NSE Alpha Membership

General
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Hi @nithin,

NSE Alpha membership requires 25lkhs as deposit and I think 50 lakhs as net worth. If someone has a book size above 50lkhs does it make sense to apply for NSE alpha membership ? I guess, except for the brokerage, all other costs remain the same. So am I correct in assuming if the interest earned on 25 lakhs is less than the total brokerage paid, it is financially feasible to think of an Alpha membership ?

25lakhs will basically say earn 8%-9% annualized. So if someone is paying more than 20k in brokerage a month, then they should also perhaps look at Alpha membership ? Ofcourse approval process, is another issue completely.

Can you please give a cost estimate at which getting your own membership at NSE starts to make sense …

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Check this link for deposits to become an alpha member. If you want to be trading both Equity and F&O, that is 20+25lks of deposits = Rs 45 lks.

Membership fees is 5lks one time, annual subscription of 50k/year for equity, and minimum transaction charges of Rs 1lk for equity F&O and Rs 50k for currency that has to be paid upfront every year. Your CA cost and everything else to start off will be another additional Rs 2lks atleast.

To be live on the exchange, you will need a trading platform and a backoffice platform. If you are happy with the NOW trading platform, exchange gives you free of cost. But the backoffice platform to process trades, maintain ledger etc will cost you a couple of lakhs a year atleast. You might need to also hire a person to do this which will be additional.

As a member on the exchange, you must adhere to all compliance. So quarterly reporting and etc. A CA can do this, buy you can say maybe Rs 1lk per year on that.

For trading F&O, you will need a clearing member. His charges for an individual might be slightly higher than what we can offer you as a broker due to our increased volume.

If you decide to move from NOW to any other trading platform, that would require you to have your own instance of OMS, frontend, data center, leased line costs etc. Upwards of Rs 12lks per year.

Assuming you stick to NOW, I’d say running cost of atleast Rs 4 to Rs 5 lks per year in addition to the deposit. This is just being member on NSE. So unless someone is paying a lot more than this as brokerage per year, it wouldn’t make any sense I am guessing.

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Thanks @nithin

I am thinking only a F&O prop book

So then F&O only = 25lakhs deposit and its opportunity cost

In terms of back office - The trades are settled on exchange, so can you please elaborate on what else is needed and why cant the CA do this on his own time ? Would you attach a lot of importance to the experience of a CA like a lawyer or is it just pushing paperwork which can be done by a CA from any place (and cheaper city) ?

I am thinking algo trades so will I need NOW ? I guess the algo have to be approved by NSE if run by a member directly via DMA - is that correct ? Would you need an OMS if you wanted to algo trade only ?

So if you were to think bare bones, F&O propbook trading via Algo, would it work out if your brokerage is say 50k/month ? In that case do brokers provide client specific pricing as well ?

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Exchanges will give you trade files and positions at the end of everyday. You are supposed to import that into a software, calculate all charges (STT, Stamp, etc), your obligations, and etc. You nee to license a backoffice platform for this.

If you are in states like Andhra Pradesh, Haryana, HP, the stamp duty is maximum of between Rs 30 to Rs 100 per contract note. So if you intend to algo trade, it is best to have address from here. You can see all stamp duty here.

If you want to do algo trades, you need to have the entire execution management system + APIs + frontend to code strategies etc. Bare minimum will cost you atleast Rs 12lks a year including infra costs.

It wouldn’t make sense at 50k/month of brokerage. We have uniform pricing which is quite less, but the traditional ones who charge more will definitely give you a bargain if you commit brokerage upfront.

In today’s world with brokers like us, I can’t think of any reason why you would want to be a brokerage. Unless you become a hedge fund and start managing tens of crores of rupees.

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hello @nithin ,Is a retail investor even if he is trading with crores of rupees ,under any obligation to use a leased line? rather than a home broadband or mobile internet connection. when can they not use these connections and have to get a leased line?

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A leased line ensures better connectivity. There is no obligation for anyone, but someone needs a better trading experience in terms of internet stability and speeds, yeah leased line it is

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Hello @nithin

Can you please clarify regarding the margin requirement in NSE Alpha vs Broker based.
Say for naked selling Options Ex Bank Nifty 1 lot.

Margin = SPAN + Exposure
I understand that SPAN is stipulated by Exchange and Exposure is determined by broker.
For NRML , Selling Bank Nifty Option 1 Lot (40units)
SPAN = 25000 * 40 * 3% = 30,000
Exposure = 30,000
Total : 60,000 approx

For Intraday is .4 times of NRML , around 24000 (60000 * .04)
Which is even lesser than SPAN alone.
But why does SPAN margin show differently at around 12000 in the Kite Dashboard for Intraday.
Is SPAN margin for Intraday lower than NRML.

If I become a NSE alpha member , how much fund would I need to place with clearing member to be able to sell 1 lot of Bank Nifty options Intraday. Being a direct member should have some benefit in this regard ?

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Margin requirement is exactly the same. Also when you take MIS/BO/CO positions, you will need 100% of SPAN+exposure to take positions.

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I explored this a lot. I conceed to Nithin’s arguement that it really dosent make sense for anyone doing personal investments to consider NSE Alpha Membership - except if you want the excitement of the ride. Its like until you learn to fly, you dont appreciate how cheap its to fly commercially.

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one person company can become NSE member (alpha or normal membership).

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In past, i have too much calculated on reducing trading cost. after many calculation, i reached at the conclusion that, having a winning strategy is most important than the taxes.
imagine that you didn’t need to pay a single penny as a taxes or brokerage but you don’t have a strategy. the summery will not be good. if you have a good winning strategy, then it pays its own cost.
just like i get min 40 points in flat market in nifty fut & 70-90 points in average market. even we play with an option we can achieve 8-12 points for rally of 40 points in index, & 40 -55 points for rally of 70-90- points in fut. so if we get a winning trade we can pay 1-2 point as brokerage in option & 5-6 point for nifty fut.
Having a winning strategy can give more return on the fund (setup cost & membership fees paid to exchange).
As a trader, we can get some free time, but once we become a member, we will be more busy,plus pressure of business expansion, otherwise the setup cost will increase.
many members surrendered their membership , some of them bankrupt, some expelled by exchange, so i think those who are thinking about new membership can do case study, why those members surrendered membership. was they faced more challenges that we know? many points to be findout.

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