SEBI Asks MIIs To Implement Uniform Charges for All Members from 1st October

Moneylife Digital Team 02 July 2024

Market regulator Securities and Exchange Board of India (SEBI) has asked market infrastructure institutions (MIIs), including stock exchanges, stock brokers, clearing corporations and depositories, to implement from 1st October a uniform and equal charge structure for all members instead of levying charges based on their volume or activity.

Directing MIIs to redesign their existing charge structure and associated processes to comply with the new structure, SEBI says, "Charges which are to be recovered from the end client should be true to label, or if certain MII charge is levied on the end client by stock brokers, depository participants, clearing members, then it should be ensured by MIIs that they receive the same amount."

"The charge structure of the MII should be uniform and equal for all its members instead of slab-wise or dependent on volume or activity of members. 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 benefitted with the reduction of charges," it added.

MIIs are public utility institutions that act as first-level regulators and are responsible for providing equal, unrestricted, transparent, and fair access to all market participants.

After examining existing processes related to charges levied by MIIs on their members, such as stock brokers, depository participants and clearing members, SEBI observed that some MIIs follow a volume-based slab-wise charge structure. "These charges are levied instead of various services offered by MIIs and are recovered from the end clients by members. It has also been observed that members generally recover such charges from the end clients on a daily basis, whereas MIIs receive aggregate charges from the members on a monthly basis."

"This process can result in a situation wherein the aggregated charges collected by the members from the end clients are 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 market regulator says.

In response, SEBI's secondary market advisory committee (SMAC) deliberated on the matter. It noted that the existing charge structure could compromise transparency and create disparities among market participants based on their operational scale.

In view of the concerns and as per deliberations with SMAC, SEBI decided that MIIs would comply with following additional principles while designing the processes for charges levied on their members which are to be recovered from the end clients.

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