It is felt that there is a need to encourage smaller and nimbler firms that may not have the financial wherewithal to meet the stringent capital and networth requirements, but can bring in innovative trading ideas and strategies that could add to the liquidity of the trading platform, the NSE said while justifying the move
The National Stock Exchange on Monday responded to the membership price war announced by rival MCX-SX last month, by slashing deposit charges for proprietary trading members, who account for a sizeable chunk of trading volumes. Most proprietary brokers trade for themselves and some even execute trades for a very small group of clients like high networth individuals or companies.
Under the Alpha class introduced by NSE, such brokers can now get a membership in the cash market segment by paying Rs 20 lakh as deposit, and a membership in the futures & options segment for Rs 25 lakh. A combined membership of both segments will cost Rs 45 lakh in deposit. Currently, cash deposit charges for the two segments are Rs 32.5 lakh and Rs 50 lakh respectively.
Networth requirement for Alpha class has been reduced to Rs 50 lakh from Rs 75 for a regular cash market membership, and to Rs 50 lakh from Rs 75 lakh for pure trading membership in the F&O segment.
"Maximum number of client IDs allowed under this category will be 50. This is being allowed only to handle order flow of family and associate Firms / companies," the NSE release said.
"Maximum number of client IDs allowed under this category will be 50. This is being allowed only to handle order flow of family and associate Firms / companies," the NSE release said.
So far, NSE had been charging a uniform deposit rate for all its members.
"However, it is felt that there is a need to encourage smaller and nimbler firms that may not have the financial wherewithal to meet the stringent capital and networth requirements, but can bring in innovative trading ideas and strategies that could add to the liquidity of the trading platform, while not compromising on the paramount objective of investor protection. Such additional liquidity and resulting market depth would benefit all market participants including retail investors," the NSE release said, justifying the move.
"However, it is felt that there is a need to encourage smaller and nimbler firms that may not have the financial wherewithal to meet the stringent capital and networth requirements, but can bring in innovative trading ideas and strategies that could add to the liquidity of the trading platform, while not compromising on the paramount objective of investor protection. Such additional liquidity and resulting market depth would benefit all market participants including retail investors," the NSE release said, justifying the move.
Most proprietary brokers do large number of non-delivery trades during the day for a small margin, and are major contributors to an exchange's trading volumes. In contrast, most institutional brokerages do largely delivery-based trades.
Even at these rates, a membership on MCX-SX, which will commence equity trading shortly, is cheaper. But the gap has now narrowed down considerably. In its introductory offer valid till October 18 , MCX-SX has priced a composite membership of the cash and futures & options segments for Rs 30 lakh. This includes a deposit of Rs 20 lakh and an admission fee of Rs 10 lakh. Also, liquidity, and not membership charges, will be the deciding factor in the choice of exchange to do the trade on.
Existing NSE members can convert their current membership to the Alpha class, the release said, adding that surplus deposit will be utilized towards any dues of the members to the Exchange and balance, if any, at the end of three years will be refunded. In the interim, the surplus deposit amount as available will also be considered for member’s trading exposure purpose.
Earlier this month, NSE had allowed members in the cash market segment to adjust their annual subscription charge of Rs 1 lakh against transaction charges. Shortly after, NSE reduced charges for leased lines and VSAT (very small aperture terminal) by 50% and around 70% respectively
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