The Securities and Exchange Board of India (SEBI) has issued a new circular, bearing no.: SEBI/HO/MRD/TPD-1/P/CIR/2024/92, effective from October 1st, 2024, addressing the charges levied by Market Infrastructure Institutions (MIIs), including stock exchanges, clearing corporations, and depositories; aiming to ensure transparency, fairness, and equality in the charges passed on to end clients by members such as stock brokers, depository participants, and clearing members. ,.
Market Infrastructure Institutions (MIIs) are first-level regulators, ensuring equal, unrestricted, transparent, and fair access to market participants, as mandated by Regulation 39 (3) of the Securities Contracts Regulations, 2018, and Regulation 82 of SEBI (Depositories and Participants) Regulations, 2018.
However, the Secondary Market Advisory Committee (SMAC) of SEBI, on the basis of an examination, noted that the slab-wise charge structure, used by some MIIs, recovered daily from end client by members, can result in higher charges collected from clients compared to what the MIIs received through aggregate charges which can further lead to misleading disclosures, reducing the transparency and hindering MIIs' ability to ensure fair access, impacting the level playing field among members of different sizes.
In light of these concerns and following discussions with SMAC, it has been decided that MIIs must adhere to the following principles while designing the processes for charges levied on their members to be recovered from end clients:
1. True to Label Charges:
Charges that MIIs recover from end clients must be "True to Label." This means that if members (such as stock brokers, depository participants, and clearing members) impose certain MII charges on end clients, MIIs must ensure they receive the exact same amount
2. Uniform Charge Structure:
The MIIs' charge structure should be consistent and equal for all members, rather than varying based on volume or activity.
3. Consideration for Existing Charges:
When designing the new charge structure, MIIs should consider the current per unit charges to ensure end clients benefit from any reduction in fees.
Directives to MIIs:
1. Redesign Charge Structure, updating the existing charge structure and processes to comply with the new principles;
2. Implement necessary Infrastructure and System Updates, including amendments to relevant bye-laws, rules, and regulations, for the circular's implementation;
3. Inform their members about the provisions of this circular and disseminate the information on their website;
4. Communicate to SEBI, the status of implementation of the provisions of this circular.
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