The BSE stock was in the limelight on Monday following Sebi’s directive to the company to cough up option turnover fee as per the ‘notional value’.
BSE stock tumbled 18.6 per cent to a low of Rs 2,612 in intra-day trades on Monday on the National Stock Exchange (NSE) after the market regulator Sebi directed the Mumbai-based stock exchange to pay regulatory fees on option turnover, including arrears and interest cost within a month.
Sebi’s directive
BSE (Bombay Stock Exchange) in an exchange filing said, SEBI has asked BSE to pay the regulatory fee on the annual turnover considering ‘notional value’ in the case of options contracts.
For the last many years, BSE was paying the regulatory fee based on annual turnover considering the premium turnover of options.
Difference between ‘premium turnover’ and ‘notional turnover’ explained
In simple terms, premium turnover of options is calculated based on the premium at which the specific contract is traded multiplied with the option contract size.
So for e.g. Sensex option contract of 75,000 Call, if traded at Rs 100, the premium turnover would be Rs 1,000 since, Sensex option contract is in 10 Lot Size. Based on which, BSE was paying the requisite turnover fee on Rs 2,000 (Buy + Sell)
However, Sebi wants BSE to pay the turnover fee based on ‘notional value’. Which in this case, would be 75,100 multiplied by 10 = Rs 7,51,000, thus turnover would be Rs 15,02,000 (Buy + Sell).
The notional value is always higher than the premium turnover, thus a higher outgo as a fee if the notional turnover is kept as the base.
The Sebi’s regulatory fee stands at 0.000012 per cent of the annual turnover.
Is Sebi right in doing so?
As per the Securities and Exchange Board of India (Stockbrokers) Regulations1992 ‘turnover’ is defined as follows:
(A) The expression ‘turnover’ shall include the value of the trades executed by the stockbroker on the concerned segment of the recognized stock exchange and of the trades settled on the expiration of the contracts.
(B) In case of options contracts, ‘turnover’ shall be computed on the basis of premium traded for the option contracts and in case where the option is exercised or assigned, it shall be additionally computed on the basis of notional value of option contracts exercised or assigned.
What does BSE has to say on this?
BSE said it was currently evaluating the validity, or otherwise, of the claim as per Sebi letter.
Meanwhile, experts opine that BSE been an exchange and a regulatory body itself, which implements the norms set by Sebi will unlikely contest the market regulator order.
Experts add that today’s sharp fall is a knee-jerk reaction to the regulatory news, as the stock has rallied over 500 per cent in the last one year.
HDFC Securities asses’ impact & likely remedy
HDFC Securities in a note on the regulatory setback to BSE, said that the stock exchange will have to pay a regulatory fee of around Rs 1/2.5/3.1 billion, which would be around 13/21/22 per cent of FY24/25/26E adjusted PAT (Profit After Tax).
The brokerage firm, meanwhile, recommends that BSE can offset the impact of higher regulatory fees by increasing the transaction charges by around 25 per cent and reducing clearing charges by around 10 per cent. Based on which, the HDFC Securities calculations suggest a reduced impact of around -5/-2 per cent for FY25/26E.
First Published: Apr 29 2024 | 11:50 AM IST