Vol. 6 | issue 7 | August 2012
MCX-SX finally in the game
MCX-SX will be a testing case for the regulator
by Anil Tyagi
MCX-SX, which recently received permission to launch its equity trading platform, has announced that its benchmark index will be known as ‘SX-40’ – an index of 40 stocks chosen on the basis of liquidity and promoter stake in comparison with BSE Sensex that comprises of 30 stocks and the NSE Nifty that has 50 stocks.
MCX-SX Vice-Chairman, Mr Jignesh Shah, announced drastically lower transaction charges while launching the membership drive that is seen to be quite aggressive and may spark off fierce competition among the three players. Justifying the lower fee structure, Shah said, “The optimisation in transaction charges, along with optimal membership structure will lower the entry barriers to capital markets, thereby fostering inclusive growth.” However, there is hardly any empirical evidence to prove the same except for the fact that it may encourage members to go in for self driven volumes as also day traders who may not do any good to the market except making it more risky. It may be worth mentioning that the exchange fee accounts for only a small portion of the trader’s total cost.
The membership drive launched by MCX-SX is also likely to lead to claims and counter claims on its success. Some basic financial calculations reveal that the membership costs seem to be on the higher side. The basic fee plus deposits add up to Rs 50 lakh (though MCX-SX is offering some discounts to certain specific categories of members till October 18, 2012). A simple rate of interest at 12 per cent per annum works out to an opportunity cost of Rs 50,000 per month. Anyone, other than existing BSE and NSE members, who wants to start a broking business will have to spend a tidy sum on setting up considering the sky-rocketing real estate prices and soaring rentals. Add to this, the usual staff costs, administrative expenses, regulatory compliances and so on, the business model may not appear to be worthy of a second look………..READ MORE