Broking company stocks were under pressure on Tuesday’s trading session after the Securities Exchange Board of India (Sebi) directed Market infrastructure institutions (MIIs), exchanges to levy the same fees.
SEBI in a circular stated that charges imposed by market infrastructure institutions including stock exchanges, clearing corporations, and depositories should be standardised and not tied to trading volumes.
As a result, shares of Angel One, Motilal Oswal Financial Services, IIFL Securities, 5Paisa Capital, and SMC Global Securities saw declines ranging from 1 percent to 10.3 percent. Angel One experienced the most significant drop among them.
Sebi in the circular highlighted that some MIIs currently use a volume-based, slab-wise charge structure for their services, which members (such as stock brokers, depository participants, and clearing members) pass on to end clients daily, while MIIs collect these charges from members monthly.
This process can lead to a discrepancy where the charges collected from end clients exceed what is paid to the MIIs, resulting in a potential misrepresentation.
To address this, Sebi mandated uniform charges across all market participants, eliminating volume-based fees to ensure transparency and fair market practices. This change is scheduled to be implemented starting October 1, 2024.
Sebi’s decision is poised to reshape the revenue models of exchanges and clearing corporations, potentially modifying fee structures for high-tier clients and has also urged MIIs to design the new fee structure to reduce charges for end clients while ensuring fairness and transparency across the market.
Moreover, this decision aims to protect the interests of small investors who may have faced higher charges under the previous ad valorem fee structure. Standardizing charges will enhance accessibility to the market for small investors.
As per the sources, the discount brokers earn between 15 percent and 30 percent via transaction charge discounts, while for deep discount brokers, that number rises further from 50 percent to 70 percent.
In the case of Angel One, it currently charges zero brokerage up to Rs. 500 for intraday trading for the first 30 days, post which, it charges the lower of Rs. 20 or 0.03 percent per executed order.
Furthermore, within the F&O segment, the broker also charges zero brokerage up to Rs. 500 for the first 30 days and then charges Rs. 20 per executed order.
Looking at the company’s financial statements, the revenue increased by 28 percent from Rs. 1,059 crores during the December quarter to Rs. 1,357 crores in the March quarter. In addition, the net profits surged by 31 percent from Rs. 260 crores to Rs. 340 crores during the same period.
According to reports, in FY 24, Angel One earned Rs, 400 crores to Rs.450 crore from transaction and depository charges, which is 25 percent to 30 percent of its financial year 2024 profit before tax.
Written By Vaibhav Patil
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