BSE soars over 13% to hit new high on raising transaction charges for equity derivatives

Shares of BSE surged over 13 percent to hit their all-time high after the exchange raised transaction charges for trades in the equity derivatives segment with effect from November 1, 2023.

These changes will primarily be levied on S&P BSE Sensex Options, particularly the nearest or immediate expiry contracts. The new transaction fee structure is based on the incremental billable monthly turnover (premium value), informed the exchange.

The stock surged as much as 13.2 percent to its record high of ₹1,798 in intra-day deals today. It has now soared over 342 percent from its 52-week low of ₹406.20, hit in March 2023.

The stock has given multibagger returns for the last 1 year as well as for 2023 YTD, surging 172 percent and 216 percent, respectively.

New Structure

Under the revised structure, ₹500 per crore will be charged for transactions with turnover up to ₹3 crore. Meanwhile, ₹3,750 per crore will be charged for transactions with turnover over ₹3 crore and up to ₹100 crore.

Furthermore, ₹3,500 per crore will be charged for transactions with turnover between ₹100 crore and ₹750 crore; ₹3,000 per crore for transactions with turnover between ₹750 crore and ₹1,500 crore; ₹2,500 per crore for transactions with turnover between ₹1,500 crore and ₹2,000 crore; and for transactions with turnovers of over ₹2,000 crore, the fee charged will be ₹2,000 per crore.

While NSE has always charged a maximum of ₹5000 per crore of premium, BSE has now increased its slab to a maximum of ₹3,750 per crore of premium.

Expert Views

Sonam Srivastava, Founder and Fund Manager, Wright Research, PMS

BSE, which holds a modest 4.2 percent market share in the derivatives segment, recently hiked its transaction charges. This move is dual-faceted: it can deter some traders due to increased costs, especially those with lean margins, but simultaneously, it presents an avenue for BSE to bolster its revenue. The rising demand for the BSE stock is evident, driven largely by the robust growth in derivatives volumes and the traction its mutual fund platform, Star MF, has been gaining. The elevated charges, while enhancing BSE's revenue stream, may influence traders' strategies, possibly pushing some to re-evaluate their participation or explore alternative trading avenues. In the short term, traders might face a squeeze on their profitability, prompting them to adapt to the evolving cost structure. The balance between BSE's strategic revenue boost and the potential shift in trader behavior will shape the market's dynamics in the near future.

It's not anticipated that the NSE will follow BSE's footsteps in raising transaction charges on the derivatives segment. The rationale behind this expectation stems from the fact that NSE's charges have traditionally been on the higher side compared to BSE. Given this pre-existing disparity in their fee structures, NSE might not find it necessary to adjust its transaction fees in response to BSE's recent revision.

Anirudh Garg, Partner and Head of Research at Invasset, PMS

Regarding the BSE's recent decision to increase transaction charges on the equity derivatives segment effective from November 1, I believe this move could have significant implications, particularly for traders and retail investors. The increased transaction costs, primarily affecting S&P BSE Sensex Options, might raise the breakeven point for retail investors, potentially making it more challenging for them to consistently turn a profit. Under the revised fee structure, the charges will vary based on turnovers, with higher turnovers incurring higher fees. While BSE started with lower slabs to encourage market participation, these adjustments bring their pricing more in line with industry standards. It's also noteworthy that this change specifically applies to S&P BSE Sensex Options, simplifying the fee structure and enhancing transparency for market participants. This could indicate that BSE's margins will likely improve in the coming quarters due to these changes.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.