Sebi considers equal treatment to equity and commodity brokers

Commodity brokers want lower registration and transaction fees

The Securities and Exchange Board of India (Sebi) has proposed treating brokers of commodity exchanges on a par with their counterparts in equity exchanges in terms of registration and transaction fees.

At present, commodity brokers are not under direct regulation of the Forward Markets Commission. The FMC is merging with the Sebi. In a recent meeting with representatives of commodity brokers, the Sebi said they should be treated on a par with equity brokers and, therefore, they must pay the uniform registration fee of Rs 50,000 per member. There were 3,399 members of three active commodity exchanges in March. Some may be common to more than one exchange. The Sebi also said there should be uniformity in fees, 0.02 per cent of the transaction, or Rs 200 for every Rs 1 crore of transaction on the futures platform.

The Sebi is in the process of framing guidelines for commodity brokers’ registration ahead of its merger with the FMC. Registration of commodity brokers is set to start by the end of August. The FMC's merger with the Sebi is expected to be completed by September.

Commodity brokers, however, urged the Sebi to distinguish between members of national and regional exchanges, and sought differential treatment for commodities on which the commodity transaction tax was levied.

Sources said commodity brokers had proposed a registration fee of Rs 50,000 for a national-level broker and Rs 25,000 for a regional player.

"We argued that members of regional exchanges have limited financial strength and hence should be allowed to pay less. For national-level players, the registration fee of Rs 50,000 is okay," they said.

Regional players are needed in the system for market development. The meeting discussed incentivising regional players to allow them to operate smoothly. So, fees should be applicable across the entire trading chain but regional players should be given a breather. A final decision on this is awaited.

Commodity brokers have urged the Sebi to set a transaction fee of 0.1 per cent, or Rs 100 for every Rs 1 crore of transaction, in commodities on which the commodity transaction tax is levied like gold, silver, base metals and processed agri-commodities. For farm goods like guar, the transaction charge proposed was 0.005 per cent, or Rs 50 for every Rs 1 crore of transaction.

The proposals were submitted to the SEBI a couple of weeks ago as part of recommendations sought by the regulator.