Published On: Fri, Sep 16th, 2011

BSE Introduces Liquidity Enhancement Program in Derivatives

Pursuant to SEBI (Securities and Exchange Board of India) granting permission to Exchanges to introduce liquidity enhancement schemes in the Equity Derivatives segment in June 2011, BSE Ltd. has announced the launch of a series of Liquidity Enhancement Incentive Program (LEIPS) with the goal of creating lasting, self-sustaining liquidity in BSE’s Derivatives Segment.

The focus of the first two program will be on Derivatives on BSE’s bellwether index, SENSEX and its underlying 30 stocks.

As part of these program, BSE will incentivize all its Derivatives members by paying them as much as Rs. 107 Crore over the duration of these two program.

Key features that characterize the LEIPS structure include:
1. Payments to all participating members being paid for Derivatives volume traded AND also for Open Interest maintained in the Derivatives segment.
2. Additionally Exchange fees for the Derivatives segment has been slashed to Rs. 0.00 or Rs 50.00 in some cases (working out to 1/100th the fees for Options trading at other Exchanges in the country).
3. Liquidity in the segment will be ensured with the presence of Market Makers – however incentive payouts will be made to all participating members and not just the Market-Makers alone.

The first program in the two-tier series is LEIPS–I (BETA). This is intended to assist BSE’s Derivatives members assess and test their end-to-end systems for quoting, trading, and clearing capabilities for BSE Derivatives segment. LEIPS-I (BETA) shall run between September 28th – October 25th, 2011.

As much as Rs. 5 Crore would be paid out to all participating members during this period.

The second program in the series—LEIPS–II— is intended to help in building a healthy Derivatives order-book on the BSE derivatives platform . LEIPS-II will commence on October 26th and run for a duration of 6 months. All Derivatives members would be incentivized for their participation – some as market makers and others as general market participants.

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