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Competition among stock exchanges to grab volume is set to intensify from Monday when MCX Stock Exchange (MCX-SX) goes live with its equity and derivatives segments. The latest entrant has hand-picked 1,116 of the most liquid companies for trading on its platform and has launched its benchmark index — SX40 — to take on the Sensex and the Nifty.
It is widely believed that the exchange will adopt aggressive methods and also unveil an incentive mechanism to get more broker members and companies on board so that it can garner as much market share as possible.
Interestingly, just a day ahead of the launch of the new exchange, the capital market regulator approved a market-making scheme for companies listed in the permitted category on stock exchanges. MCX-SX might try to leverage this. Permitted category companies refers to those entities that are already listed on existing stock exchanges and which a new entrant includes on its platform.
The top officials of the exchange, however, say that it is too early to talk about market share and the focus would be on building a firm foundation and broaden the overall equity market.
“The exchange is a long-term institutional set-up and we are focused on the processes and systems,” said Jignesh Shah, vice-chairman, MCX-SX. “We have not set any volume target,” he added while addressing media persons on Saturday after the exchange was launched by finance minister P Chidambaram.
While the exchange has decided to initially start operations with equity and derivatives, it will later try its luck with interest rate futures, the corporate bond segment and even a platform for small and medium enterprises.
While it has been more than 20 years since an equity exchange was launched in India, the recent past did see its fair share of developments due to the impending entry of a new player. Brokers seem to be the biggest beneficiaries as membership fees dropped. MCX-SX has managed to get a little over 400 broker members on board.
MCX-SX launched a membership drive with fees almost 30-40% lower than that of the National Stock Exchange (NSE), which is currently the largest equity bourse in the country. It led to the NSE launching a new category of membership with significantly lower fees. MCX-SX has also pegged its trading costs lower than that of existing stock exchanges.
Meanwhile, the derivatives segment of the exchange will have around 150 stocks on which single stocks future would be launched.