Playing the price war is emerging as one of the key strategies of MCX Stock Exchange, which will go live with equity cash and derivatives trading on its platform from Diwali. After it set a lower deposit and net worth structure for membership, the Financial Technologies-promoted exchange on Monday announced transaction charges, 36-50 per cent lower than rival National Stock Exchange (NSE).
However, MCX-SX is positioning itself as a premium bourse by setting both transaction and membership cost structure way higher than that of BSE.
Cutting transaction charges can directly affect the bottom line of stock exchanges (SEs). Around 60 per cent of NSE's revenue came from transaction charges during financial year 2010-2011. NSE's net profit for 2011-12 stood at Rs 705 crore, compared with Rs 638 crore the year before.
The market share of index options trading is more than 75 per cent of the entire equity derivative segment on both BSE and NSE. The MCX-SX has set its transaction charge at Rs 25 on a turnover of every Rs 1 lakh, compared to NSE's Rs 50. Transaction charge on BSE for index options is Rs 50 on a turnover of every Rs 1 crore. Transaction fee is charged on options premium.
Earlier, NSE had lowered the trading cost in the futures and options (F&O) and the cash segments by 10 per cent in September 2009. This had resulted in a major spurt in options trading volumes, from around 10 per cent of all derivative trades to 45 per cent on NSE.
Jignesh Shah, vice-chairman MCX-SX, said: "The lower transaction charges will help in financial inclusion in the country and increase in participation. We may not be going for extending trade timings and the market will trade for only five days in a week on MCX-SX."
In the futures segment and cash, the NSE's transaction fee is applicable in different slabs on turnover and MCX-SX will do the same.
NSE is a leader in the equity cash and derivative segment with an 80 per cent market share. Hence, it had easily got the premium till now. Trading in the wholesale debt market and interest rate futures has not picked up on NSE and BSE, though the former exchange has 1,500 brokers members and the latter 1,000. While NSE trades more than Rs 1 lakh crore worth of equity derivatives on an average daily, trading on BSE has picked up recently in this segment on the back of its incentive scheme for brokers.
