BSE fails to entice F&O traders

The National Stock Exchange (NSE), which is increasingly adding stocks to its futures and options (F&O) segment, is running away with volumes in the derivatives segment, even as rival Bombay Stock Exchange (BSE), the country's oldest stock exchange, is yet to come up with a concrete strategy to attract traders to its derivatives segment.

On an average, the NSE clocks transactions worth more than Rs 40,000 crore in the F&O segment, while the daily volumes on the BSE barely touch Rs 1,000 crore.

Market players said it was perplexing that the BSE could not even attract trading in those stocks where the market-wide position limits have been crossed on the NSE and are in the ban period.

For instance, the derivative contracts in the underlying Arvind Mills, JP Hydro and GMR Infrastructure have crossed 95 percent of the market-wide position limit on NSE and are currently in the ban period. Still, the derivative contracts of these stocks on BSE are not attracting any interest from the traders.

It was earlier felt that Germany's Deutsche Boerse and Singapore's SGX, which took five per cent stake each in BSE this year, would help the exchange in activating the moribund derivatives segment.

But there seems to be no movement on this front either, said sources. Both Deutsche Boerse and SGX have a vibrant derivatives market.

Neeraj Kohli, chief operating officer of MAPE Admisi Securities, suggested the waiving of transaction charges for derivatives trading on BSE to attract traders towards the exchange's F&O segment.

"It is very difficult to attract traders into BSE's derivatives segment unless you provide them with some incentives. We feel the exchange should do well if it waive the transaction charges for derivatives, at least for an initial period of six months," he said.

Adds Vijay Kedia, managing director, Kedia Securities, "Liquidity is provided by the jobbers or arbitrageurs. To attract the jobbers into BSE's F&O, they should be given some incentives. BSE should not think about making money from the F&O segment, at least for some time. The NSE is a very liquid market, and BSE, where there are hardly any volumes, cannot charge the same fees for transactions."

The transaction costs in futures amount to Rs 2 per lakh of turnover plus 0.0001 per cent for investor protection fund. In the options segment, the transaction costs are set at 0.05 per cent on the premium value, plus 0.001 per cent on the premium amount.

When contacted, a BSE official, on condition of anonymity, said, that the exchange was in the process of increasing the awareness about its F&O segment.

"When you have lost the first mover advantage, it is very difficult to do the catching up job. From zero, we are now achieving transactions worth about Rs 1,000 crore. So, we are catching up slowly," he said.