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BSE to take on rivals in commodity derivatives with lowest transaction fee

Exchange leaning heavily on superior technology to make a dent in the segment before universal exchange becomes a reality

Rajesh Bhayani  |  Mumbai 


With the country’s oldest stock exchange, the Bombay Stock Exchange, starting in commodities derivatives for the first time on Monday morning, ripples are set to go around the industry. This isn't only because one is well prepared to launch commodity derivatives, but also because it plans to offer the lowest transaction charge payable by broker-members to the exchange -- one rupee per trade, irrespective of the contract value. While opened at 10 a.m. on Monday, when other commodity derivative exchanges had started trading, there was no change in the prices on the platform as it was like a trial-run. The brass also believes most members will dabble in gold futures, the first product it plans to launch when Sebi allows trading. The earliest this happen is October 2018, after equity market hours. The session will also help the exchange figure out if it wants to extend the timings in other segments in future. remain open till 11 p.m. Speaking to Business Standard, Ashish Chauhan, MD & CEO, BSE, said, “We will offer one rupee per trade as transaction charge payable by members to the exchange and that will be on a per-trade basis, irrespective of the amount of the trade. We offer such charges in other segment as well.” has been putting in place for the past two years, and had also appointed a CEO for the segment quite some time back. The exchange has also started gaining ground and increasing market share the past one month, after it restructured transaction charges in It has used its technological advancement to improve its mutual fund services, and introduced an e-mandate on StAR MF platform last Monday. This is a mechanism that digitises the entire mandate registration process by doing away with physical mandates. It is particularly useful in the case of (SIPs), which take a few weeks when mandate is given in physical form. “Currently, there are 32 banks offering e-mandate services through (NPCI) and four banks are at the certification stage,” Chauhan explained.

Over 550 e-mandates have already been registered under the new facility. Chauhan claims BSE's technological edge can be extended to as well. The exchange uses the fastest technology, T-7, acquired from its partner Since is open source, it is cheaper. Unlike other exchanges, BSE’s technology is not linked with volumes and is also more economical for the exchange to maintain. Response time is as low as six micro seconds, allowing the exchange to execute a staggering 30 million orders a minute. This kind of speed helps both market makers and algo traders, improving liquidity in the process. require faster technology as well, as there are put and call options, one for the at-the-money series (hovering around the index) and two each for out-of-money and in-the-money series for both call and put as minimum series. As the price moves, more series are added, which is why, the faster the technology, the greater the liquidity and order execution speed. Explaining its strength, the MD said, “All banks’ subsidiaries that are members of will be able to do broking in and won't have to take a separate membership like all other brokers. Even for new members, BSE’s membership fee is Rs one million (Rs 10 lakh).” However real-time risk management and managing collateral are already happening on BSE’s (INX). ”Those who are engaged in market making in other segments, including commodities, on other exchanges will find it cheaper to do so on BSE’s once actual trading starts.” The most important aspect is BSE's (IPF), Chauhan claims. “We have an of around Rs 7.5 billion (Rs 700 crore). At present we provide Rs 1.5 million (Rs 15 lakh) to investors from this fund, which makes it easier for investors to participate in commodities using BSE’s platform.” BSE story graph

First Published: Mon, January 29 2018. 12:24 IST