Sebi to roll out new turnover fee plan

The Securities and Exchange Board of India (Sebi) will soon effect changes in the structure of turnover fee paid by stock brokers. The changes will be in line with the recommendations made by the D C Anjaria committee in 2003-04.

The committee had recommended fee payment of Rs 100, Rs 5 and Rs 50 for every Rs 1 crore turnover in the equity, the debt and the derivatives segments respectively.

It had also proposed that the fee should be perpetual and not just for the first five years of registration and that such fees should be applicable only to new registrations and not to brokers, who have already paid fees on the basis of the existing scale of fees.

The Sebi move will finally provide some respite to stock brokers, who have had to pay high turnover fee despite the fact that their earnings have come down drastically over the past decade.

Further, it would also accelerate consolidation in the broking business, which has been severely impacted by the current registration fee structure. "Only the regulator would stand to lose, if we slash the turnover fee. We don't mind foregoing this income," a Sebi source said.

Since 1992 stock brokers have been paying a fee linked to the turnover of trades transacted by them, either on behalf of their clients or on their own, on stock exchanges for the first five years of their registration.

For an aggregate annual turnover of up to Rs 1 crore, the fee payable is Rs 5,000. And for a turnover in excess of Rs 1 crore, the fee payable is one hundredth of 1 per cent of the amount.

The Anjaria committee had found that on an average the brokerage earnings in 2002-03 were just 0.17 per cent compared with 2 per cent when the regulations were framed in 1992.

Experts have been pointing out that this is a huge amount and cross-subsidises the regulation of other segments of the market, where intermediaries do not pay fees commensurate with their earnings.

For instance, merchant bankers, who mostly earn their fees linked to the size of the transactions they handle, pay a pittance as registration fee to the Sebi, when compared with what stock brokers pay.

Brokers said consolidation in the broking business has been jeopardised with the Sebi initiating the five-year turnover fee with every change in control.