BSE sweetens deal for members
The Bombay Stock Exchange (BSE) is trying to kick-start its dormant equity futures and options (F&O) segment. Registrations for trading and clearing members in the bourse’s equity derivatives segment have gathered pace in September and October so far and many more are expected in the next two months, according to two persons familiar with the development.
“The aggressive registrations are part of a broader action plan to generate volumes in futures and options,” said a member of the BSE familiar with the matter, requesting anonymity. The source declined to share details.
The bourse plans to admit at least 200-250 brokers as trading members in the derivatives segment, the BSE member said. It admitted 48 brokers as trading and clearing members in September and has registered another 34 in October so far. The BSE had nine registrations in August, after failing to find takers for membership in its derivatives segment before that.
The exchange has sweetened the deal for brokers to register with it as a trading member in futures and options. “For existing BSE members, the registrations are being done free of cost provided all requirements such as minimum capital have been met,” said the member quoted above.
An email query to a BSE spokesperson on this matter did not elicit any response. The exchange’s deputy chief executive Ashish Kumar Chauhan could not be reached on his cell phone and did not respond to a text message.
The BSE, Asia’s oldest bourse, struggled to retain members in the derivatives segment amid the financial market turmoil in 2008. Various brokers voluntarily surrendered memberships as they were unwilling to block funds as membership deposit with the stock exchange, especially when there is scant activity in its derivatives products
BSE contributes less than 1% to India’s equity derivatives trading, dominated by the National Stock Exchange (NSE).
Average daily turnover in NSE’s futures and options products since April 1, 2010 is Rs 97,279 crore compared with Rs 72,392 in the year ended March 31, 2010.
BSE has tried to boost activity in its derivatives segment in the past through various means, encouraged by the government and the Securities Exchange Board of India (Sebi) as they have been uncomfortable about NSE’s monopoly in exchange-traded derivatives. But, market participants said previously-used methods by the BSE to boost volumes did not find takers among brokers because of ‘systemic flaws’. The BSE can capture a share of NSE’s volumes if it can cut transaction expenses, they said.
“Lowering transaction costs will be a better way to attract futures and options volumes on the BSE rather than once again attempting to make market-making work,” said Shshank Mehta, derivatives strategist, Nirmal Bang Securities.
