EEB products will receive nip-and-tuck treatment under Sundararaman Ramamurthy

BSE (formerly Bombay Stock Exchange), Asia’s oldest exchange, is initiating various adjustments to its products to stem the decline in market share, both in the cash and derivatives segments, people familiar with the matter said.

Under the leadership of Sundararaman Ramamurthy, the exchange has lined up various changes in the cash market, equity derivatives, and currency derivatives.

Ramamurthy, one of the early architects of the rival National Stock Exchange, took over as managing director and chief executive of BSE in January.

For the cash segment, BSE has reduced the size of the mark to just 1 paisa for shares below Rs 100. The measure has already begun to show results, and the turnover of the shares in this segment grew by 14 percent in March.

In February, the BSE introduced 10-country exercise intervals for the currency options segment. The move helps lower premiums, leading to lower trading costs.

Strikes with a strike interval of 10 paise have contributed to 64 percent of the US dollar/rupee turnover in March.

The most significant change, however, will be the relaunch of the Sensex and Bankex derivatives contracts.

Sensex lot sizes will be reduced from 15 to 10; for Bankex index derivatives, from 20 to 15. The change is aimed at reducing the lot size and therefore the spread to attract traders.

Now, Sensex’s contract size will be Rs 6 lakh, compared to Nifty’s Rs 9 lakh.

The exchange will also reach out to brokers and traders, highlighting the benefits of product tweaks and low costs. It will also underscore the high correlation between the Sensex and Nifty, the most popular index derivatives.

Another unique proposition offered by the exchange will be to move the expiration day to Friday (from Thursday) to appeal to traders with specific hedging and trading needs.

“The exchange has been in dialogue with several major brokers such as Zerodha, Upstox, ICICI Securities, and Axis Securities. On many platforms, the BSE had no access and prices were not displayed to traders. The BSE is engaging with them to facilitate the same,” a person familiar with the news said.

Transaction fees on stock futures at BSE are zero, while it claims 90 percent lower transaction fees on stock options.

Despite lower costs, the BSE has failed to develop cracks in NSE’s dominant position.

Industry players say traders are willing to incur higher trading costs for a venue that offers greater liquidity, helping to reduce impact costs.

“BSE impact costs are on the higher side. It’s like a chicken and egg situation. All these product settings are innovative, but traders will not move unless there is liquidity. And liquidity can’t be generated until traders move in,” said one broker.

In the cash segment, the exchange had a market share of nearly 7 percent in March, up from 6.6 percent the previous month.

In the derivatives segment, meanwhile, its market share has shrunk to almost zero, from 2.5 percent at the end of the last fiscal year.