BSE Share Rises 317% In 8 Months, Hikes Fees In Equity Derivatives Transactions; Will NSE Follow Suit?

Investors made massive buying in BSE shares taking the exchange to a new 52-week high. The stellar performance in BSE shares comes despite the exchange's hike in transaction charges of the equity derivatives segment in the range of Rs 500 to Rs 3,500 per crore. BSE is listed on its rival NSE. Although BSE's move is expected to have significant implications for investors, one would wonder if its rival NSE will also follow the same.

In its regulatory filing, BSE said that trading members may note that the transaction charges structure for the Equity derivatives segment will be revised with effect from November 01, 2023, as below:

- An incremental billable monthly turnover of up to Rs 3 crore will have a transaction charge of Rs 500 per crore.

- more than Rs 3 crore to Rs 100 crore turnover, the charge will be Rs 3,750 per crore.

- More than Rs 100 crore to Rs 750 crore, the charge is Rs 3,500 per crore.

- More than Rs 750 crore to Rs 1,500 crore, the transaction charge is Rs 3,000 per crore.

- More than Rs 1,500 crore to Rs 2,000 crore, the transaction charge is Rs 2,000 per crore.

Following this, BSE shares touched a new 52-week high of Rs 1,798 apiece on NSE. The stock ended at Rs 1,695 apiece, up by 6.75%. It needs to be noted that BSE shares outperformed benchmark Nifty 50 which slipped by 261 points or 1.34% on October 23rd.

Notably, BSE shares have zoomed by over 317% from its 52-week low of Rs 406.20 apiece which was recorded on March 28, 2023, on NSE.

Will NSE follow suit?

According to Sonam Srivastava, Founder and Fund Manager, Wright Research, PMS, BSE, which holds a modest 4.2% market share in the derivatives segment, recently hiked its transaction charges. This move is dual-faceted: it can deter some traders due to increased costs, especially those with lean margins, but simultaneously, it presents an avenue for BSE to bolster its revenue.

Meanwhile, Anirudh Garg, Partner and Head of Research at Invasset, PMS believes that this move could have significant implications, particularly for traders and retail investors. The increased transaction costs, primarily affecting S&P BSE Sensex Options, might raise the breakeven point for retail investors, potentially making it more challenging for them to consistently turn a profit.

Under the revised fee structure, Garg explained that the charges will vary based on turnovers, with higher turnovers incurring higher fees. While BSE started with lower slabs to encourage market participation, these adjustments bring their pricing more in line with industry standards. It's also noteworthy that this change specifically applies to S&P BSE Sensex Options, simplifying the fee structure and enhancing transparency for market participants. This could indicate that BSE's margins will likely improve in the coming quarters due to these changes.

The decision to alter transaction charges is typically at the discretion of each stock exchange and is not universally synchronized across all platforms, Garg added.

In the short term, Wright Research's fund manager added, "traders might 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 behavior will shape the market's dynamics in the near future."

On BSE's share price, Srivastava added, "The rising demand for the BSE stock is evident, driven largely by the robust growth in derivatives volumes and the traction its mutual fund platform, Star MF, has been gaining. The elevated charges, while enhancing BSE's revenue stream, may influence traders' strategies, possibly pushing some to re-evaluate their participation or explore alternative trading avenues."

Talking about whether NSE will follow a similar pattern. Srivastava said, "It's not anticipated that the NSE will follow BSE's footsteps in raising transaction charges on the derivatives segment. The rationale behind this expectation stems from the fact that NSE's charges have traditionally been on the higher side compared to BSE. Given this pre-existing disparity in their fee structures, NSE might not find it necessary to adjust its transaction fees in response to BSE's recent revision."

Along similar lines, Garg said, "While the Bombay Stock Exchange (BSE) has recently revealed its plans to increase transaction charges in the equity derivatives segment, it doesn't automatically imply that the National Stock Exchange (NSE) will adopt identical modifications. Stock exchanges independently evaluate and adjust their fee structures based on their unique considerations, competitive positioning, and the prevailing market dynamics."

Consequently, Garg said, while it remains possible that NSE might introduce similar changes in the future, it is by no means a foregone conclusion. In this context, market participants regularly stay vigilant, monitoring these developments closely to remain well-informed about potential alterations in transaction costs on different exchanges.

Disclaimer:

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