Sebi Mandates Uniform Fees For Stock Exchanges
This change is expected to impact discount brokerage firms, whose business models heavily depend on rebates received from exchanges for high trading volumes
The Securities and Exchange Board of India (Sebi) said on Monday that market infrastructure institutions (MIIs) such as stock exchanges, clearing corporations and depositories must implement a uniform fee structure, discontinuing the practice of volume-based charges.
Historically, exchanges have incentivised higher trading volumes by offering brokers lower fees, particularly stimulating activity in the derivatives market.
Sebi's new directive, part of broader efforts to temper the frenzied trading in derivatives markets, requires MIIs to ensure that fees charged to end clients accurately reflect the true costs, without variations linked to transaction volumes. This change is expected to impact discount brokerage firms, whose business models heavily depend on rebates received from exchanges for high trading volumes.
The regulatory body noted that the existing system, where members often collected higher aggregated charges from end clients compared to the monthly fees paid to MIIs, led to misleading disclosures regarding actual costs. This practice, observed by Sebi's Secondary Market Advisory Committee (SMAC), was found to compromise transparency and create an uneven playing field among brokers of different sizes.
The new mandate stipulates that MIIs must establish a uniform and equal fee structure for all members, moving away from the current volume-dependent slabs. The intention of the reform is to ensure fair access for all market participants and potentially reduce charges for end clients.
MIIs are now tasked with developing the necessary infrastructure and systems to implement these changes by 1 October 2024 to comply with the latest Sebi directive.
