Shares of Indian brokers fell on Tuesday, a day after India’s markets regulators asked market institutions like exchanges to levy uniform charges on brokers that are not based on volumes.
As of 9:30 AM, broking company stocks including Angel One, IIFL Securities, 5Paisa Capital, SMC Global, Motilal Oswal Financial Services, and Geojit Financial Services fell in the range of 2–11 per cent. In comparison, BSE Sensex was trading at record levels, up 0.23 per cent at 79,662.64.
Among them, Angel One was the top loser, falling as much as 10.50 per cent to hit an intraday low of Rs 2,307.95 per share. IIFL Securities followed closely with a loss of 7.44 per cent. The stock fell to an intraday low of Rs 195.20 per share.
Among other stocks, 5Paisa fell 4.5 per cent, SMC Global (down 2.4 per cent) and Motilal Oswal Financial Services (down 2.81 per cent), and Geojit Financial Services (down 2.8 per cent).
SEBI’s new circular stated that Market Infrastructure Institutions (MIIs) like stock exchanges and clearing corporations should not give discounts based on turnovers.
Currently, MIIs such as exchanges and depositories levy transaction charges and depository fees on brokers using a slab-wise structure. Brokers, in turn, charge their customers using a similar slab-wise structure.
However, the timing of these charges differs as brokers generally recover these charges from end clients on a daily basis, while MIIs receive the aggregate charges from members on a monthly basis. Consequently, the total charges collected by brokers from end clients are higher than the charges paid to MIIs at the end of the month due to the slab benefit.
Accordingly, discount brokers currently earn between 15 per cent and 30 per cent via transaction charge discounts, while for deep discount brokers, that number rises further to 50 per cent to 70 per cent.
However, the revised circular states that the MII charges, which are to be recovered from the end client, should be “true to label,” meaning that if any MII charge is levied on the end client by members (stockbrokers, depository participants, clearing members), MIIs should ensure that they receive the same amount.
As per the circular, the charge structure of MIIs should be uniform and equal for all members instead of the slab-wise structure which is dependent on volume/activity of members.
Based on these changes, Motilal Oswal Financial Services feels that discount brokers’ revenues may be hit as they earn a significant share of their revenues from such charges with their large base of retail customers and hence lower volume/ticket size. Angel One earned about Rs 4oo crore from these charges in FY24.
Despite that, the brokerage also feels that the impact of these charges can still be offset by higher brokerage rates.
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