BSE to stop LEIPs in weekly Sensex option contracts

Leading stock exchange BSE will discontinue the liquidity enhancement incentive programme in the weekly options contracts on Sensex from March 4. The liquidity enhancement incentive programmes (LEIPS) — wherein both market makers and general market participants get incentives in the form of cash payment for trading in option contracts of S&P BSE Sensex — was launched by BSE in May 2014.

According to Sebi regulations, stock exchanges can introduce incentive schemes for brokers and intermediaries to enhance liquidity in illiquid securities in the equity cash and derivative segments. “...the weekly options contracts shall not be part of LEIPS Programme on S&P BSE Sensex Options with effect from March 4, 2016,” BSE said in a circular.

Under the programme, market makers have a continuous quoting obligation with specified size and spread in Futures Contracts of the Sensex. It offers four types of incentives to market participants -- trading volume based daily cash incentives, open interest based cash incentives paid on daily basis, quote based incentives and lower transaction fees for all active trading members.

Earlier in October, BSE had discontinued the liquidity enhancement incentive programme on single stock options contracts.