MCX, NSE, BSE – Stock Exchange Wars

A major price war has started between the stock exchanges in India with MCX sharply cutting the prices of transactions on its equity cash and futures platform to lure traders and brokers from the market leaders NSE and BSE. The Financial Technologies owned MCX-SX has also reduced the capital and net worth requirements of members to a fraction charged by NSE and BSE. Note MCX is the predominant commodity exchange in India and one of the largest in the world in the trading of base and precious metals. MCX was fighting a prolonged battle with the equity regulator SEBI to allow MCX to trade in equities. After the court war was won by MCX, the exchange has now become very aggressive in the equities segment challenging the duopoly of NSE and BSE. Note MCX already has a big presence in the trading of currency futures as well.

Read more about How to beat the Indian Stock Market.

DNA

 The Securities and Exchange Board of India (SEBI) has finally shone the green light at MCX-Stock Exchange’s (MCX-SX’s) equity aspirations. Following a prolonged battle that went all the way to the Supreme Court, the regulator has allowed it to start operations in both cash and derivatives segments of equities as well as interest rate futures and the wholesale debt segment, according to a statement issued by the exchange. The court battle with SEBI began after the regulator rejected its application in 2010 for starting operations in the equity segment for not appropriately meeting shareholding guidelines. Under the then existing Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges (MIMPS) Regulations, ownership in an exchange is limited to 5% for ordinary stakeholders and 15% for specific financial institutions. MCX-SX tried to meet these obligations by reducing the paid-up capital of the company and issuing warrants to its promoters. SEBI denied MCX-SX permission to start equity operations, noting that it had not sought, nor obtained regulatory approvals for the scheme used by the exchange to comply with the regulatory requirements. The battle went to the High Court and then the Supreme Court. The regulator, meanwhile, made amendments to the MIMPS regulations, stating explicitly that all forms of control, including indirect ones such as through warrants, would be considered while calculating the 5% limit. It gave the entities three years to meet the obligations under the new regulations, which came into force on June 20.

FE

 In a bid to woo the probable broker-members to its bourse, Financial Technologies-promoted MCX Stock Exchange (MCX-SX) today announced lower transaction charges to the tune of 50 percent of those charged by other exchanges for its exchange platform slated to start around Diwali. “Our transaction charges for members are around 50 percent less than the other exchanges,” chairman and CEO of Financial Technologies Jignesh Shah told reporters today while kicking off nationwide road-shows for membership drive here. The exchange also introduced a cost optimal membership fee and deposit structure of Rs 25 lakh as net outlay valid till October 18, capping the total outlay for an MCX-SX membership to Rs 50 lakh. As per regulatory requirement, the minimum deposit (base minimum capital) is Rs 10 lakh and networth (paid-up capital) is Rs 30 lakh for cash equity and trading membership of F&O segments. Shah claimed that the structure proposed by his exchange will release significant capital for members which will otherwise be blocked by exchanges, despite there being no need of it. The membership is also transferable after three years as per rules and guidelines of the exchange, he added.