The Hindu Business Line : SEBI yet to decide on reduction in turnover fee

Two years after an expert panel suggested reduction in turnover fees paid by stockbrokers to the Securities and Exchange Board of India on account of drastic fall in brokerage rates over the last decade or so, the market regulator is yet to take a decision.

Top officials of broking firms allege that SEBI was sitting on the recommendations made by the committee headed by Mr D.C. Anjaria fearing "loss of huge revenues."

The Anjaria Committee, which submitted its report to SEBI in 2003-04, had recommended the fees for the cash segment be brought down from Rs 1,000 per Rs 1 crore worth transaction to Rs 100. The committee also suggested the turnover fees in government securities segment be reduced to Rs 5 per Rs 1 crore of transactions from the prevailing Rs 100 per Rs 1 crore.

SEBI officials were not available for comment.

However, SEBI admits the need for such reductions. "The fee structure for brokers as prescribed in 1992 is not in tune with the level of brokerage prevailing after a decade. This necessitated a review of the fee structure for stockbrokers. Accordingly, a committee was constituted under the chairmanship of (Mr) D.C. Anjaria to consider a revision of the fee structure for the brokers," said SEBI's Annual Report 2003-04. "The committee has finalised its report and the same is under consideration," the report says.

Brokerage rates plummet

Industry officials point out that the brokerages are operating under stiff competition and the brokerage rates paid by the investors have almost touched "rock-bottom levels."

From one per cent levels, the brokerage rates have come down to 0.03 per cent for intra-day transactions. For delivery-based transactions, the rates now stand at 0.10 per cent. This was also ruling at one per cent levels in the early 1990s.

"Competition within the industry has intensified, forcing us to cut down on commission rates. But, SEBI rates are still at the early 1990 levels," said an official in a broking firm.

`SEBI unwilling to revise'

He alleged that SEBI was not willing to revise the rates downwards fearing a massive reduction in its revenues. For instance, the fees collected from stock brokers and sub-brokers during 2003-04 stood at Rs 63.42 crore (or 72.16 per cent), out of a total of Rs 87.88 crore during the same period, according to the SEBI Annual Report.

Similarly, in 2002-03, SEBI collected a massive Rs 100 crore from stockbrokers and sub-brokers, compared to the total fees of Rs 107.89 crore collected . The other contributors to SEBI income include mutual funds, portfolio managers, takeover fees and foreign venture capital.

"The fees collected from other capital market players were revised with the changing times. But not for the stock broking community," said another official in a local broking outfit.

With substantial increase in trading volumes over the last five to eight years, the time is now right for a reduction in fees, he said.

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