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Informist, Tuesday, Nov. 12, 2024

By Rajesh Gajra

MUMBAI – The BSE Ltd. will continue to seek a favourable response from the dominant clearing corporation, and continue to resort to escalation to the market regulator, on the issue of skewed clearing charges policy under the clearing interoperability agreement between exchanges and clearing corporations, Managing Director and Chief Executive Officer Sundararaman Ramamurthy told analysts and investors Tuesday in a post-earnings conference call. He said since September 2023, the BSE has been discussing with National Clearing Ltd., the clearing subsidiary of National Stock Exchange of India Ltd. and having the dominant market share in clearing and settlement activity, to reduce the clearing charges levied on BSE for clearing and settling trades of BSE brokers.

"Our dialogue in this matter with the clearing corporation and the escalation that we have made to the regulators on this shall continue till we get a satisfactory resolution," Ramamurthy said. He said the interoperability agreement uses the yardstick of levying clearing charge per contract. Since the relaunch of equity futures and options contracts on the exchange, the BSE has witnessed participants trade nearer to the expiry where the premium per contract is much lower.

This makes it lopsided for the BSE since it earns low revenue as an exchange on transaction charges on premium turnover and pays NSE Clearing and its own clearing subsidiary, Indian Clearing Corporation Ltd., a higher charge based on number of contracts. "If the income earning is based on premium per crore (INR 10 million), then the clearing charges paid also should be on premium per crore per person (client)," Ramamurthy said.

BSE's clearing subsidiary's market share in the clearing and settlement market, where it competes with NSE Clearing, is very low. In NSE's post September quarter earnings call with shareholders on Nov 5, its managing director and chief executive officer Ashishkumar Chauhan said NSE Clearing had a "robust market share of 94% for clearing and settlement for cash equity assignments, 96% for equity delivery segment and 64% for currency derivatives segment in Jul-Sept." This means that BSE ends up paying NSE Clearing clearing and settlement charges for the trades on BSE by its brokers.

The BSE, however, may see a favourable reduction in clearing charges due to the doubling in market lot for Sensex futures and options contracts to 20, as well for Bankex contracts to 30, from Nov 21. Ramamurthy said when the size of the contract increases the premium per contract will be more and therefore the transaction charges received by the exchange should increase. "For every one rupee of clearing charge paid, the amount of premium collected will be more," he said.

But the BSE CEO cautioned that the benefit will depend upon how the market traders view that increase in the premium and how much they are therefore able to trade those contracts. It will be an "important factor to wait and watch," Ramamurthy said.

Shares of BSE ended Tuesday 1.2% up at INR 4,678.20 on the National Stock Exchange.  End

Edited by Vidhi Verma

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