NSE's waiver bonanza 'difficult' to follow for other exchanges

Other exchanges feel that it would be very difficult for them to offer such kind of transaction fee waiver or revise connectivity charges by more than 50%

The National Stock Exchange (NSE), has decided to waive transaction charges pertaining to trades generated from leased lines in semi-urban and rural areas to the extent of the annual leased line connectivity cost of about Rs1 lakh. According to industry experts, other exchanges will not be able to match such kind of a 'lavish' bonanza offered by NSE.

"NSE is flush with funds and is under pressure to show 'lower profits', since there is a ‘hue and cry’ about its huge profits. That may be the reason why NSE, which has shied away from the media in recent past, is spending abundant money on advertising as well as giving discounts to members," said one official from an exchange who does not want to be quoted.

The NSE has also revised the connectivity charges to Rs1 lakh from Rs2-Rs2.5 lakh per leased line for members connected through points of presence (PoPs) at Rajkot, Jaipur and Kochi. "It would be very difficult for other exchanges to offer such kind of transaction fee waiver or revise connectivity charges by more than 50%," said official from another exchange.

NSE's infrastructure can support more than 2,000 very small aperture terminals (VSATs) and 3,000 leased lines. At present, more than 9,000 users trade on the real time-online NSE application.

According to Divya Malik Lahiri, spokesperson, NSE, the transaction waiver scheme will be applicable on annual recurring basis and the members can avail the benefit of this scheme every year or until further notice. Similarly, for POP locations at Rajkot, Jaipur and Kochi, the annual recovery charges (ARCs) and interest free deposits (IFSDs) are revised to Rs1 lakh each, she said.

In October 2009, in a similar move, NSE had waived transaction charges equivalent to the annual VSAT charges levied by the exchange. The waiver was capped to the annual VSAT charges levied by the exchange for the respective year or part thereof with effect from 1 October 2009. The general annual VSAT charges fixed in April 2005 was Rs1.10 lakh a year.

However, despite offering the waiver scheme for VSAT, members from semi-urban and rural areas were not happy due to pricing differences compared with leased lines. They felt that a leased line would be a better bet for their operations in certain cases compared with high costs of VSAT.

There are two different aspects of why NSE is resorting to such methods. One, it want to maintain its dominance, given that there are some new players waiting in the wings to enter the market. Second, NSE used to have a monopoly in equity and currency derivatives segment. Post February it is losing its market share in currency derivatives to new entrant MCX-SX. (read more http://www.moneylife.in/article/8/5094.html ).

Not one to take things lying down, NSE had already made a predatory move, typical of its aggressive mindset, by making membership to its currency derivatives segment free. This waiver meant that MCX-SX could also not charge the fee from its members. Incensed, the MCX-SX filed a complaint with the Competition Commission of India (CCI), which ordered an investigation into the alleged misuse of the dominant position by NSE.

With the Manner of Increasing and Maintaining Public Shareholding in Recognised Exchanges Regulations (MIMPS) compliance in place, MCX-SX is all set to enter the equity trading space dominated by two warring bourses—the NSE and the BSE. Other points that work in favour of MCX-SX are that most of the traders use a software (ODIN) developed by its parent Financial Technologies. According to sources, about 30% traders use the trade software provided by exchanges such as BOLT from BSE while 70% of traders use software like ODIN, Omnesys and FasTrade. ODIN holds majority share in trade terminals.

NSE also allows members to provide internet-trading facility to their clients through a shared web infrastructure called as NSE on web (NOW). There are about 900 users who use NOW, said the NSE official.

The other new player waiting in the wings is United Stock Exchange (USE), promoted by 21 banks, including state-run and private lenders, BSE and companies such as Jaypee Capital Ltd, state-run MMTC Ltd and Indian Potash. 

Earlier, TS Narayanasami, managing director and chief executive, USE, had said, “Trading membership of USE is initially free with nil transaction charges to begin with. It is envisaged that since almost the entire banking system is a stakeholder, USE will gain significantly by the volumes traded by them on the exchange. USE has tentatively planned to commence operations in June 2010.”

Last year, in an attempt to capture volumes from NSE’s vastly superior derivatives segment, BSE slashed transaction costs for its equity futures and options (F&O) segment. It hoped that the revised fee structures would substantially lower transaction costs for all market participants and improve depth and liquidity in its equity derivatives segment.

According to reports, both NSE and BSE earn over 80% of their revenues from trade charges. Other such charges contribute little to the kitty of exchanges compared with trade charges. For FY09, NSE's total revenues declined to Rs1,024 crore from Rs1,038 crore, however its net profit increased to Rs576 crore from Rs543 crore, a year ago. 







