India's leading stock exchange BSE (Bombay Stock Exchange) will launch a liquidity enhancement scheme on monthly single stock options and index options from September. Under the liquidity enhancement scheme (LES), brokers and other market intermediaries are given incentives for a specified period of time to bring in liquidity and generate investor interest in securities which have limited trading activity.

In a notice, BSE said, "The exchange shall be launching the liquidity enhancement scheme on monthly single stock options and index options of equity derivative segment with effect from September 1, 2018."

Index options allow an investor the right to purchase or sell the underlying stock index for a defined time period. Besides, index options are cash settled when exercised, as opposed to options on single stocks where the underlying stock is transferred when exercised.

The bourse said it will monitor the performance of the programme including the presence of market makers and their compliance with the quote obligations through a mix of online and offline monitoring tools. Besides, it will publish information on the programme from time to time.

LES on stock options and index options programme may remain in force for a maximum period of three years as a part of SEBI rule. Once the scheme is discontinued, the exchange has the option to re-introduce it provided "it is less than the three year period since the introduction of the scheme on that security".