The price war between stock exchanges has intensified, with the National Stock Exchange (NSE) introducing various measures for a class of members. This may effectively reduce the cost of exchange transaction fee for a few existing players to about zero.
To counter the aggressive membership drive of arch rival MCX-SX, the NSE has cut its deposit and net worth criteria by up to 50 per cent, under the new ‘Alpha’ category. Existing members who fit the bill can also convert to the Alpha category; their surplus deposits would be used to pay the exchange’s transaction and infrastructure charges for three years. The membership fee of Rs 5 lakh for Alpha members has also been waived by the exchange.
Under the Alpha category, the NSE would allow a broker to handle up to 50 client IDs. This would largely benefit companies that have direct memberships in exchanges for treasury operations, propriety desks of brokerages, institutions and fund houses that seek to directly connect with the exchange. High frequency trading, which is estimated to contribute about 20 per cent of the total market volume, is largely carried out by propriety desks of brokers and foreign players. While some feel NSE’s move would act against broking firms, some say not many small players are interested in direct memberships with exchanges, owing to compliance issues.
The membership deposit for Alpha members would be Rs 45 lakh — for cash and derivatives together. NSE charges a membership deposit of Rs 1.5 crore for companies and Rs 75 lakh for individuals and partnership firms. The net worth requirement would be Rs 50 lakh for trading members and Rs 1 crore for trading and clearing members, under Alpha.
“With the NSE on an aggressive mode, MCX-SX would find it difficult to gain substantial market share. After NSE’s move today, MCX-SX’s membership would be the key,” said a Mumbai-based broker. Sources say after its roadshow last week was well received by brokers across the country, MCX-SX was eying about 500 members.
Experts say most foreign brokerages would prefer to have memberships on all the exchanges.
Earlier, the Bombay Stock Exchange had seen several foreign institutional investors flock to its platform, after it launched the market making scheme.
MCX-SX had earlier announced a fee discount of 10 per cent for accountants, chartered financial analysts, lawyers, those with a masters’ degree in business administration, etc, and a 20 per cent discount to members from remote places. The membership deposit is Rs 20 lakh for cash and derivatives, while the net worth requirement is Rs 30 lakh, if enrolled during the introductory period. MCX-SX also charges Rs 5 lakh as membership fee. The move by NSE to keep the deposit and net worth criteria higher than MCX-SX’s is based on its leadership in the segment.