India's brokerage stocks fall as markets regulator asks exchanges to levy uniform charge (updated)
02/07/2024 05:39
(Updates shares, adds context)
BENGALURU, July 2 (Reuters) - Shares of Indian brokers
fell on Tuesday, a day after India's markets regulators asked
market institutions like stock exchanges to levy uniform charges
on brokers that are not based on volumes.
Brokerages like Angel One ANGO.NS , 5Paisa Capital
PAIS.NS , SMC Global Securities SMCG.NS , Motilal Oswal
MOFS.NS , Geojit Financial GEOJ.NS and Dolat Algotech
DOLA.NS fell between 3% and 8% in early trade.
Exchange operator BSE BSEL.NS was down 2.5%.
Exchanges often charge a lower fee to brokers if they
generate high volumes, contributing to a surge in trading across
segments like derivatives, which the regulator wants to curb.
The new regulation will be effective from Oct 1.
Securities and Exchange Board of India last week warned of
rising risks from a surge in derivative trading volumes, with
small investors jumping in to trade risky options contracts.
A series of steps are being discussed by regulators to cool
the frenzy, Reuters reported last month.
"A 100% pass-through of exchange transaction charges
threatens to destabilise the discount brokerage business model,"
Tejas Khoday, cofounder and CEO of FYERS, a discount broking
firm said.
While retail customers are charged the standard slab rate,
brokers were benefiting from a lower fee due to high turnover,
Khoday said.
The exchange transaction charge, which constitutes between
15%-30% of large brokers' revenues and more than 50% of discount
brokers', is crucial for their sustainability, Khoday said.
One of India's top discount brokers, Zerodha, did not
immediately comment on the impact of the regulation on its
business.
Shares of some of the brokerages have risen between 50%-124%
so far this year on a surge in trading activity, with Indian
benchmarks Nifty 50 index .NSEI and S&P BSE Sensex .BSESN
hovering around record highs.
While Dolat Algotech is the top gainer among brokerage
stocks so far this year, surging 124%, Angel One has been a top
drag, falling 26%.
(Reporting by Sethuraman NR in Bengaluru; Editing by Mrigank
Dhaniwala)
((Sethuraman.NR@thomsonreuters.com; (+91 9945291420); Reuters
Messaging: nallur.sethuraman.thomsonreuters.com@reuters.net))