BSE stock jumped over 13 percent and made a new all-time high at Rs 1,798.00 after the Bombay Stock Exchange announced on October 20 that it would increase transaction charges on the equity derivatives segment with effect from November 1.
These changes will primarily be levied on S&P BSE Sensex Options, particularly the nearest or immediate expiry contracts. The new transaction fee structure is based on the incremental billable monthly turnover (premium value).
With BSE slowly improving their market share in the derivatives segment, this move to increase transaction costs will negatively impact traders and especially retail investors, according to market experts.
"As the majority of the retail investors are option buyers, any increase in transaction costs would further impact their breakeven point and make it more difficult to consistently make profits," said A R Ramachandran of Tips2trades.
Under the revised fee structure, the charges will be Rs 500 per crore for turnovers up to Rs 3 crore. For turnovers of more than Rs 3 crore and up to Rs 100 crore, the charges levied will be Rs 3,750 per crore.
Meanwhile, for turnovers in the range of Rs 100 crore to Rs 750 crore, charges of Rs 3,500 per crore will be applied. Transactions with turnovers between more than Rs 750 crore and Rs 1,500 crore will have charges of Rs 3,000 per crore.
For turnovers above Rs 1,500 crore up to Rs 2,000 crore, the fees will be Rs 2,500 per crore. For turnovers above Rs 2,000 crore, a transaction fee of Rs 2,000 per crore will be charged.
While NSE has always charged a maximum of Rs 5000 per crore of premium as an exchange charge, BSE has now come with a max slab of Rs 3,750 per crore of premium.
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"BSE started off at lower slabs to incentivize the market and to ensure trading volumes are increasing on their derivative products. It has now resorted to increasing the price in line with market standards," said Trivesh D, COO at Tradejini.
Meanwhile, according to Anirudh Garg Partner and Head of Research at Invasset, PMS, increased transaction costs might raise the breakeven point for retail investors, potentially making it more challenging for them to consistently turn a profit.
On today's surge in BSE's stock, Ramachandran said, "With the increase in transaction costs, margins for BSE in the coming quarters are bound to improve as more traders join the options trading bandwagon and hence the phenomenal rally seen in the BSE stock price."
According to Ramachandran, BSE seems very overbought on the daily charts and advised investors to book profits as a daily close below support of Rs 1,587 could drag the stock down to Rs 1,400 in the near term.
BSE holds a modest 4.2% market share in the derivatives segment. "The rising demand for the BSE stock is driven largely by the robust growth in derivatives volumes and the traction its mutual fund platform, Star MF, has been gaining," said Sonam Srivastava, Founder and Fund Manager, Wright Research, PMS.
In the short term, Srivastava expects traders to face a squeeze on their profitability, prompting them to adapt to the evolving cost structure. The balance between BSE's strategic revenue boost and the potential shift in trader behaviour will shape the market's dynamics in the near future.
It is worth noting that the nearest or immediate expiry contracts of S&P BSE Sensex Options will be determined based on the trade date. The turnover derived from premiums for these contracts will be calculated daily and then aggregated at the close of the month.
Transaction charges will be applied according to the specified slabs, based on the incremental turnover basis for the cumulative turnover at the end of the month. Traders should expect a revised turnover and transaction charges file that aligns with this updated structure.
These transaction fee changes only apply to S&P BSE Sensex Options, with no revisions being done to transaction charges in other equity derivatives contracts. The revisions are also aimed at simplifying the fee structure and improving transparency for market participants within this segment.
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