The Bombay Stock Exchange’s (BSE) move to cut membership fees by 90 per cent to just Rs 10 lakh, mainly to counter competition from the upcoming MCX Stock Exchange, has worked.
BSE has registered nearly 1,200 new members, in addition to its existing 800 members, in just over a week after announcing the scheme.
Now, BSE plans to soon begin nationwide road shows in over 20 cities and undertake a huge membership drive among traders and sub-brokers. It is expecting to add another 2,000 members in a few months.
According to sources, approximately 300 new members were from Maharashtra, 150 from Delhi, 200 from Gujarat, 150 from West Bengal, 80 from Rajasthan, 50 from Tamil Nadu, 40 from Uttar Pradesh, 25 each from Karnataka, Madhya Pradesh and Haryana, and five each from 10 other states.
BSE had, last month, cut its membership deposit rate from Rs.1 crore. Along with other charges, including refundable ones, such as base minimum capital, contribution towards trade guarantee fund and sundry fees, a cash market membership on BSE will now not cost more than Rs 33 lakh. Brokers had to pay over Rs 5 crore before the exchange was de-mutualised.
Comparatively, a broker who wants to take membership of the National Stock Exchange would have to pay over Rs 1 crore.
BSE is also wooing NSE members and says it got 100-150 members from its rival.
“We hope the scheme and the membership drive will build and expand our existing membership base. Volumes will surely go up,” said Madhu Kannan, BSE managing director and chief executive officer.
It makes sense for large sub-brokers to have their own deposit-based membership, as one with 10-15 franchisees can easily generate a brokerage of Rs.10 lakh per month. Also, some big day traders who pay over Rs 25,000 as brokerage would find the BSE offer viable.
According to sources, BSE is expecting over 20 per cent rise in daily trading volume in the equity cash segment on account of new members. Existing members generate over Rs.5,000 crore daily trading volumes in the segment and even if each new member generates a turnover of just Rs 1 crore, there will be a one-fourth rise in daily volumes.
“MCX SX will have to be really innovative to woo brokers. The BSE market share in the cash segment is likely to significantly go up after its membership drive; the membership is actually free, as the money is refundable,” said an analyst of a domestic research firm.
The MCX Stock Exchange will soon launch equity trading on its platform. Both BSE and the NSE see it as a serious threat due to its grassroot contacts with brokers, which has helped the group corner nearly 80 per cent market share in commodity trading and over 50 per cent in currency derivatives.