India’s securities regulator, Sebi, has announced a major change to how stock exchanges and other market infrastructure institutions (MIIs) charge brokers. The new rule, which will come into effect from October 1, will require MIIs to charge brokers a uniform fee, regardless of the volume of trades they generate. This move is aimed at creating a more level playing field for smaller brokers and reducing the incentive for excessive derivatives trading.
Under the current system, MIIs charge brokers a fee based on the volume of trades they generate. This means that large brokers, who generate a lot of trades, end up paying lower fees per trade than smaller brokers. Sebi believes that this system is unfair and gives large brokers an unfair advantage.
The new rule will require MIIs to charge all brokers the same fee, regardless of the volume of trades they generate. This will level the playing field for smaller brokers and make it more difficult for large brokers to undercut their prices.
Sebi also believes that the current system encourages excessive derivatives trading. Because brokers pay lower fees per trade when they generate a lot of trades, there is an incentive for them to encourage their clients to trade derivatives more often. Sebi believes that this can lead to excessive speculation and instability in the market.
The new rule is expected to have a significant impact on the broking industry. Large brokers will likely see their costs increase, while smaller brokers may see their costs decrease. The rule may also lead to a reduction in derivatives trading activity.
