USE begins membership drive

Nod likely soon; lower membership fee aimed at attracting brokers of other exchanges.

Exchanges operating in the currency and the interest rate derivatives arena might soon have to gear themselves for increased competition. The United Stock Exchange (USE), close to getting the final regulatory approval, has initiated a membership drive.

The membership charges of USE, in which Bombay Stock Exchange (BSE) holds 15 percent, has been so designed as to attract a high number of brokers who are already members of other exchanges.

According to a person familiar with the development, the exchange has already got the in-principle approval and is "pretty close" to getting the final approval from the Securities and Exchange Board of India (Sebi), said a source, on condition of anonymity. Despite repeated attempts, T S Narayanasami, Managing Director and CEO of USE, could not be reached for comments.

According to an email, a copy of which is with Business Standard, sent to a large number of brokers, USE is charging Rs 1 lakh as deposit for trading members. The processing charges have been waived and there would be no other charges till trading commences. For clearing members, the deposit is Rs 50 lakh. Clearing members also have to pay a one-time processing fee of Rs 10,000 to USE and Rs 50,000 to Sebi.

Interestingly, the deposit has to be paid only at the time of activation and not at the time of application. Further, the mail said, "trading is expected to commence shortly".

A typical membership process involves applying to the exchange, that processes it and, if accepted, sends it to Sebi. Once this approval comes, membership is activated.

Lowering or waiving charges has been seen before. When MCX-SX wanted to attract a large number of brokers to counter the might of the National Stock Exchange (NSE), it waived admission fees and processing charges, albeit for a brief period of time. Currently, admission fees for MCX-SX is Rs 2 lakh for associates of MCX members and Rs 5 lakh for all other applicants. Those who are already members of BSE, NSE, NCDEX or are registered at Fedai (Foreign Exchange Dealers' Association of India) have to pay an admission fee of Rs 2.5 lakh. The processing fee has been fixed at Rs 10,000.

The NSE, which competes with MCX-SX in the currency derivatives segment, has a deposit requirement of Rs 20 lakh for applicants wanting to be trading-cum-clearing members of the currency segment. Those already members of NSE can get this for Rs 10 lakh.

Currency derivatives were launched in India in August 2008, while interest rate futures made their entry much later, in September 2009. Currently, NSE and MCX-SX are the only two exchanges registering impressive trading volumes in these instruments. BSE also launched its currency derivatives segment before acquiring a 15 per cent stake in USE in August 2009. USE is based on a unique public-private partnership, having most of the public sector and private sector banks as stakeholders. USE shareholders also include Tata Consultancy Services, Jaypee Capital and MMTC.