Pse To Recover On-Line Costs From Brokers

The Pune Stock Exchange (PSE) plans to recover the capital expenditure and maintenance costs of the screen-based trading system from member-brokers following a directive to this effect from the Securities and Exchange Board of India (Sebi).

Although the Sebi directive to recover the costs from brokers was issued way back in October 1992, the capital market watchdog has asked the exchanges to implement it now.

With effect from April 1, 1997, PSE has proposed that the full cost of the screen-based trading system will be recovered from the members.

PSE has devised a two-pronged strategy to recover the costs. It will continue to appropriate the interest on the cash component of the additional capital contributed by the brokers.

 

The exchange will also be charging a turnover-based fee of 0.005 per cent on a quarterly basis on the turnover of member-brokers in the previous quarter.

These measures are expected to net Rs.43.5 lakhs per annum to the exchange. All the recovered amount will be credited to a reserve fund.

As part of the computerised trading system, the PSE incurred a capital expenditure of Rs.2.43 crore which includes hardware and software supplied by CMC Ltd.

Besides, Rs.57.5 lakhs was spent for support facilities like network management, diesel generation set, uninterrupted power supply and site preparation.

The PSE has projected a life span of 5 years for its computer systems.

So, it has proposed that capital costs will be recovered at the rate of 20 per cent per annum.

In the case of capital outlay for support facilities, the recovery would be spread over 10 years and charged at 10 per cent per annum.

On the above basis, the Pune Stock Exchange will undertake a total recovery of Rs.43.02 lakhs per annum on capital costs alone.

The exchange will also be recovering Rs.1.6 lakhs per month to cover operating costs.

Since the PSE has already undertaken a partial recovery of the above expenses by not paying interest on the cash component of Rs.1 lakh to those members who have paid the additional capital of Rs.2 lakhs in 1996, this move will result in 40 per cent recovery of the total costs considering interest earnings of 14 per cent per annum amounting to Rs.24.08 lakhs.