The dwindling cash market volumes have resulted in a lower contribution of core income to exchange revenues. The trend seen in the last six quarters continued in the latest quarterly numbers of the BSE and the National Stock Exchange (NSE) too.
In the third quarter, the core income of the BSE and the NSE stood at Rs 57 crore and Rs 203 crore, respectively, representing 49% and 56% of total revenue for the respective stock exchanges.
While the core income of NSE grew 5% from Rs 193 crore in the same quarter last year, BSE fell 7.8% from Rs 74 crore.
The operating income of stock exchanges includes membership fees, transaction charges and penalties on account of non-compliance by member brokers. The transaction charges which are levied on both the cash and derivative trades form the biggest portion of this income. The transaction charges for cash market are relatively higher.
In the last two years, the cash market volumes have declined by nearly a fourth even as activity on derivatives side has risen by a similar extent. In the third quarter, the combined average daily volume of both exchanges in the cash segment was Rs 13,142 crore, representing 7.5% of the total market activity. It observed a 4% y-o-y drop.
The futures and options segment clocked in an ADT of Rs 1.75 lakh crore during the period, up over 10% compared with the last year.
Due to weaker trading activities in last two years, non-core income continued to support the topline of major stock exchanges. The other income of BSE has surpassed core income for at least last eight quarters. NSE’s other income has on average been 0.9 times its core income in last three quarters.
Non-core revenue of the exchanges largely consists of income from investments and dividends, including those from subsidiaries and equity holdings.
While NSE accounts such receipts as other income, BSE reports it as a revenue item called “investments and deposit income”.
NSE pocketed exception gains of Rs 122.3 crore in the quarter stemming from the sale of equity shares of subsidiary company and sale of shares of two subsidiary company and an associate company to another group subsidiary. BSE witnessed a marginal drop of 3% in net earnings to Rs 36.6 crore y-o-y.