Market regulator Sebi directs exchanges, other MIIs to levy same fees

Move aimed at providing fair access, fee to all clients

The Securities and Exchange Board of India (Sebi) on Monday directed stock exchanges and other market infrastructure institutions (MIIs) to discontinue with the practice of levying slab-wise fee structures. MIIs will now have to charge uniform fees, irrespective of the size of market participants, essentially the brokers.

Currently, exchanges charge trading members (brokers) a slab-wise fee structure for both cash and derivatives segments. The structure is aimed at incentivising brokers that generate higher turnover. The market regulator said the current structure goes against the principle of equal, fair and transparent access to all market participants.

“The existing slab-wise charge structure of MIIs can also 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,” said Sebi in a circular.

Sebi also said while the brokers recover such charges from the end clients on a daily basis, but pay exchanges and other MIIs on a monthly basis. This often results in situations where the charges paid to the investors are higher than those paid to the MIIs. “This can also result in an incorrect or misleading disclosure to the end client about the charges levied by MIIs,” it said.

The regulator has said the charges paid to MII should be ‘true to label’— which means if a certain charge is levied on the end client by stock brokers, depository participants, clearing members, it should be ensured by MIIs that the same amount is received by them.

“The charge structure of the MII should be uniform and equal for all its members instead of slab-wise viz. dependent on volume/activity of members,” said the circular, which will become effective from October 1, 2024.

Sebi’s move could upend the revenue model for exchanges and clearing corporations and could even increase the fee structure for the top-end clients. However, to ensure that the charges remain low. “To begin with, the new charge structure designed by MIIs should give due consideration to the existing per unit charges realised by MIIs so that the end clients are benefited with the reduction of charges,” Sebi said.