MCX Stock Exchange Limited (MCX-SX) has announced the launch of equity enhancement schemes, under which the exchange will pay participants for trading on its platform.
Under the new scheme, which will start from March 6, MCX-SX will pay participants for trading in both equity cash and derivative segments. Rivals of MCX-SX, the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) had launched incentive schemes on the derivative side. The Securities and Exchange Board of India (Sebi) had issued a circular allowing stock exchanges to introduce incentive schemes for brokers and intermediaries to enhance liquidity in illiquid securities in the equity cash segment just a day before MCX-SX began trading.
"Our scheme will ensure broad market participation and encourage volumes even from small towns and cities," said MCX-SX's managing director and chief executive officer Joseph Massey.
According to MCX-SX, all retail investors/clients would be entitled to Rs 100 a day for trading in equity cash and equity derivative for a month. The top 10 registered dealers from each region would receive a monthly incentive of Rs 1 lakh; the best performer would receive an additional Rs 1 lakh in each region. However, there is a rider that payments to retail investors every month be capped at Rs 50 lakh.
Further, the exchange said that market makers performing up to 90 per cent of their obligation during the month in 25 securities would be entitled to an additional incentive of Rs 21 lakh a month. In case of 40 securities, the member would be entitled to receive an additional incentive of Rs 50 lakh a month.
"All passive orders will entitle the member/investor to receive about 50 per cent of the transaction cost received by the exchange from the active order," it added. The schemes would offer incentives for contributing to liquidity in all equity and equity derivative instruments at MCX-SX with special focus on futures contracts of 50 securities as notified by the exchange.
"Market makers will be obliged to contribute to genuine participation and will be incentivised at a higher rate compared to other participants. Payments to members would be made on a fortnightly basis," said MCX-SX. Additionally, incentives would be provided for retail clients, dealers and proprietary traders to create a liquid order book based on genuine end-users' participation. These incentives are available for a period of four months, from March to June.
Lacklusture markets and higher statutory costs are keeping volumes low on both NSE and BSE.
Equity trading on MCX-SX began on a weak note after it started operations in the segment from February 11. The average daily trading volumes on MCX-SX stood at Rs 12 crore in the equity derivatives segment and Rs 33 lakh in the cash segment during the first week.