6 years ago

Now that Judiciary has ruled that NSE(other stock exchanges) are semi/quasi govt organizations,it is time ofr govt also to restrict the exchanges from making huge profits,by any name tr.charges,membership fee or other charges.Now also for common man/ordinary investor all charges put together(read total trading charges including IT paid by him/her) is too high.If govt really wants investor penetration, the charges for retail investor must be reduced and exchanges must be prevented from making huge ROI.

SEBI asks MFs to keep expense ratios flat under liquid funds

The market regulator has found that liquid and debt schemes change their expense ratio numerous times during a month and has proposed to limit it to 5 basis points on a daily basis (or 0.05%) in a day or 0.5% in a year

Market watchdog Securities and Exchange Board of India (SEBI) in its recently held mutual fund advisory committee meeting has observed that fund houses were frequently changing the expense ratios of liquid and short-term debt schemes. It was changed 18 times in a super institutional liquid scheme ranging from 0.25%-1.15% in a month.  

"It is mainly done to accommodate high net-worth individuals (HNIs). Fund houses are doing this for the last one year. Investor's interest cannot be protected by increasing the expense ratio. If they (AMCs) reduce it then it is done to pass on the benefits," said a top official of a fund house.   

Fund houses are of the view that such frequent changes in expense ratio is done due to fluctuations in the market and to protect investor's money. The regulator has proposed to limit the expense ratio at 5 basis (0.05%) points on a daily basis or 0.5% in a year.

According to SEBI, Reliance Money Manager Fund short-term institutional plan had revised the expense ratio 15 times (from 0.39%-1.49%) while in the non-institutional category it was changed 11 times (from 0.45%-1.69%). Most of the schemes highlighted by SEBI were of debt and liquid fund category.

"An institutional liquid scheme had revised the expense 13 times in the range of 0.35%-1.35% in January 2009. Most of these schemes have been only increasing their expense ratio," said a CEO of a leading fund house.
Apart from this, SEBI has given the leeway to MFs to have different expense structures for different schemes of a fund. It has also suggested MFs to either have a flat structure at 1.5% for equity funds, 1% for debt funds and 0.75% for index funds including exchange-traded funds (ETFs) and to do away with different expense slabs.

Currently MFs are allowed to charge 1.25% as investment and management fee for the first Rs100 crore of assets under management (AUM), and 1% for the subsequent amount. For the first Rs100 crore of AUM, a fund house can charge a total expense of 2.50% under an equity scheme and 2.25% for a debt scheme. As the corpus increases, the maximum permissible limit the MFs can charge is 1.50% for debt schemes and 1.75% for equity schemes annually. According to sources, the frequent expense ratio changes are aimed to smoothen the net asset value (NAV) movement.


CAG audit: Second setback for telcos as HC too spurns plea for stay

The Court, however, also said the CAG will not ask for any further document except the details relating to revenue-sharing

In a setback to mobile operators, the Delhi High Court today asked them to submit their account books to the apex auditor Comptroller and Auditor General of India (CAG), which has been asked by the government to check under-reporting of revenue for calculating the licence fee, reports PTI.

A division bench comprising justices Sanjay Kishan Kaul and Valmiki Mehta directed telecom operators to provide details of their revenue sharing to the CAG for auditing.

"We direct that without prejudice to the rights and contentions of the parties, the petitioners (telcos) will make available the revenue sharing details/documents to the CAG for auditing," the bench said in an interim order.

Over the telcos plea that they are private industry players and do not fall under the domain of the CAG, the court said, "In our considered view, prima facie the interest of the government is the revenue generated under the licence agreement."

The court, however, also said the CAG will not ask for any further document except the details relating to revenue sharing. "No further material would be asked from petitioners except those concerning the revenue sharing arrangements," the court said.

The court further directed the CAG not to disclose the information given by the telcos in the public domain or to any third-party. "Since this information is being directed to be disclosed without prejudice to the rights and contentions of the petitioners, the said information shall not fall into the public domain and will not be disclosed to any third party," the court said.

The court, however, admitted the petition filed by the GSM lobby the Cellular Operators Association of India (COAI) and CDMA lobby Association of Unified Telecom Service Providers of India (AUSPI) and issued notices to the Department of Telecom (DoT) and the sectoral regulator Telecom Regulatory Authority of India (TRAI).

The COAI and AUSPI had challenged the recent CAG direction to the telcos to submit their revenue sharing details with it for auditing.

Earlier on May 20, telecom tribunal Telecom Disputes Settlement and Appellate Tribunal (TDSAT) had also declined a similar request from Bharti Airtel and Vodafone to stay the CAG audit.


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