Under the scheme, brokers and other market intermediaries will be given incentives for a specified period of time to bring in liquidity and generate investor interest in those securities which have limited trading activity

MCX Stock Exchange (MCX-SX) on Tuesday said it will launch incentive schemes for brokers and intermediaries to enhance liquidity in illiquid securities in the equity and derivatives segments from March 2013.

“MCX-SX will introduce liquidity enhancement scheme (LES) in equity and equity derivatives segments with effect from 6 March, 2013,” the stock exchange said in a statement.

This is the first national exchange in the country to offer incentives for liquidity enhancement in the equity cash market, it added.

Under the scheme, brokers and other market intermediaries will be given incentives for a specified period of time to bring in liquidity and generate investor interest in those securities which have limited trading activity.

There are more than 2,000 illiquid stocks on leading exchanges. The exchange said the scheme would benefit all participants across various segments of the market.

MCX-SX said the market maker performing up to 90% of its obligation during the month in 25 securities would be entitled to receive an additional incentive of Rs21 lakh per month. In case of 40 securities, the member would be entitled to receive an additional incentive of Rs50 lakh per month.

“All passive orders will entitle the member/investor to receive about 50% of the transaction cost received by the exchange from the active order,” it added.

The schemes would offer incentives for contributing to liquidity in all equity and equity derivative instruments at MCX-SX with a special focus on Futures contracts of 50 securities as notified by the exchange.

“Market makers will be obligated to contribute to genuine participation and will be incentivised at a higher rate compared to other participants. Payments to members would be made on a fortnightly basis,” MCX-SX said.

Additionally, incentives would be provided for retail clients, dealers and proprietary traders to create a liquid order book based on genuine end users' participation. These incentives are available for a period of four months, from March to June.

MCX-SX said all retail investors/clients would be entitled to Rs100 per day for trading in equity cash and equity derivatives, while top 10 registered dealers from each region (North, South, East and West) would receive a monthly incentive of Rs1 lakh, with the best performer receiving an additional Rs1 lakh in each region.

Last week, MCX-SX, the third full-fledged equity bourse after BSE and NSE, had begun trading in equities and equity derivatives.

Market regulator Securities and Exchange Board of India (SEBI) earlier this month had allowed stock exchanges to introduce incentive schemes for brokers and intermediaries to enhance liquidity in illiquid securities in the equity cash segment.