Equity F&O turnover at all-time high
BSE, NSE fight intensifies
Palak Shah Mumbai Trading activity in India's stock markets is scaling new heights. Equity derivative turnover crossed the Rs 4 lakh crore mark today for the first time in the domestic market on the back of high volumes in the options segment. With this the fight between the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) has only intensified.
The futures and options (F&O) turnover on NSE and BSE combined rose to Rs 4.048 lakh crore. The BSE over took NSE in index options trading segment to corner a 58% market share on the expiry of December series contracts today. Index options worth over Rs 1.71 lakh crore were traded on BSE while NSE saw a turnover of over Rs 1.21 lakh crore in the segment. Trading on BSE's derivative segment is aided by a market making scheme, but the exchange says majority of turnover is based on trading activity without incentive. Overall, equity derivative worth Rs 2.27 lakh crore were traded on NSE while Rs 1.72 lakh crore were traded on BSE today.
According to BSE, the exchanges spend on incentivising derivative segment was only 25-30% since November against what it use to be at the start of this year. BSE was spending around Rs 12-13 crore every month on derivative incentive scheme between January and March 2012, which has now come down to Rs 3-4 crore, says the exchange. While trading in NSE's Nifty index dominates derivative segment on that exchange, it is BSE Sensex and BSE 100 index which generate majority of volumes for BSE. The NSE follows cash based settlement system in derivatives segment while BSE follows physical settlement.
| TOP 5 F&O Turnover in Rs crore
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| Date | BSE | NSE | Total (BSE+NSE) |
| | 172278.76 | | |
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Experts say, pick up of options trading on BSE may resut in yet another price war in the exchange industry. While the NSE charges Rs 5,000 for every Rs 1 crore of options turnover, BSE takes a measly Rs 50 for the same. The NSE had lowered F&O) and the cash segments by 10% in September 2009. This had resulted in a major spurt in options trading volumes, from around 10 per cent of all derivative trades to 45% on NSE. In response, BSE had lowered the membership fees on its platform by 90% to Rs 10 lakh in 2010.
However, stock brokers say that NSE may not hurry to cut charges as yet. Open interest in BSE's derivative segment was significantly lower and volumes in single stock F&O was extremely poor. From January, the BSE will introduce a market making scheme to incentivise trading in single stock F&O, the exchanges said in a circular. While NSE is home to foreign institutional investors (FIIs) in India, nine of the 135 brokers actively trading on BSE cater to FIIs and it has seen nearly 44,000 clients participate in derivative segment in the past three months.
| Type of Instrument | Turnover (Rs Cr) |
| Sensex/BSE 100 (Options Contracts - Current Month | 1,71,784.69 |
| NIFTY (Options Contracts - Current Month) | 1,21,488.42 |
| BSE Market Share | 58.57% |
The third exchange MCX SX, which will launch trading in equity segment has said that their thrust will be mainly on delivery based trading than 'speculative' derivative segment. Recently, the Securities and Exchange Board of India (Sebi) has made attempts to keep retail participants away from derivative trading by measures like banning mini index contracts in derivative segment. Also, deposits were increased for propriety and algorithmic trading.
