Transaction cost for existing prop traders on NSE to be zero

The NSE has announced up to 50% lower deposit and net worth criteria, than existing amount, under new category 'Alpha'

Price war between stock exchanges has intensified. National Stock Exchange (NSE) has initiated new measures for a class of members. This may effectively push the cost of exchange transaction fee for some existing players to near zero.

To counter the aggressive membership drive of arch rival MCX SX, the NSE has announced up to 50 per cent lower deposit and net worth criteria, than existing amount, under new category 'Alpha.'

Even existing members who fit the bill can convert to Alpha and their surplus deposit will be utilized to pay transaction and infrastructure charges of the exchange for a period of three years. The membership fee of Rs 5 lakh for Alpha members has also been waived off by the exchange.

Under Alpha, The NSE will allow a broker to handle maximum 50 client ID's. This will largely benefit corporate houses, which take direct membership of exchanges for treasury operations. Propriety desks of brokerages and even institutions and fund houses, which want to directly connect with the exchange. ven high frequency trading, which is estimated to contribute around 20 per cent of total market volume, is largely done by propriety desk of brokers and foreign players. While there is a view that NSE's move will go against broking firm, there is also a belief that not many small players like to take direct membership of exchange due to huge compliance issues.

The membership deposit for Alpha members will be Rs 45 lakh for both cash and derivative combined. NSE charges a membership deposit of Rs 1.5 crore both segments for companies and Rs 75 lakh for individuals and partnership firms. The net worth requirement will be Rs 50 lakh for trading members and Rs 1 crore for trading and clearing members under Alpha. Currently, it is 1 crore for companies on NSE.

The MCX SX will find it difficult to gain a substantial market share with NSE turning aggressive. Membership number of MCX SX will be the key to be watched after NSE's move today,” said a Mumbai based broker. Sources say, MCX SX was eying more than 500 members after its road show last week was well received by brokers across the country.

However, experts are of the view that most foreign brokerages would prefer to have membership of all the exchanges. Even the Bombay Stock Exchange had seen several FIIs flock to its platform after it started with market making scheme.

The MCX SX had announced 10 per cent fee discount to professionals such as MBAs accountants, CFAs ICWAs, lawyers among others and 20 per cent discount to members from remote places. The membership deposit is Rs 20 lakh for cash and derivative and net worth is Rs 30 lakh, if enrolled during the introductory period. MCX SX also charges Rs 5 lakh as membership fee. NSE's logic in keeping the deposit and net worth criteria higher than MCX SX is based on its leadership in the segment.