NSE to sweeten Liquidity Enhancement Scheme from 2nd January

With effect from 2nd January, the daily cap on trade level incentives for futures will be increased to Rs125 crore from the existing Rs100 crore. Furthermore, in case of options, the daily cap will be revised to Rs500 crore of the notional traded value, NSE announced

Mumbai: The National Stock Exchange (NSE) will sweeten the incentives provided under its liquidity enhancement scheme (LES) for S&P 500 and Dow Jones Industrial Average (DJIA) derivatives from 2nd January next year, reports PTI.

The NSE had introduced the LES scheme for derivatives on the S&P 500 and DJIA indices from 15th September. The NSE had launched derivatives trading on these two US indices in late August. The move to improve the incentives provided under the LES is aimed at increasing trading interest in derivatives products.

With effect from 2nd January, the daily cap on trade level incentives for futures will be increased to Rs125 crore from the existing Rs100 crore. Furthermore, in case of options, the daily cap will be revised to Rs500 crore of the notional traded value.

In addition, the cash incentives payable on the traded value of futures and the premium paid on options contracts will be increased.

Over-and-above these trade level incentives, a market participant executing a buy trade in case of S&P 500 options will receive an incentive of Rs1,500 per crore, as against the existing incentive of Rs400 per crore, while a sell trade will earn an incentive of Rs4,500 per crore compared to the Rs1,700 per crore incentive fixed earlier.

In the case of futures contracts, the trade incentive for sellers of DJIA futures and S&P 500 futures will be increased to Rs2,100 from Rs1,700 per crore of the traded value.

With respect to the existing open interest level incentive structure, the cash incentive payable for maintaining open interest will be increased to Rs25 lakh per month from Rs18 lakh a month previously.

What is more, the open interest level incentive will be extended to the top ten participants, as against the existing cap restricting it to the top five participants, and will be payable on a proportionate basis.

With respect to the order level incentive structure, the existing cash incentive payable will be increased exclusively for S&P500 options by Rs3 lakh per month. Therefore, the cash incentive at the order level shall be paid from a pool of Rs21 lakh per month.

Furthermore, the existing obligation of maintaining orders on both sides in at least three calls and three puts out of the specified strikes—six out-of-the money (OTM), six in-the-money (ITM) closer to the at-the-money (ATM) and one ATM—will be reduced to two calls and two puts from January 2.

The NSE has stated that there will be no change in any other order level obligations for both futures and options.

The stock exchange will also improve the incentives for the top five client-based trading members in terms of daily volumes in DJIA and S&P 500 derivatives.

Trading members that achieve an average daily volume of at least Rs5 crore across clients in a month (excluding proprietary trading) and with average daily participation of at least 15 clients in a month will be proportionately rewarded on a monthly basis from a pool of Rs5 lakh.

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RBI should look to bring in reforms on asset side of banks

“Though there have been many reforms in the banking space in the last two decades, issues related to long-term financing, rising complexity of financial products with globalisation along with various sources of funding still remain. Regulators have to address these issues for long-term stability of the sector,” Member of Financial Sector Legislative Reforms Commission (FSLRC), YH Malegam said

Mumbai: Despite many reforms in the banking system over the last two decades, challenges like diversified structure of financing and complexity of financial products should be addressed for long-term stability, reports PTI. 

“Though there have been many reforms in the banking space in the last two decades, issues related to long-term financing, rising complexity of financial products with globalisation along with various sources of funding still remain. Regulators have to address these issues for long-term stability of the sector,” Member of Financial Sector Legislative Reforms Commission (FSLRC), YH Malegam said at ‘Financial Planning Congress 10-11’ organised by Financial Planning Standards Board of India here.

He, however, said Indian banks are better placed than their global counterparts as far as capital adequacy and exposure to risky assets are concerned.

The banking sector has seen various reforms like entry of new sector private sector banks, reduction of cash reserve ratio (CRR) and statutory liquidity ratio (SLR), deregulation of interest rates, and introduction of base rate among others, in the past 20 years.

“In the recent past, many of the reforms are directed towards liabilities side of the business. However, there are little reforms on the asset side. Perhaps, the regulator should bring some reforms in the asset side so that a balance will be maintained,” joint managing director of Kotak Mahindra Bank, C Jayaram said.

He also said that basic banking experience will change in the next five to 10 years with the advent of technological solutions in the banking sector.

On consolidation in the banking space, Mr Jayaram said consolidation within the public sector banking space should be done for higher productivity.

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Credit flow to MFIs will now improve: Malegam

“Credit flows, perhaps, were waiting for the regulations to be issued. And now that the regulations have been issued, I think there should be adequate credit flow to the microfinance sector,” Mr Malegam told reporters

Mumbai: Credit flow to microfinance institutions (MFI) will be adequate in future as the regulations relating to MFIs have been issued, Member of Financial Sector Legislative Reforms Commission (FSLRC), YH Malegam said on Sunday.

“Credit flows, perhaps, were waiting for the regulations to be issued. And now that the regulations have been issued, I think there should be adequate credit flow to the sector,” Mr Malegam told reporters on the sidelines of ‘Financial Planning Congress 10-11’ organised by Financial Planning Standards Board of India here.

The microfinance sector was thrown into a tizzy last October when Andhra Pradesh issued an ordinance that sought stringent regulation of the industry, following reports of a spate of suicides by harried borrowers. Andhra is the largest MFI market in the country.

Following this, loan recovery slowed to a trickle and banks also refused to offer fresh funds to MFIs. RBI then set up a committee under the chairmanship of Mr Malegam, who submitted his report early this year.

The Malegam Committee came up with its report on MFIs prescribing an interest cap of 24% on lending, creation of NBFC-MFIs along with host of other guidelines.

Referring to overall health of MFI industry, Mr Malegam said, “So far as other state governments (except Andhra Pradesh) are concerned, there is an improvement. Definitely, interest rates have come down. Well run and efficient MFIs are able to operate under the guidelines issued.” 

He, however, conceded that the proposals given by his committee will have less impact in Andhra Pradesh.

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