Markets see NSE fee cut move positive

Stock markets are entering an interesting phase with India’s leading bourse, National Stock Exchange (NSE), slashing its transaction fee and annual subscription charges effective from October 1, both in cash as well as future and options (F&O) segments, within days of its rival MCX-SX proposing competitive membership rates.

In a circular, issued on Wednesday, NSE said following representations from members to rationalise annual charges both, in capital market and F&O segments, it had decided to allow setting off of capital market annual subscription charges against transaction charges of members in this segment. NSE Head (Business Development) Ravi Varanasi told Deccan Herald the move was a further step to bring down trading and connectivity costs.

The move by NSE has generated excitement in the market.  More than price war between bourses, Deena Mehta of Asit C Mehta Investments is excited over the entry of MCX Index and believes it will help promote niche areas that are still to be tapped.

Mehta said she is not so particular about a price war because it favours only big time traders and pro-account people.  But bigger excitement, she said, is the new exchange that is likely to expand the reach, footprint and the number of demat accounts for all retail investors.

Under an introductory offer valid till October 18, MCX-SX will provide entry-level membership at Rs 25 lakh (Rs 5 lakh of membership fee and Rs 20 lakh deposit).

Competitive rates

The rates are considered to be competitive compared to NSE and BSE, opine experts.  Mehta said it is not an easy task for any bourse to shift volumes traditionally from wherever they are.  

For instance, she pointed out that even this day BSE continues to have a big volume in the small and midcap space.  

Similarly, Mehta said, in derivatives market where BSE has launched the liquidity enhancement programme in which the cost is almost one-tenth of what is being charged by NSE, but still BSE could not overtake NSE.

All the same, there is a niche which is available for each of the bourses, like BSE went in for mutual funds. “They continue to have a dominant share so I think going forward, if more things are done by BSE on mutual fund, a lot of business can go over there,” Mehta said.

MCX is also trying to target the corporate debt segment. Its membership fee structure is designed to bring in cost optimisation and that in turn frees up huge capital for members and brokers that would otherwise be blocked in exchanges.
They could be deployed for client acquisition and training of staff along with business expansion.