Sebi slashes fees on trading, filing documents to boost market activity

The broker turnover fee has been slashed by 50 per cent of the existing fee structure

The Securities and Exchange Board of India (Sebi) has announced a sharp cut in the fees it levies on market activity, such as trading and filing of offer documents. The capital markets regulator said the cut in fees was to boost market activity, which has been hit by the coronavirus disease (Covid-19) pandemic.

“In its continuing efforts to help market participants tide over challenges due to Covid-19, Sebi has decided to reduce the broker turnover and filing fees on offer documents for public issue, rights issue, and buyback of shares,” it said in a release.

The broker turnover fee has been slashed 50 per cent of the existing fee structure. The reduced fee, however, will only be applicable between June and March 2021. The move will result in reduction in trading costs for investors.

Similarly, to encourage firms to tap the capital market for fund-raising activity, Sebi has also slashed filing fees on offer documents by 50 per cent of the existing fee structure. This, however, will be applicable only for the period between June and December. An issuer has to pay a small percentage of the proposed fund-raise as fee to the regulator.  Since the pandemic, barely any company has filed for an initial public offering (IPO). 

 

 

However, some listed companies have announced buybacks.  While the cut in broker turnover fees will directly benefit traders, it remains to be seen if the reduction in fee for filing of offer documents will spur corporate activity, which experts say hinges more on market conditions.

The two categories where Sebi has cut fees accounted for 16 per cent of the regulator’s total fee pool of Rs 750 crore in 2018-19, down 26 per cent from a year ago. The regulator has not made its annual report for the 2019-20 public.

Earlier this month, Sebi had relaxed norms pertaining to IPOs, buybacks, and rights. For buybacks, Sebi reduced the 12-month cooling-off period that companies have to observe between buybacks and equity fund-raising to six months.

For IPOs, it extended the IPO approval expiration period by six months. It made some key relaxations to the rights issue framework by reducing the minimum subscription threshold from the existing 90 per cent to 75 per cent of the offer size.