was the second blow to NSE's notion of superiority.

Winner Takes All
India's National Stock Exchange trades 4 to 6 times as much equity as its older rival
Source: World Federation of Exchanges; BSE

The first came from the Bombay High Court last year. NSE had filed a defamation suit against Moneylife India, a personal-finance website, for publishing allegations the exchange's algorithmic trading system gave an unfair advantage to some brokers. The judge, however, chided the exchange for its "self-congratulatory assertions" of innocence, and fined it heavily. Later, a panel set up by the market regulator to look into whistleblower complaints found NSE's price dissemination engine to be indeed "prone to manipulation or market abuse."

The chain reaction that ensued is good news for investors. NSE was a huge success as a government-sponsored alternative to the gambling den that BSE was back in the early 1990s. But while the older exchange is today nowhere as successful as NSE, it's no longer a cooperative of the crooked. There's no reason the regulator should allow NSE to go on believing it's some kind of an appendage of the Indian state that deserves to be treated differently, and indeed deferentially.

That notion is changing, though. The board is looking to replace CEO Chitra Ramkrishna, who unexpectedly resigned earlier this month. While the executive search may delay the IPO, it's important to find somebody competent yet relatively unconnected from the exchange's history of success, which has become its own enemy.

As a publicly traded company, NSE is going to need better governance. That will be impossible to achieve until it loses its swagger.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Andy Mukherjee in Singapore at

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