Will BSE's new pricing strategy for trades get in more volume?

As per the new system, BSE will charge Re 1 per trade for up to 5 lakh transactions in a month

In a move seen to attract big deals, the Bombay Stock Exchange (BSE) will start charging transaction fee on per trade basis from today.

As per the new system, Asia’s oldest stock exchange will charge Re 1 per trade for up to 5 lakh transactions in a month; 70 paise for 5-10 lakh transactions in a month; 60 paise for 10-20 lakh and 30 paise for over 40 lakh. Earlier, the exchange charged a flat Rs 275 per crore on a gross turnover of Rs 1 crore.

That apart, BSE will levy a flat transaction charge of Rs 10 per crore of turnover on both active and passive trades done on its currency derivative segment.

Experts say the latest move from the BSE is aimed at attracting big / bulk deals. Though attracting more volume as compared to its rival, the National Stock Exchange, is still an uphill task.

“The move is aimed at maximising revenues. BSE is a listed entity, and soon, we may also have the NSE get listed as well. Though the BSE is doing well, the growth is not comparable to the NSE. The aim is to improve margins. The NSE is slowly gaining market share and BSE is not able to compete on growth parameters,” says G Chokkalingam, founder and managing director of Equinomics Research & Advisory.

“As regards volumes, the trading platform needs to become more popular with investors and the penetration across the country needs to improve. Till then, it will be an uphill task for the BSE to significantly improve on the volume front. A back of the envelop calculation shows that for any large-cap stock, the volume is 10-times more on the NSE,” he adds.

Deven Choksey, managing director and chief executive officer of Mumbai-based brokerage KR Choksey Securities, too, agrees that the exchange is trying to shore up volumes. He, however, feels that the policy does have its demerits as well.

“The move is aimed at increasing volumes and liquidity on the exchange. The higher the volume, lower the charges. This, I think, is the philosophy the BSE is working on right now, which is not bad. However, at the same time, the fallout will be that those investors who are on a lower volume will have to shell out more. That could put off some investors. The policy, I believe, may have its own challenges,” Choksey says.

In February, BSE's initial public offer (IPO) generated a huge demand across investors. The Rs 1,240-crore issue saw 51 times more demand than the shares on offer. The institutional investor portion was subscribed 49 times, the high net worth individual portion nearly 159 times and the retail (small) investor portion by 6.5 times, the exchange data shows.

The stock listed at Rs 1,085, a 33% premium to the issue price, and now trades at Rs 978 levels on the National Stock Exchange (NSE).