BSE reopens limited trading membership to boost derivatives

Our Markets Bureau

Mumbai, Dec 9: In a desperate attempt to impart liquidity to the sagging turnover and invite more participation on the derivatives segment, The Stock Exchange, Mumbai’s (BSE) governing council of the derivatives segment has decided to reopen admission to Limited Trading Membership (LTM) in the derivatives’ segment of the exchange.

In a communication to its members on Friday, BSE said that the application forms for registration as LTM of derivatives segment will now be acceptable at the membership department of the exchange effective from Friday, December 7.

The decision to reopen the admission to LTM was taken at the meeting of the special committee of the governing council held on December 5.

LTM in effect would be open for sub-brokers and persons with limited resources, but with full knowledge of the derivatives segment.
The BSE has, however, decided that the members who wish to become LTM on the derivatives segment will have to get themselves affiliated “only” with the trading-cum-clearing members (TCM) of the exchange.

Besides the National Stock Exchange (NSE), BSE is the only other exchange that offers trading facility in all derivatives products, including index futures and options and options and futures on individual stocks.

Despite stock futures showing a sharp rise in turnover on the NSE, the picture at BSE is totally different. The overall turnover in all derivatives products have failed to cross Rs 10 crore at BSE, with the bulk coming from stock futures which contributed around 60-70 per cent of the total turnover.

The BSE administration is also worried as the turnover in the derivatives segment of the exchange is not picking up in consonance with the rise in the turnover of the cash market.

The overall turnover on the cash market has shown a sharp uptrend following the introduction of stock futures, which market players also attribute to sharp rise in prices of Sensex-based stocks during the last one month.

The governing council had revised the financial requirements of Trading Membership in May 2001.

The financial requirements of Trading and Clearing Membership/Clearing Membership were, however, kept unchanged.
A member seeking an LTM facility at the exchange can avail it at Rs 18.50 lakh, plus he also has to furnish a minimum deposit of Rs 25 lakhs.

The total investment of the member will include a minimum security deposit after registration with the Securities and Exchange Board of India (Sebi) at Rs 2.5 lakh, which will be increased to Rs 5 lakh by January 1, 2002 (50 per cent cash and 50 per cent cash/cash equivalents) and another Rs 7.5 lakh by July 1, 2002 (33.33 per cent in cash, 33.33 per cent in cash/cash equivalents and 33.33 per cent in cash/cash equivalent/ approved securities).

The other charges includes annual charges of Rs 25,000 and a one-time charge of Rs 3 lakh (Rs 2 lakh towards Investor Protection Fund and Rs 1 lakh towards initial contribution to Trade Guarantee Fund).