MCX's bid to lure brokers with attractive rates for its equity exchange has forced market leader National Stock Exchange (NSE) to change transaction fees effective October 1.
MCX, which is currently organizing road shows to recruit broker members for its stock exchange, has announced competitive transaction and membership fees to take on the NSE and the Bombay Stock Exchange.
Under an introductory offer valid till October 18, MCX-SX would provide entry-level membership at Rs 25 lakh (Rs 5 lakh of membership fee and Rs 20 lakh deposit). The rates are considered to be very competitive as compared to those of NSE and BSE.
MCX-SX has said that its membership fee structure is designed to bring in cost optimization as it frees up huge capital for members and brokers that would otherwise be blocked in exchanges. Brokers and members would be able to utilize this fund towards client acquisition, training of staff and business expansion, MCX-SX has said.
To counter the low pricing advantage of MCX-SX for brokers in the cash segment of equity trade, market leader NSE has allowed to set-off the annual subscription charge against the transaction fee. Further, any unutilized amount at the end of the year will be carried forward to the subsequent year.
NSE's announcement translates into a benefit of Rs 1 lakh per annum for brokers. NSE may also lower its transaction charge, which stands at Rs 3- 3.25 per lakh of the traded value (with further slab wise reduction) currently. In contrast, MCX has fixed transaction charge at Rs 1.5-2 per lakh of traded value.
Sandip Sabharwal, CEO (PMS) at Prabhudas Lilladher told NDTV that the price war will lead to a decline in profitability of existing exchanges and new ones, like MCX, might end up making losses.
"I don't think there is a space for a third exchange," Mr Sabharwal added.
MCX, which currently operates only in currency derivatives segment, will launch its stock exchange around Diwali, in mid-November, in its quest to become the country's third major equities market.
It has been quickly taking the necessary steps to commence stock trading since the July approval by market regulator Securities and Exchange Board of India to trade in equities, equity futures, interest rate futures and wholesale debt products.
At 1.40 p.m., shares in MCX traded 2 per cent higher at Rs 1,219 on the BSE.
(With inputs from PTI and Reuters)