FREQUENTLY ASKED QUESTIONS ON REVISED TRANSACTION CHARGES IN EQUITY DERIVATIVES SEGMENT

FREQUENTLY ASKED QUESTIONS ON REVISED TRANSACTION
CHARGES IN EQUITY DERIVATIVES SEGMENT

1) What are Passive Orders?

For every executed trade, the order (Limit Orders) which has been placed first on the basis of the order time stamp assigned by BSE system will be considered as a Passive Order.

2) What are Active Orders?

For every executed trade, the order (Market Order or Limit Order) which has been matched against an existing order (or Passive Order) will be considered as an Active Order.

3) What is the advantage to the member in placing Passive Orders?

The advantage in placing Passive Orders is –

Stock & Index Futures: For every executed trade, the Exchange will pay Rs.1 per lakh of transaction value (price X quantity) to the member who has placed the passive order.

Stock & Index Options: For every executed trade, the Exchange will pay Rs.15 per lakh of premium value (premium X quantity) to the member who has placed the passive order.

4) Can you show me an example of the order book along with the transaction charges levied on them?

Example 1: Index & Stock Futures

Time ^*	Bid Qty (contracts)	Bid Price	Offer Qty (contracts)	Offer Price	Passive Order	Active Order	Transaction Charges (Rs./1,00,000)

10.00.01	500	1002	-	-	√		(1.00)
10.01.05			1000	1002		√	1.50

10.01.05	Trade at 1002 for 500 contracts

10.01.05			500	1002	√		(1.00)
10.02.00	300	1002				√	1.50

10.02.00	Trade at 1002 for 300 contracts

* - Time stamp reference is to the time assigned by the BSE system, & not order entry time by the member.

Example 2: Index & Stock Options

Time ^*	Bid Qty (contracts)	Bid Price (Premium)	Offer Qty (contracts)	Offer Price (Premium)	Passive Order	Active Order	Transaction Charges (Rs./1,00,000 of Total Premium)

10.00.01	500	100	-	-	√		(15.00)
10.01.05			1000	100		√	20.00

10.01.05	Trade at Premium price Rs.100 for 500 contracts

10.01.05			500	100	√		(15.00)
10.02.00	300	100				√	20.00

10.02.00	Trade at Premium price Rs.100 for 300 contracts

* - Time stamp reference is to the time assigned by the BSE system, & not order entry time by the member.

5) How will charges be levied if two orders are placed at the same time?

Executed orders are identified as passive or active on the basis of their respective time stamps assigned by the BSE System. As per the Exchange trading system design, two orders cannot have the same time stamp.

6) What if the order placed gets matched with a Stop Loss Order?

When a trade is executed, the order that is placed first in the system, based on the order time stamp which is assigned by BSE system will be considered as a Passive Order.

E.g.: Case Study

Þ At 10:02:00 am: Client A places a Stop Loss order for 100 contracts of Scrip XYZ at Rs 95.00

Þ At 10:10:05 am: Client B places buy order of 100 contracts of scrip XYZ at Rs 95.00 in the system.

Þ At 10:15:00 am: Market price of scrip XYZ falls to Rs 95.10

Þ At 10:15:00 am: Client A’s order for 100 contracts of Scrip XYZ at Rs 95.00 is added to the order book

Þ At 10:15:05 am: Trade gets executed between clients A & B at Rs 95.00

Þ Stop Loss order of Client A will be considered as the Active Order, although it was submitted to the exchange prior to Client B’s order. Time Stamp is based on when the order is entered into the exchange’s system. Hence Buy Order of Client B will be considered as Passive Order.

Þ Hence, Client A will be levied transaction charge @ Rs. 1.50 / Rs. 1 lakh of transaction value and Exchange will pay Client B transaction charge @ Rs. 1 / Rs. 1 lakh of transaction value

7) How will the Members identify their executed orders as passive orders / active orders?

Effective December 29, 2009, a new Broker Query File of Derivatives segment containing information on Passive and Active orders will be available for download to identify their executed trades.

8) What is the name and format for the Derivatives Broker Query file?

File Name: : DBRddmmyy (where dd- day; mm – month; yy – year)

File Format is: The new Derivatives Broker Query File will contain following fields –

9) What is the location of this file?

This file will be available in Dload32->General->Settlement Option->DataFiles-> BRK Files (Derivatives) option after 5:05PM.

Similar information will be made available through DTSS shortly which will be communicated in due course.

10) How can members & their clients take advantage of the revised Transaction charges?

The Exchange endeavours to incentivise members & their clients for placing more Passive Orders thereby filling up the order book in the system. This will attract other market participants to avail of the emerging opportunities to trade in BSE’s Derivatives segment. Consequently, this would help in better price discovery and lower impact costs.