To attract investors towards non-equity market segments, the National Stock Exchange (NSE) on Friday announced a slew of fee waivers for trading in segments like interest rate futures, mutual funds and wholesale debt market.
In separate circulars, NSE said it was waiving transaction charges for trade in interest rate futures, buy or sale of mutual fund schemes through the exchange platform, as also trade in wholesale debt market during the current financial year.
The bourse also waived transaction charges for the current financial year for trade in its Hang Seng Benchmark Exchange Traded Scheme, which allows Indian investors to trade in Hong Kong-listed companies through the NSE. About a year ago, NSE began trading in Hang Seng BeAS.
The scheme tracks the Hang Seng index of the Hong Kong stock market, which includes many large-cap companies from China and other countries, such as HSBC Holdings, Bank of China, ICBC, Hutchison, PetroChina and China Mobile.
In another circular, NSE said that it would not charge any transaction fees on trade in interest rate futures for one more year, that is till March 31, 2012. Interest rate futures, which were launched in India less than two years ago, allow investors to benefit from taking positions about rise or fall in rates. To encourage active participation in interest rate futures trading, NSE had announced transaction charges, waiver in July 2010 till March 31, 2011.
Interest rate futures are derivative products that allow the investors to buy or sell a notional interest-bearing instrument, such as government debt bond, at a specified future date and at a price determined at the time of the contract.
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According to the latest monthly bulletin of market regulator Sebi, the total turnover of interest rate futures declined by 35.2 per cent in February 2011. The turnover stood at Rs 20 lakh in February, as against Rs 30 lakh in the previous month. According to Sebi, NSE had begun trading in interest rate futures on August 31, 2009 and total turnover during the financial year ended March 31, 2010, stood at Rs 2,975 crore.
However, it fell sharply in 2010-11 and total turnover for that financial year till February 2011 was only Rs 62 crore. The average daily turnover also fell from Rs 21.2 crore in 2009-10 to Rs 0.3 crore in the latest finacial year. Trading in interest rate futures allow the investors — mostly banks, insurance companies, funds and other corporates — to hedge risks from rise or fall in the interest rate on account of their exposure to debts.
Besides, speculators also use these contracts to bet on lower or higher market interest rates in the future. The value by which the contract rises and falls is in inverse proportion to the rise and fall in market interest rates.
In another circular, NSE said that it would also waive the transactions charges and annual subscription fee for trade in wholesale debt market for the new finacial year, beginning on Friday. “The Exchange has received requests from trading members, seeking a temporary concession in the annual subscription and transaction charges being levied by the Exchange,”NSE said.