Country's largest stock exchange NSE on Monday announced a new category of membership for those not trading on behalf of their clients, with lower deposit and networth requirements.
The new class of membership, named 'Alpha', would become effective on Tuesday and is aimed at entrepreneurs and professional trading members and would "provide quick, easy and cost efficient access to the trading platform to firms that do not handle client accounts," NSE said in a circular.
National Stock Exchange would give capital market segment membership at a deposit of Rs 20 lakh (Rs 2 million) and in F&O segment for Rs 25 lakh (Rs 2.5 million).
Members would be allowed choose any one or both the segments, as against the existing offer of combined membership of both the segments, for a deposit of Rs 1.10 crore.
Besides, the exchange has also lowered the networth requirement by 50 per cent to Rs 50 lakh (Rs 5 million) for the new category.
The new category of membership has been announced by NSE amid rising competition in the market, whereas BSE has been seeking to aggressively expand its base and MCX-SX is slated to begin operating as a full-fledged bourse in November.
Earlier this month, MCX-SX began its membership drive at competitive rates.
NSE said its existing members can also move to the new category and the resulting surplus deposits would be utilised to pay transaction and infrastructure charges over a period of three years.
The exchange said the systemic challenges posed by each of these categories of intermediaries would vary.
A retail brokerage servicing a large number of clients could be required to establish and manage elaborate systems and processes to handle client funds and securities, whereas the same may not be the case with a brokerage firm trading essentially on its own account.
The brokerage handling customer funds therefore has to be required to place larger capital and have higher networth, while a firm trading with its own money, could be allowed to enter with a lower capital requirement, NSE said.
"This differentiation is critical to ensure that only well capitalized entities are allowed to handle investor funds and those who are not sufficiently capitalised should not have access to investor funds," it added.
In the current scenario all market intermediaries, irrespective of whether they handle customer funds or not, are subjected to the same base capital and networth requirements.
It was felt that firms that do not handle client funds may be allowed access with lower capital and networth, NSE said.
As they do not handle any outside investor funds, investor interests would not be compromised, it added.