Newly launched MCX Stock Exchange, which has not been able to attract significant volumes since it started equity operations a week ago, on Tuesday announced a liquidity enhancement scheme in both cash – a first by the company’s claim – and derivatives segments.
Under the scheme, effective March 6, the exchange will offer a trading incentive of Rs500 per crore for traded value of less than Rs200 crore per day and Rs750 per crore for traded value of over `200 crore per day to all participants.
Also, it will waive exchange transaction fee for passive legs of all trades in the cash segment.
In equity derivatives, too, the exchange has introduced incentives for market makers in lieu of providing quotes, maintaining liquidity and open interest in futures and options segment.
It has also provided for an additional incentive of Rs100 per day, subject to a maximum of Rs50 lakh per month, for clients or investors trading in cash and stock futures. To be eligible for this incentive, a client needs to have a minimum turnover of Rs11 lakh in cash equity and a minimum turnover of `1 crore in stocks futures during a month, with at least one trade daily in equity cash or stock futures during the month.
Average daily turnover on MCX-SX has been just Rs33 lakh in the cash segment so far, spread across just a few scrips, due to lack of participation and very wide spreads. Including derivatives, average turnover has been Rs12.62 crore a day.
Compare this with the average daily cash turnover on NSE and BSE of around `11,000 crore and `2,350 crore, respectively.
Experts believe the incentive scheme will help build liquidity, but it would be some time before it achieves significant volumes.
“It will be a tough task for MCX-SX to draw volumes even with the incentive structure and it will have to shell out huge incentives before it manages to garner some share from rival exchanges,” said the head of a domestic brokerage firm, requesting anonymity.
To recall, BSE, Asia’s oldest exchange, had also introduced a liquidity enhancement scheme on September 28, 2011 to prop up its derivatives segment. It has spent more than Rs140 crore since October that year and is still running the scheme to derive 25% of market share in derivatives market.