BSE to begin charging for currency derivatives trade

Mumbai: After exempting trades on its currency derivatives platform from any transaction charges for nearly one year, leading bourse BSE will begin levying a fee for this segment from December this year.

However, the proposed transaction charges of the BSE -- which would be Rs 2 per crore of turnover initially and would eventually rise to Rs 10 per crore by October 2015 -- would still be only a small fraction of the charges levied by its rivals NSE and MCX Stock Exchange for currency derivatives.

The BSE launched its currency derivatives platform in November 2013 and has not levied any transaction fees for these trades since then, while the NSE and MCX-SX began charging these trades in August 2011 after an order from the fair trade regulator Competition Commission of India (CCI).

Interestingly, BSE's decision to levy transaction charges on trades in currency derivatives comes within days of an August 4 order from the Competition Appellate Tribunal, which upheld the CCI order against National Stock Exchange (NSE).

In 2011, the competition watchdog had found the NSE guilty of abusing its dominant market position and adopting unfair trade practices in currency derivatives trading by not charging for trades in currency derivatives segment. The NSE had later challenged the CCI order before Compat while it has said it would also appeal against the Tribunal directive.

However, the NSE had begun levying transaction fees for currency derivatives soon after the CCI order nearly three years ago, while MCX-SX had also followed the suit.
In a circular issued today, the BSE said it has decided to levy transaction charge on trades done in currency derivative contracts, although the waiver for trades in Interest Rate derivatives contracts would continue till January 31, 2015.

"The Transaction Charges structure has been designed to give benefit of extremely low cost open source technology and shall be applicable with effect from December 1, 2014."

Earlier in March this year, the BSE extended waiver of transaction charges in currency derivatives by six months till November 30, 2014, and for the Interest Rate derivatives for a further period of eight months till January 31, 2015.

The charges for currency derivatives would be Rs two per crore of turnover for two months from December 1, 2014 to January 31, 2015, and would increase to Rs 4 for the next two months. It would further rise to Rs 6 from April 1, 2015 for two months, then to Rs 8 for next two months and finally to Rs 10 with effect from October 1, 2015.

In comparison, the NSE charges Rs 100-115 for every Rs one crore of trades value in currency futures segment in four different slabs. The charges are almost similar for MCX-SX.

For currency options, the NSE charges are Rs 30-40 for every Rs one lakh of premium value in three slabs.

Besides, the NSE and MCX-SX require their trading members to contribute an amount as a percentage of turnover to the Investors Protection Fund, as against a flat one-time payment of Rs 250 charged by the BSE. Some other facilities are also offered free by the BSE, although they are chargeable at the NSE and MCX-SX.