Companies in the broking industry experienced a sharp decline in their share values during today's intraday session following an announcement from the Indian market regulator, SEBI.
On Monday, SEBI in a circular stated that charges imposed by market infrastructure institutions—including stock exchanges, clearing corporations, and depositories—should be standardised and not tied to trading volumes.
In response, shares of Angel One, Motilal Oswal Financial Services, IIFL Securities, 5Paisa Capital, and SMC Global Securities plummeted by 1% to 10.3%. Angel One recorded the largest decline among them.
Exchanges often charge a lower fee to brokers if they generate high volumes, contributing to a surge in trading across segments like derivatives. Asking exchanges to stop this practice is part of a wider set of measures being discussed by the Securities and Exchange Board of India to curb the frenzy in India's derivative markets.
In a circular, SEBI emphasised that market infrastructure institutions (MIIs), as public utilities and first-level regulators, must provide equal, unrestricted, transparent, and fair access to all market participants.
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SEBI highlighted that some MIIs currently use a volume-based, slab-wise charge structure for their services, which members (such as stock brokers, depository participants, and clearing members) pass on to end clients daily, while MIIs collect these charges from members monthly.
This process can lead to a discrepancy where the charges collected from end clients exceed what is paid to the MIIs, resulting in a potential misrepresentation. To address this, SEBI mandated that charges should be uniform and not based on volumes, ensuring transparency and a level playing field for all market participants.
The regulator said that the charges imposed by MIIs should accurately reflect what is charged to the end client. If a specific MII charge is passed on to the end client by members (such as stock brokers, depository participants, or clearing members), MIIs must ensure they receive the exact amount.
Additionally, it stated that the charge structure of MIIs should be uniform and equal for all members, rather than being based on trading volume or activity levels. Initially, the new charge structure designed by MIIs should consider the current per-unit charges, aiming to reduce costs for end clients.
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