SEBI mandates uniform charges for all market infrastructure institution members

Markets regulator SEBI on Monday directed stock exchanges and other market infrastructure institutions (MIIs) to implement a uniform and equal charge structure for all members rather than varying charges based on their volume or activity.

The regulator instructed stock exchanges, clearing corporations, and depositories constituted as MIIs to ensure that any charges recovered from the end client are 'True to Label'.

It means that if a certain charge is levied on the end client by members -- stock brokers, depository participants, clearing members -- it should be ensured by MIIs that the same amount is received by them.

"To begin with, the new charge structure designed by MIIs should give due consideration to the existing per unit charges realised by MIIs so that the end clients are benefited from the reduction of charges," Sebi said in a circular.

The regulator has asked MIIs to comply with these additional principles while designing the processes for charges levied on their members, which are to be recovered from the end clients.

MIIs, being public utility institutions, act as first-level regulators, and are entrusted with the responsibility of providing equal, unrestricted, transparent and fair access to all market participants.

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Upon examination of existing processes related to charges levied by MIIs on their members, Sebi observed that a volume-based slab-wise charge structure is followed by some MIIs.

These charges are levied in lieu of various services offered by MIIs and are recovered from the end clients by members.

It has also been observed that members generally recover such charges from the end clients on a daily basis, whereas MIIs receive aggregate charges from the members on a monthly basis.

"This process can result in a situation wherein the aggregated charges collected by the members from the end clients are higher than the end-of-month charges paid to the MII (due to slab benefit). This can also result in an incorrect or misleading disclosure to the end client about the charges levied by MIIs," Sebi noted.

The matter was deliberated with the Sebi's Secondary Market Advisory Committee (SMAC), wherein it was observed that in addition to impacting transparency, the existing slab-wise charge structure of MIIs can also create a hindrance for the MIIs in ensuring equal and fair access to all market participants by impacting level playing field between members owing to their size differentials.