CIRCULAR
SEBI/HO/MRD/TPD-1/P/CIR/2024/92 July 01, 2024
To
All Stock Exchanges
All Clearing Corporations
All Depositories
Sir/Madam,
Charges levied by Market Infrastructure Institutions – True to Label
1. Market Infrastructure Institutions (MIIs) being public utility institutions act as first
level Regulator and are entrusted with the responsibility of providing equal,
unrestricted, transparent and fair access to all market participants. The
principle of equal, fair and transparent access by MIIs is highlighted in
Regulation 39 (3) of Securities Contracts (Regulations) (Stock Exchange and
Clearing Corporations) Regulations, 2018 and Regulation 82 of SEBI
(Depositories and Participants) Regulations, 2018.
2. Upon examination of existing processes related to charges levied by MIIs on
their members (i.e. stock brokers, depository participants, clearing members),
it was 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 daily
basis whereas MIIs receive aggregate charges from the members on monthly
basis.
3. The aforesaid process can result in a situation wherein the aggregated charges
collected by the members from the end clients is 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.
4. The aforesaid matter was deliberated with the Secondary Market Advisory
Committee (SMAC) of SEBI, 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.
5. In view of the aforesaid concerns and as per deliberations with SMAC, it has
been decided that the MIIs would comply with following additional principles
while designing the processes for charges levied on their members which are
to be recovered from the end clients:
a. The MII charges which are to be recovered from the end client should
be True to Label i.e. if certain MII charge is levied on the end client by
members (i.e. stock brokers, depository participants, clearing members),
it should be ensured by MIIs that the same amount is received by them.
b. The charge structure of the MII should be uniform and equal for all its
members instead of slab-wise viz. dependent on volume/activity of
members.
c. To begin with, the new charge structure designed by MIIs should give
due consideration to the existing per unit charges realized by MIIs so
that the end clients are benefitted with the reduction of charges.
6. Accordingly, MIIs are directed to:
a. Redesign the existing charge structure and associated processes to comply
with the aforesaid principles;
b. Take necessary steps to put in place requisite infrastructure and systems
for implementation of the circular, including necessary amendments to the
relevant bye-laws, rules and regulations;
c. Bring the provisions of this circular to the notice of their members and also
disseminate the same on their website; and
d. Communicate to SEBI, the status of implementation of the provisions of this
circular.
7. The circular would be effective from October 01, 2024. The circular is being
issued in exercise of powers conferred under Section 11 (1) of the Securities
and Exchange Board of India Act, 1992 read with Regulation 51 of the
Securities Contracts (Regulation) (Stock Exchanges and Clearing
Corporations) Regulations, 2018 and Regulation 97 of Securities and
Exchange Board of India (Depositories and Participants) Regulations, 2018
to protect the interests of investors in securities and to promote the
development of, and to regulate the securities market to protect the interests of
investors in securities and to promote the development of, and to regulate the
securities market
Yours faithfully,
Ansuman Dev Pradhan
Deputy General Manager
Technology, Process Re-engineering, Data Analytics
Market Regulation Department
+91-22-26449622 Email: ansumanp@sebi.gov.in