The National Stock Exchange will sweeten the incentives provided under its liquidity enhancement scheme (LES) for S&P 500 and Dow Jones Industrial Average derivatives from January 2.

The NSE had introduced the LES scheme for derivatives on the S&P-500 and Dow Jones indices from September 15. The NSE had launched derivatives trading on these two US indices in late August. The move to improve the incentives provided under the LES is aimed at increasing trading interest in derivatives products.

With effect from January 2, the daily cap on trade level incentives for futures will be increased to Rs 125 crore from the existing Rs 100 crore. Further, in case of options, the daily cap will be revised to Rs 500 crore of the notional traded value.

In addition, the cash incentives payable on the traded value of futures and the premium paid on options contracts will be increased.

Over and above these trade level incentives, a market participant executing a buy trade in case of S&P 500 options will receive an incentive of Rs 1,500 per crore, against the existing incentive of Rs 400 per crore, while a sell trade will earn an incentive of Rs 4,500 per crore, compared to the Rs 1,700 per crore incentive fixed earlier.

In the case of futures contracts, the trade incentive for sellers of Dow Jones Industrial Average futures and S&P 500 futures will be increased to Rs 2,100 from Rs 1,700 per crore of the traded value.

With respect to the existing open interest level incentive structure, the cash incentive payable for maintaining open interest will be increased to Rs 25 lakh per month from Rs 18 lakh a month previously.

What is more, the open interest level incentive will be extended to the top 10 participants, against the existing cap restricting it to the top five participants, and will be payable on a proportionate basis.

With respect to the order level incentive structure, the existing cash incentive payable will be increased exclusively for S&P 500 options by Rs 3 lakh per month. Therefore, the cash incentive at the order level shall be paid from a pool of Rs 21 lakh per month.

Furthermore, the existing obligation of maintaining orders on both sides in at least three calls and three puts out of the specified strikes —— six out-of-the money (OTM), six in-the-money (ITM) closer to the at-the-money (ATM) and one ATM — will be reduced to two calls and two puts from January 2.

The NSE has stated that there will be no change in any other order level obligations for both futures and options.

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