MCX-SX Announces Incentives to Boost Liquidity

Trading in equity and stock derivatives segment started in MCX-SX Stock Exchange from last Monday (11/02/2013), and  now It is planning to offer incentives to brokers, dealers and retail investors who trade to raise the bourse’s volumes. This liquidity enhancement scheme will come into effect on March 6 and it will involve the 1116 stocks traded on the cash market and around 150 stocks traded on the futures and options segment. In the futures segment, the scheme has focused on a universe of 50 stocks(i.e. 40 stocks of SX 40 and ten other liquid scrips) for market makers.

Incentives to Participants

All participants on the cash market are entitled to receive up to Rs 600 per crore if they generate daily volumes up to Rs 200 crore. Those posting volumes more than Rs 200 crore will receive Rs 850 per crore. In the derivatives segment exchange transaction fees will be waived completely for those generating passive buy or sell orders, or orders that remain on the exchange order book. To additionally incentivise those generating passive buy and sell orders, 50% of the transaction fees paid by those placing active orders will be passed on to them.

Additional incentives will be provided for four months beginning March 6 to retail clients, dealers and proprietary traders to create a liquid order book based on genuine end users’ participation. All retail investors/clients will be entitled to Rs 100 per day for trading in equity cash and equity derivatives. The top 10 registered dealers from each region (North, South, East and West) will receive a monthly incentive of Rs 1 lakh, with the top performer receiving an additional Rs 1 lakh in each region. The top three members (on the basis of equity cash plus equity futures turnover) will be rewarded (monthly) with Rs 11 lakh, Rs 7.5 lakh and Rs 5 lakh respectively. A detailed information on the scheme has been posted on the exchange’s web site.

Tax Treatment

According to a MCX-SX media release, incentives provided for cash market trades will offset around 64 percent of the Securities Transaction Tax (STT) charges, and those for stock futures trades will offset around 37 percent of STT. On passive orders (to buy or to sell at a price below or above prevailing market price), investors will get a full waiver on transaction costs.