SEBI Asks Exchanges To Discontinue Slab-Wise Fees To Brokers

India's market regulator has introduced guidelines for market infrastructure institutions, or MIIs, to ensure fair and transparent fee structures, potentially reducing costs for end clients such as investors and traders.

The Securities and Exchange Board of India found that under the current system, some MIIs follow a volume-based slab structure. This system can result in members collecting more fees from end clients daily than what they pay to MIIs monthly, leading to misleading disclosures about the actual charges.

Hence, SEBI has now mandated that MIIs must follow several principles when designing the processes for the charges they levy on their members, such as stockbrokers and depository participants, which are then passed on to the end clients.

Firstly, charges billed to end clients must be "True to Label." This means that if an MII charges a specific fee to an end client, it should receive the exact same amount without any discrepancies. This rule ensures that there are no hidden or extra charges being added by the intermediaries.

Secondly, the charge structure of MIIs should be uniform and equal for all its members. Currently, some MIIs use a slab-wise structure where fees depend on the volume or activity of the members. SEBI's new rule requires a flat fee structure to ensure fairness and prevent any advantages based on size or activity level.

SEBI also emphasised that the new charge structure should take into account the existing per-unit charges and aim to reduce costs for end clients. This means that investors and traders might see lower fees as a result of these changes.

MIIs must also update their infrastructure and systems, amend relevant rules and regulations, and inform their members and the public about these changes. Further, MIIs are required to report the implementation status of these provisions to SEBI.