This is with reference to the Exchange Notice No. 26 dated January 13, 2012 regarding Introduction of Liquidity Enhancement Incentive Programme (LEIPS) – III for BSE F&O segment. Trading Members are hereby informed that the Exchange proposes to amend certain terms and conditions of LEIPS-III Programme effective February 27, 2012 to enhance the effectiveness of the scheme and to tighten the rules to ensure a well orderly market, as follows:
1. Revision in Trading volume based cash incentive rates - General Market Maker (GMP) and Market Maker (MM) incentive rates on notional turnover shall be revised from the current existing flat rate across all moneyness, as under -
|
Moneyness
(Call and Put)
|
Market Makers Incentive Rate (Rs. per Cr.)
|
General Market Participants Incentive Rate (Rs. per Cr.)
|
|
Passive
|
Active
|
Passive
|
Active
|
|
Buy
|
Sell
|
Buy
|
Sell
|
Buy
|
Sell
|
Buy
|
Sell
|
|
All remaining ITMs
|
NA
|
NA
|
NA
|
NA
|
200
|
200
|
200
|
200
|
|
ITM2
|
200
|
400
|
200
|
200
|
200
|
200
|
200
|
200
|
|
ITM1
|
200
|
400
|
200
|
200
|
200
|
200
|
200
|
200
|
|
ATM
|
200
|
400
|
200
|
200
|
200
|
200
|
200
|
200
|
|
OTM 1
|
175
|
350
|
175
|
175
|
175
|
175
|
175
|
175
|
|
OTM 2
|
150
|
300
|
150
|
150
|
150
|
150
|
150
|
150
|
|
OTM 3
|
125
|
250
|
125
|
125
|
125
|
125
|
125
|
125
|
|
OTM 4
|
100
|
200
|
100
|
100
|
100
|
100
|
100
|
100
|
|
OTM 5
|
NA
|
NA
|
NA
|
NA
|
75
|
75
|
75
|
75
|
|
OTM 6
|
NA
|
NA
|
NA
|
NA
|
50
|
50
|
50
|
50
|
|
OTM 7
|
NA
|
NA
|
NA
|
NA
|
25
|
25
|
25
|
25
|
|
OTM 8
|
NA
|
NA
|
NA
|
NA
|
10
|
10
|
10
|
10
|
|
All remaining OTMs
|
NA
|
NA
|
NA
|
NA
|
0
|
0
|
0
|
0
|
Table 1
Illustration: Exchange Turnover in one minute period = 15Cr
Per Minute Time period Cap – 13.6 Cr
Member ‘A’Total turnover – Rs.3.5 Cr
Member ‘A’ Turnover – OTM1Call – 2Cr, OTM2Put-1Cr, OTM7Call - 0.50Cr;
Incentive payout to Member ‘A’ at GMP Rates =
Pro-rata ratio 13.6/15 = 0.9
OTM1Call – 0.9*2*175 = Rs 315
OTM2Put-1Cr – 0.9*1*150 = Rs.135
OTM7Call – 0.9*0.50*25 = Rs.11.25
Member ‘A’ total incentive payout at GMP rates = Rs.461.25
2. Quoting Obligations of Market Maker permitted in any select option contract instead of all 14 Sensex option contracts series specified earlier -
a) The Market Maker shall be required to provide and maintain two-way quotes in any one or more of the 14 valid market making contracts series (Calls and Puts at ITM1, ITM2, ATM, OTM1, OTM2, OTM3 and OTM4) as published by the Exchange on the Sensex Options at prescribed size-spread specifications (mentioned in Table 2 below) for at-least 75% of the trading day instead of all the 14 strikes, which was the requirement earlier.
|
Bid Prices of Premium (Rs)
|
Maximum Permissible Spread (Rs) (Current Month Contract)
|
Minimum Quantity of Contracts
|
|
0-10
|
Rs. 0.50
|
2
|
|
10-50
|
Rs. 1.00
|
2
|
|
50-100
|
Rs. 2.00
|
2
|
|
100-250
|
Rs. 4.00
|
2
|
|
250-500
|
Rs. 6.00
|
2
|
|
500-750
|
Rs. 9.00
|
2
|
|
>750
|
Rs. 12.00
|
2
|
Table 2
Such Market Makers shall be eligible for additional MM incentives on trading volumes only on those contract series in which they fulfill the aforesaid obligations.
