Proposed New Fee Structure for Brokers and Trading/ Clearing Members

PRESS RELEASE

The report of the Committee constituted by SEBI under the Chairmanship of       Mr. D. C. Anjaria for revision of the fee structure for the brokers in the cash and the derivatives segment was put up on SEBI’s website for public comments. Taking into account the public comments on the report, the present level of brokerages earned and the implementation of the SEBI (Interest Liability Regularisation) Scheme, 2004, it is proposed to introduce a new fee structure for brokers in the cash and the derivatives segment on the following lines. Considering that broker fee structure is an important matter, public comments are being sought. The proposal has been placed on SEBI’s website www.sebi.gov.in for public comments.

The proposed new fee structure given below has three components:

1. New brokers in the cash segment (those who are not covered under the existing fee structure): The Anjaria Committee had interalia recommended fees at the rate of Rs. 100 per Rs. 1 crore of turnover for new brokers in the cash segment. Since then with growing competition, brokerages have undergone a downward revision and public comments have also been received to the effect that the assumptions made by Anjaria Committee on the level of brokerage did not reflect the present level of brokerages. It has accordingly been proposed to reduce the fees to 1/5^th of what was recommended by the Anjaria Committee for the new brokers in the cash segment.
2. Existing and New brokers (trading and clearing members) in the derivatives segment: Considering that the derivatives market has grown significantly and the number of participants including brokers have also increased, the Anjaria Committee has recommended upward revision of fee from Rs. 10 per Rs. 1 crore of turnover to Rs. 50 per Rs. 1 crore of turnover to be achieved in a phased manner. After discussing with the representatives of brokers, it is proposed to increase the fees from Rs. 10 per Rs. 1 crore of turnover to Rs. 20 per Rs. 1 crore of turnover.

 

3. Existing brokers in the cash segment (brokers who have already paid or are paying fees for one or more blocks of five financial years): It has been represented to SEBI in the public comments that the recommendation of the Anjaria Committee to charge fees annually to new brokers while allowing the existing brokers not to pay any further fees, over and above what has been paid for the fixed tenure of five years, would mean uneven competition between the new and existing brokers.

Suggestions have therefore been received for introducing a base minimum level of fees to the existing brokers. The amount of the fees on the existing brokers would be such it will not impose a significant financial burden on the existing brokers, while at the same time, ensure that all brokers in the cash segment are placed on an equal footing. An option is also being given to switch over to the proposed new fee structure immediately or after the completion of ten financial years from the date of grant of registration by the Board/ after the completion of the current block of five financial years, as applicable.

If a broker shifts to the new fee structure on a prospective date, it would be required to pay the outstanding fee liability, if any, up to the date of such switch over to the proposed new fee structure. Further, the Exchange / clearing corporation mechanism will be used to collect SEBI fees from brokers.

The comments on this proposal may please be e-mailed at anjariacom@sebi.gov.in on or before June 10, 2006.

Mumbai

May 16, 2006