Hint of incentives for delivery-based trade

Mumbai, Feb. 9: Finance minister P. Chidambaram today hinted at lowering the securities transaction tax (STT) on delivery-based trades in the upcoming budget.

At present, an investor pays STT at the rate of 0.1 per cent on delivery-based transactions. This means, on a transaction of Rs 1 lakh, an investor pays Rs 100. While the levy was lowered in the last budget, it is still higher than that charged on non-delivery based trades.

At the launch of the equity and equity derivatives segment of the MCX Stock Exchange (MCX-SX) today, Chidambaram expressed concern that most of the trading in the stock and commodity markets were non-delivery based.

"Perhaps, it is in the nature of the stock markets that the bulk of trade are non-delivery based. We must put our heads together and find out how significant number of trades must end in delivery," Chidambaram said, adding that the government was planning to take measures to encourage delivery-based trades in consultation with Sebi, the stock exchanges and other markets players.

New exchange

The MCX stock exchange will open for trading from February 11. The flagship index of MCX-SX ' SX40 ' will be a free-float based index of 40 large-cap and liquid stocks, representing diverse sectors. The base value of SX-40 will be 10,000 with its base date being March 31, 2010. Under the capital market segment of MCX-SX, initially equity shares of 1,116 companies shall be admitted for trading.

Demystifying bourses

Chidambaram called for demystifying the stock markets and keeping products simple so that small investors could understand them better.

Concerned over the reluctance of savers to park surplus funds in financial instruments, Chidambaram said he would modify the Rajiv Gandhi Equity Savings Scheme in the budget to make it more attractive.

The finance minister also made a case to converge know-your-customer (KYC) norms for different financial sector regulators to bring in more retail participation.

"KYC norms for all intermediaries, market regulators should converge and become one set of norms. The next step is to converge the KYC norms for different sets of regulators," he said.