It’s a price war at the bourses

It took less than a day for the country's top bourse, the National Stock Exchange, to hurriedly convene a meeting of its board's pricing committee to take stock of the MCX SX's aggressive move to get members on board and get a foothold in trading volumes. The move, however, did not surprise those who are familiar with the business strategy of Jignesh Shah, the promoter of Financial Technologies and other group companies including MCX.

MCX-SX broke the price barrier in the stock exchange business by announcing a significantly lower membership cost and transaction fee. This has forced NSE to at least take stock to begin with. Market is rife with speculation that NSE too may bring its cost structure down sooner than later. A source close to the development told The Indian Express there may be some changes in NSE's membership fee too.

MCX-SX's pricing move just reinforces the benefits of competition, be it the consumer goods market, where players indulge in a slugfest over wafer-thin margins, or the more complex exchange business. When NSE entered the exchange business in 1994, it sharply cut membership cost to Rs 1.5 crore from Rs 4 crore (charged by BSE then) as its offering. MCX-SX has taken it a couple of steps ahead. In the introductory phase, it has offered membership for as little as Rs 25 lakh till October 18, 2012. It says the price will double to Rs 50 lakh after that. But even Rs 50 lakh is significantly lower to what NSE charges today. On the net worth front too, NSE demands Rs 1 crore networth to be maintained by corporate members at all times as against Rs 30 lakh required by BSE and MCX-SX. This is the minimum prescribed by the market regulator Securities and Exchange Board of India.

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