As correctly predicted by Moneylife, the NSE also announced reduction in transaction charges from next month citing the need to increase liquidity and encourage wider participation of investors

Mumbai: Two days after the privately promoted MCX Stock Exchange (MCX-SX) bourse announced up to 50% lower transaction fees for the prospective broker-members, country's largest exchange National Stock Exchange (NSE) also announced a reduction in its fee, citing the need to increase liquidity and encourage wider participation of investors, reports PTI. Moneylife on Monday has correctly predicted that NSE, the most expensive but richest exchange would soon follow the suit and this may start a bloody price war among exchanges.

The reduced charges, not yet quantified, will be effective 1st October, NSE said in a statement.

"The move will help increasing the liquidity and make transactions cost-efficient, which is expected to bring more investments into the market," an NSE spokesperson told PTI.

The yet-to-be operational MCX Stock Exchange on Monday announced lower transaction charges to the tune of 50%.

The NSE members will be able to set off annual subscription charge of Rs1 lakh per annum against their transaction charges, the bourse said, adding the annual subscription charges are no longer a fixed overhead. "This will give an immediate relief to over 1,400 trading members," an NSE statement said.

In the F&O segment, advance transaction charges are currently being offset against transactions charges of the current year. Whatever is not utilised can be carried forward till they utilize the same.

Just as in the case of rural VSATs etc, where adjustments have been made against transaction charges, the exchange has decided to give benefit of annual subscription charges in the capital market segment.

In 1996, when the cash segment was introduced, charge was Rs10 for a lakh of trade for any traded value. In 2000 it was brought down to Rs4 for traded value above Rs800 crore and Rs7 for traded value up to Rs200 crore.

It was further brought down in 2005 to Rs3.50 per lakh of trade for any traded value and then again in 2009 it was brought down to Rs3.25 for a lakh of trade for traded value up to the first Rs1,250 crore and Rs3 for traded value above Rs15,000 crore.

In the Futures & Options too, the transaction charges have been brought down several times. In July 2001, for both futures and options, fees was levied (after an initial waiver in 2000) at Rs2 for a lakh of trade, the NSE said.

In 2005, charges on options began to be levied on just the premium and not the traded value. In 2009, futures fees was brought down to Rs1.90 per lakh for traded value up to the first Rs2,500 crore and Rs1.75 for traded value above Rs15,000 crore.