Charges levied by market infrastructure institutions should be true to label: Sebi

The charges levied by stock exchanges, depository participants and clearing members should be true to label and uniform, the Securities and Exchange Board of India (Sebi) said on Monday.

True to label means that if a charge is levied on the end client by stockbrokers, depository participants, and clearing members, market infrastructure institutions (MIIs) should ensure that they receive the same amount.

Sebi directed that the charge structure of the MII should be uniform and equal for all its members instead of the slab-wise charge which is dependent on the volume or activity of the members. 

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This circular is going to be effective from 1 October 2024.

Sebi examined the existing processes related to charges being levied by the MII on its members. 

The volume-based slab wise charges were being levied in return for various services offered by MIIs and were recovered from the client by the members on a daily basis. However, the aggregate charges were being received by MIIs from its members on a monthly basis. 

“The process can result in a situation wherein the aggregated charges collected by the members from the end clients is higher than the end of month charges paid to the MII (due to slab benefit). This can also result in an incorrect or misleading disclosure to the end client about the charges levied by MIIs,” the circular pointed out. 

This issue was taken up by the Secondary Market Advisory Committee (SMAC) which observed that the existing slab-wise charge structure may create a hindrance for the MIIs in ensuring equal and fair access to all market participants by impacting the level playing field between members owing to their size differentials.

After due consideration by SMAC, Sebi issued the following directions in the circular: 

• Redesign existing charge structure and associated to comply with the circular;
• Put in place requisite infrastructure and systems for implementation of the circular, including necessary amendments to relevant bye-laws, rules and regulations;
• Notifying its members and disseminate information on website; and
• Inform Sebi about the status of implementation of the circular.

Sebi had also approved a broad-minimum criteria for assessing performances of the MIIs by external evaluators in the board meeting of 27 June. The evaluation will take place once every 3 years and the first evaluation will take place within a year of implementation of the mechanism.

Anand K. Rathi, co-founder, MIRA Money, said the circular will ensure that stockbrokers do not make customers pay more than what the stockbrokers pay the MII.

“This will also ensure that MII charges a flat fee irrespective of the volume or activity for a specific time. For instance, they may say that if you have done a particular volume of activity you will get preferential treatment for 12 months,” he said.
 

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