Proposed New Fee Structure for Brokers and Trading/ Clearing Members
- 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 the 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 proposed new fee structure given below has three components:
Ø first applicable to new brokers in the cash segment (those who are not covered under the existing fee structure);
Ø second applicable to existing and new brokers in the derivatives segment;
Ø third applicable to existing brokers in the cash segment who have already paid or are paying fees for one or more blocks of five financial years.
- 3.1 New brokers in the cash segment
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. This recommendation was based on a study of brokerage carried out in the year 2003. 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 1/5th of what was recommended by the Anjaria Committee for the new brokers in the cash segment. The proposed new fee structure for new brokers in the cash segment is given in the following table:
Table I
Proposed New Fee Structure for new brokers in the cash segment
|
Cash Segment (for every Rs. 1 crore of turnover)
|
|
Type of transaction
|
*Existing Fee Structure
(For the first five years on turnover > Rs. 1 crore)
(Rs. per crore)
|
Fee Structure recommended by Anjaria Committee
(Payable every year by new brokers)
(Rs. per crore)
|
New Proposed Fee Structure
(Payable every year by new brokers)
(Rs. per crore)
|
|
(1)
|
(2)
|
(3)
|
(4)
|
|
Cash Equity
|
|
Jobbing turnover (sale side)
|
500
|
100 (0.001%)
|
20 (0.0002%)
|
|
Jobbing turnover (purchase side)
|
0
|
|
Carry-forward turnover
|
1,000
|
|
Carry-forward off-setting turnover
|
0
|
|
Off-market turnover (two-sides)
|
1,000
|
|
Other turnover (two-sides)
|
1,000
|
|
Cash Debt
|
|
PSU Bonds/ Government securities turnover (two sides)
|
100
|
5 (0.00005%)
|
5 (0.00005%)
|
|
Other debt turnover (two sides)
|
1,000
|
|
Off-market turnover
|
100 / 1000
|
| |
|
|
|
|
(*subject to a minimum of Rs. 5,000 per year for the first five years and Rs. 5,000 for every block of five financial years commencing from the sixth financial year after the date of grant of initial registration to keep his registration in force.)
3.2 Existing and New brokers (trading and clearing members) in the derivatives segment
Unlike the brokers in the cash segment who have been paying fees on a fixed tenure basis, the existing brokers (trading and clearing members) in the derivatives segment are paying fees every year based on their turnover. Initially the level of fee structure was decided taking into account the nascent stage of development of the derivatives market and the need to encourage its growth. 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. It had also recommended that since the recommended rate in the derivative segment is substantially higher than the current level of Rs. 10/- per Rs. 1 crore of turnover, SEBI may, in the first instance, consider upward revision of fees in a phased manner by increasing from Rs. 10/- per Rs. 1 crore of turnover as currently defined to Rs. 20/- per Rs. 1 crore of turnover as now defined by the Committee. 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. The proposed new fee structure for new brokers in the cash segment is given in the following table:
Table II
Proposed New Fee Structure for Existing and New brokers (trading and clearing members) in the derivatives segment
|
Derivatives Segment (for every Rs. 1 crore of turnover)
|
|
Type of transaction
|
Existing Fee Structure
(Payable every year by all members in the derivatives segment)
(Rs. per crore)
|
Fee Structure recommended by Anjaria Committee
(Payable every year by all members in the derivatives segment)
(Rs. per crore)
|
New Proposed Fee Structure
(Payable every year by all members in the derivatives segment)
(Rs. per crore)
|
|
(1)
|
(2)
|
(3)
|
(4)
|
|
Trading Member of Derivative Segment
|
Turnover > Rs. 500 crore – Rs. 10 per one crore of turnover
Turnover < = Rs. 500 crore – Rs. 10,000 (flat)
|
50 (in phases), 20 to start with
|
20 (0.0002%)
|
|
Clearing Member of Derivative Segment
|
25,000 per year
|
-
|
50,000 per year
|
| |
|
|
|
|
3.3 Existing brokers in the cash segment
3.3.1 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.
3.3.2 It is proposed that:
Ø such of those existing brokers who are paying turnover based fees for the first block of five financial years under the existing fee structure would be given an option 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;
Ø such of those existing brokers who have who have already paid fees for the first block of five financial years would be given an option to switch over to the proposed new fee structure immediately or after the completion of the current block of five financial years.
3.3.3 It may be mentioned here that even 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.
- Exchange mechanism for collection of fees
The Exchange / clearing corporation mechanism will be used to collect SEBI fees from brokers. Any transaction in securities, irrespective of the type of transaction or mode of transaction would attract fees as per proposed new fee structure. The broker will be under obligation to report off-market transactions, if any, to the concerned Exchange. For this purpose, all transactions in securities which are carried out by the broker outside the exchange would mean off-market transaction. Exchange / clearing corporation shall be used to compute and recover SEBI fees from the brokers / Trading Members / Clearing Members and remit the same to SEBI by 5th working day of next month.
The comments on this proposal may please be e-mailed at anjariacom@sebi.gov.in on or before 10th June 2006.
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