MCX Stock Exchange (MCX-SX), which recently got Sebi approval for its equity trading platform, has invited memberships at a competitive price that could prompt incumbents BSE and National Stock Exchange to reconsider their membership fees.
In its introductory offer valid till October 18, MCX-SX has priced a composite membership of the cash and futures & options segments for Rs 30 lakh. This includes a deposit of Rs 20 lakh and an admission fee of Rs 10 lakh.
The fee is almost the same as that charged by the BSE, but lower than the charges on the NSE.
Exchange business is all about liquidity, and traders and clients prefer the most liquid bourse, whatever the other incentives. That is the reason why NSE has been able to charge a premium for membership. The deposit charge for cash market membership on the NSE is Rs 1.25 crore and that for the F&O segment varies from Rs 25-75 lakh.
In order to extend its reach in the hinterland, MCX-SX is offering a 20% discount on composite membership charge, for members residing in "sub-districts and talukas beyond the existing 2000 cities and towns where capital market access is currently not available."
The exchange is offering a 10% to discount to professionally qualified members, who are taking membership in a stock exchange for the first time.
And while the profit margins in the stock exchange business are juicy (between 35-50%), it could take a while for MCX-SX to make a mark, as the industry is almost mature. The bourse will be up against well-entrenched market leader NSE, which currently has almost a 75% market share in the cash segment. And while BSE is a distant number two, it still has the resources to withstand a possible price war by the new entrant.
The number of brokers too has been declining, as many have closed shop, unable to cover their operating costs. The NSE claims to have 1405 members at present, and the BSE, 1383. A majority of the brokers have membership on both exchanges. And while there may not be any steep decline in the headline numbers, markets participants say the number of active brokers would be less than a couple of hundred.