Non-core income continues to support the topline of major stock exchanges,with the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) both seeing strong growth in other income at a time when trading activity has been weak.
Although the trend holds true for the last few quarters,it was particularly evident in the three months to June 2013 when other income surpassed revenue from exchange activities for the BSE and the NSE. In case of the BSE,non-core income during the period stood at Rs 78.55 crore against its operating income of Rs 54.25 crore. For the NSE,non-core income was at Rs 262.9 crore against operating income of Rs 218.6 crore.
Non-core revenues of the exchanges largely consists of income from investments and dividends including those from subsidiaries and equity holdings. While the NSE accounts such receipts as other income,the BSE reports it as a revenue item called investments and deposit income.
The BSE earned nearly Rs 67.5 crore in the June quarter from its sizeable investment corpus of Rs 3143 crore as of June 31,2013. This includes interest gains on investments in taxable bonds,tax-free bonds and fixed deposits with banks to which the exchange has committed nearly 75% of total funds. Investments of Rs 835 crore parked in debt MFs returned Rs 13.2 crore during the three months.
According to the BSE,shareholders funds accounted for about two-thirds of the total corpus used for investments while 24%,or Rs 765 crore,came from margins and deposits made by exchange members.
The balance investments of Rs 57 crore has been made out of short-term deployment of surplus working capital, said the BSE in an email reply. Although similar details could not be obtained from the NSE,it said that generally,the other income comprises interest income,dividend income,rent income and other miscellaneous income.
For the NSE,other income has stayed in the range of Rs 100 crore to Rs 300 crore in the last five quarters with some sudden jumps seen during the June quarter of current fiscal and the last fiscal. As per the NSE,this surge was on account of receipt of dividends from subsidiaries.
The strength in non-core income at the country’s top exchanges has gained importance in the wake of muted retail trading activity. Generally,the operating income of stock exchanges includes membership fees,transaction charges and penalties on account of non-compliance by member brokers. The transaction charges that are levied on both the cash and derivative trades form the biggest portion of this income.
The cash market delivery based activity has come down,the exchange income may have got impacted since transaction charges are relatively higher for the segment, said an official from a domestic brokerage house. During the last two years,cash market volumes have declined by nearly a fourth even as activity on derivatives side has risen to a similar extent.