New Delhi: Gearing up to start full-fledged stock exchange, MCX-SX on Wednesday launched a membership drive to sign-up entities to trade on its platform, while offering competitive rates to take on its rivals NSE and BSE.
MCX-SX (MCX Stock Exchange) said that it would follow a "integrated India model" for its operations, under which it would have special focus on smaller cities to help create an equity culture across the country.
MCX-SX is currently present only in currency derivatives segment, with about 750 members. It recently got market regulator Sebi's nod to deal in stocks, equity futures and options, interest rate derivatives and wholesale debt markets.
BSE has listed out a total of 1,083 members on its website, while NSE has more than 1,400 members.
Under an introductory offer valid till October 18, MCX-SX would provide entry-level membership at Rs 25 lakh (Rs 5 lakh of membership fee and Rs 20 lakh deposits).
While NSE has new membership fee of Rs 5 lakh, the same at BSE is Rs 2.5 lakh. NSE and BSE seek deposits worth up to Rs 1.25 crore and Rs 30 lakh respectively from their members.
Besides, the members at MCX-SX would have to maintain a networth of Rs 30 lakh, which is similar at BSE but higher at a minimum of Rs 1 crore at NSE.
Experts say that market might see some course-correction in the membership charges, given the competitive price offered by MCX-SX, although charges have already come down at BSE in the past couple of years.
The membership cost structure of an exchange typically includes membership fee, deposits and members' networth.
MCX-SX would seek to attract people from smaller cities through its competitive cost-structure. Currently, the market participation and liquidity is limited to less than 2 percent of population and is heavily dominated by top metro cities.
As per latest data available with Sebi, the top four cities accounted for 82.9 percent of total cash segment turnover at NSE in July 2012. At the BSE, the top-four cities accounted for about 64 per cent of total turnover.
MCX-SX said that its introductory entry-level membership offer of Rs 25 lakhs, which includes a rebate given against transaction charge during the offer and which would rise to Rs 50 lakh after October 18.
It is designed to bring in cost optimisation as it frees up huge capital for members and brokers that would otherwise be blocked in exchanges, it said.
Brokers and members would be be able to utilise this fund towards client acquisition, training of staff and business expansion, MCX-SX said, while announcing two new categories of memberships for Indian markets -- professionally qualified members and rural entrepreneur members.
Besides, MCX-SX would have a third category of composite members for all eligible entities.
The exchange said the two newly introduced special categories will help towards the larger goal of financial inclusion and market development.
In its 'Professionally Qualified Members' category, the exchange would seek to attract professionals with an experience of capital market ecosystem such as investment banking, private equity, venture capital, broking and financial intermediation industry.
Other professionals like MBAs, lawyers, engineers, Chartered Accountants, doctors too would be eligible for this category. MCX-SX will provide training, covering all asset classes and market segments for the members' staff, besides other benefits including a 10 percent discount on on composite membership charges.
The 'Rural Entrepreneur Membership' category would target persons in those 5,924 sub-districts and talukas, beyond the existing 2,000, where there is capital no market penetration. MCX-SX would provide various capacity building services, including training programmes, to this category as well.
Commenting on the membership drive, MCX-SX Managing Director and CEO Joseph Massey said: "We have implemented an integrated India model, which will foster balanced participation from foreign institutional investors, domestic financial institutions and new members from Tier II and Tier III centres.
"Our aim is to drive financial inclusion by optimising the cost structure of membership and innovating two unique categories for MCX-SX membership," he said.
The exchange would offer membership in categories of Trading Member, Self Clearing Member, Trading-cum-Clearing Member and Professional Clearing Member (PCM.)
The membership road-shows will be held in multiple centres across the country, starting in Mumbai on September 10, 2012. The other cities where these road-shows would be held include Ahmedabad, New Delhi, Kolkata, Chennai, Hyderabad and Indore.