For E.g - Market Maker fulfills 75 % quote obligation in only two option contracts viz. OTM3 call option and ITM2 put option contract and 65 % quote obligation in OTM1 call option contract as prescribed by the Exchange. Then the Market Maker shall be eligible for MM incentive on volume done in OTM3 call option and ITM2 put option contracts.
Similarly, if the Market Maker fulfills 75 % quote obligation in all the 14 valid contracts, he will be eligible to receive MM incentive on volume done in all these contracts.
b) For Level 2 quoting obligations, market makers shall be required to maintain 2 way quotes in any one or more pairs (pair consists of 1 Call and 1 Put strike at the same moneyness) of the valid market making contracts series (Calls and Puts at ITM1, ITM2, ATM, OTM1, OTM2, OTM3 and OTM4) as published by the Exchange on the Sensex Options at prescribed size-spread specifications (mentioned in Table 3 below) instead of all 14 strikes, which was the requirement earlier.
Market maker shall be required to fulfill Level 2 Quote obligations for at least 85% of the trading day (instead of the current 95%).
Such market makers shall be eligible for Quote based cash Incentives in only those contracts in which they fulfill the aforesaid obligations.
Market makers fulfilling the aforesaid quote obligation shall be paid at rates as follows:
|
Moneyness
(Call and Put)
|
Maximum Permissible Spread (Rs) (Current Month Contract)
|
Minimum Quantity of Contracts
|
Quote Based Cash Incentive (Level 2) Rate per MM
(Rs.)
|
Quote Based Cash Incentive (Level 2) pool across all eligible MMs (Rs.)
|
|
ITM 2
|
Rs. 3.00
|
20
|
45,000
|
5,70,000
|
|
ITM 1
|
Rs. 2.50
|
20
|
40,000
|
5,00,000
|
|
ATM
|
Rs. 2.00
|
20
|
40,000
|
5,00,000
|
|
OTM 1
|
Rs. 1.50
|
20
|
30,000
|
3,80,000
|
|
OTM 2
|
Rs. 1.00
|
20
|
20,000
|
2,50,000
|
|
OTM 3
|
Rs. 0.50
|
20
|
15,000
|
1,80,000
|
|
OTM 4
|
Rs. 0.25
|
20
|
10,000
|
1,20,000
|
|
Total
|
|
|
2,00,000
|
25,00,000
|
Illustration: - Market maker ‘A’ fulfills Level 2 quote obligations in following moneyness strikes –
85%in ITM1 (Call +Put),
85% in ITM2 (Call +Put),
85% in OTM3 (Call +Put)
85 % in OTM4 (Call)
85% in ATM (Put)
75% in OTM2 (Call + Put)
Quote based cash incentive for market maker ‘A’ shall be = Rs 40,000 + Rs 45,000 + Rs 15,000 = Rs.1,00,000
The market maker shall not be eligible to receive incentives in -
– OTM4 (Call) and ATM (Put) as he has not fulfilled obligations in a pair of Put and Call
– OTM 2 (Call + Put) as his fulfillment percentage is less than 85%
If the cumulative quote based cash incentive for a particular moneyness crosses its pool value as specified in the table above; then qualifying MMs shall be paid incentive on pro-rata basis for that moneyness.
All other terms and conditions of LEIPS III Programme shall remain unchanged.
All the aforementioned amendments shall be effective from February 27, 2012.
For and on behalf of BSE Ltd.,
|
Rajesh Saraf
|
Sameer Vaze
|
|
General Manager
|
Dy. Manager
|
|
Trading Operations
|
Trading Operations
|
|