BSE escalates price war with rival NSE

Taking its price war with main rival National Stock Exchange (NSE) up a notch, the Bombay Stock Exchange (BSE) has announced the waiver of all transaction charges for brokers from semi-urban areas with effect from next month.

The move is a part of the BSE's efforts to attract more business from brokers operating from areas other than big cities like Mumbai, Delhi and Ahmedabad.

In a circular to its members, the BSE said that "transaction charges accruing to BSE, equivalent to annual connectivity costs of the member pertaining to BSE, will be waived off for semi-urban areas with effect from March 1, 2011."

The transaction charges will be waived for trading in any segment of the BSE, the bourse said.

"Semi-urban areas are defined as towns falling outside the municipal limits of Mumbai (including Thane and Navi Mumbai), New Delhi (including Delhi, NOIDA and Gurgaon), Kolkata, Chennai, Ahmedabad, Hyderabad (including Secunderabad) and Bangalore," the BSE said.

The NSE had in May last year decided to waive the transaction charges for brokers engaged in the cash and derivative segments through leased lines from rural and semi-urban areas. Prior to the waiver, the brokers were paying Rs 1 lakh per year for these transactions.

The BSE has been in existence for over 135 years, making it the oldest bourse in Asia, but its business volumes are much lower than the NSE, which began operations in 1994. The NSE overtook the BSE to become the country's largest stock exchange in 1995.

The factors helping the NSE maintain its lead include a low-cost structure due to the use of the latest technology. Nevertheless, the BSE has been trying to bridge this gap over the past few years.

Some of the steps taken by BSE on this front include the announcement of new derivative rates in December, 2009, lowering transaction costs, and increasing the duration of trade by kicking off at 9 am. The NSE has also implemented this strategy of an early market opening time.