Securities and Exchange Board of India (Sebi) on July 1, 2024, directed stock exchanges, depository participants and clearing members to levy charges uniformly from all its members regardless of the volume of activity they generate. Market Infrastructure Institutions are directed to comply with these rules by October 1, 2024. Further Sebi placed the onus on MIIs to make sure that the charges levied by their members on end clients are true to label.
True to label directive means that MIIs should ensure that they receive the entire amount of charges levied on the end client by stockbrokers, depository participants, and clearing members.
Sebi explained, "It has also been observed that members generally recover such charges from the end clients daily whereas MIIs receive aggregate charges from the members every month. The aforesaid 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."
Impact of Circular
Sebi directed that the charge structure of the MII should be uniform and equal for all its members instead of the slab-wise charge which is dependent on the volume or activity of the members. "To begin with, the new charge structure designed by MIIs should give due consideration to the existing per unit charges realized by MIIs so that the end clients benefit from the reduction of charges," Sebi said.
The true-to-label directive from Sebi will bring more transparency to the levy of charges and discount brokers will not be able to levy additional charges on their client. If discount brokers are required to pay higher charges to MII, it remains to be seen whether they will be able to continue offering free services to their clients. Discount brokers are brokerage firms that provide trading services to clients without offering research reports or advisory services. Shares of broking stocks like Angel One and Motilal Oswal fell 8.97 per cent and 3.38 per cent today after the Sebi circular to MIIs was notified.
