BackNSE plans discounts on fees for brokers clocking high turnovers
25-60% discount on transaction charges to be offered to members, based on their daily turnover, for two months till 31 May
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Mumbai: The National Stock Exchange Ltd (NSE) has decided to offer discounts on certain transaction fees to brokers who clock a high turnover, as the nation’s largest bourse seeks to retain its dominance in currency futures and stock options trading.
A discount in the range of 25-60% on transaction charges will be offered to members, based on their daily turnover in the currency futures and equity options segments, according to instructions issued by NSE on 31 March. The concession, however, will be offered only for two months till 31 May.
In November, NSE had offered a similar discount on transaction fees in the range of 30-50% in the currency futures segment and 40% in the equity options segment for the two-month period ended 31 January.
NSE dominates trading in equity options. For example, the exchange registered a turnover of ₹ 10,845.30 crore in the equity options segment on 1 April.
In comparison, BSE Ltd clocked only ₹ 215.04 crore of turnover in that segment on the same day.
NSE has, however, been facing stiff competition from BSE in the exchange-traded currency derivatives segment. BSE, with its aggressive pricing policy, has been able to corner a sizeable market share in the last one year.
While BSE had a 12% market share in December 2013—the first full month since launch in November—the share of Asia’s oldest stock exchange has since then risen to more than 37% in March. In March, the average daily currency futures turnover on NSE and BSE was ₹ 11,095 crore and ₹ 6,540 crore, respectively.
While Metropolitan Stock Exchange of India Ltd (MSXI)—formerly known as MCX Stock Exchange Ltd—also offers trading in currency derivatives, its share has fallen significantly and, on most days, it sees trades worth less than ₹ 2,000 crore.
According to the latest NSE circular, a broker registering a turnover in excess of ₹ 600 crore in currency futures will get a 59% discount in transaction charges for all incremental trades beyond that amount. Similarly, a turnover in the range of ₹ 300 crore and ₹ 350 crore will get the member a 25% discount on the incremental turnover.
NSE did not respond to a mail seeking comments on the reason for offering a discount on transaction charges in certain segments for the second time instead of a permanent reduction in charges.
While cost is an important factor, trading turnover is also a function of volatility, investor participation and the performance of other asset classes, said Naveen Mathur, associate director of commodities and currencies at Angel Broking Ltd. Lower transaction costs alone may not necessarily lead to higher business growth, he said.
The issue of pricing has been a sensitive matter in the currency segment. In 2009, MSXI sought the intervention of the Competition Commission of India (CCI) in NSE’s decision to offer currency derivatives trading free of cost.
NSE, which launched its currency platform in August 2008, started to levy a charge only in August 2011 following an adverse order by CCI, which was upheld by the Competition Appellate Tribunal (Compat). NSE has challenged the tribunal order at the Supreme Court.
Even as BSE levies transaction charges in its currency segment, those are a fraction of what the other exchanges charge. While NSE and MSXI charge in the range of ₹ 110 and ₹ 120 for every crore of turnover, BSE decided to levy charges in a phased manner from ₹ 2 per crore from 1 December 2014 to ₹ 10 from 1 October 2015. Currency futures contracts allow investors to hedge against changes in foreign exchange rates between a pair of currencies. Exchanges in India offer rupee-dollar, rupee-euro, rupee-pound and rupee-yen contracts.
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