Dear Traders,
On July 1, 2024, the Securities and Exchange Board of India (SEBI) issued a pivotal circular, which brought significant changes to how Market Infrastructure Institutions (MIIs) such as stock exchanges, clearing corporations, and depositories levy charges. This move was aimed at enhancing transparency, promoting fairness, and ensuring that charges passed on to clients accurately reflect what is paid to the exchange.
MIIs play a critical role in ensuring smooth and regulated trading environments for market participants. However, SEBI identified inconsistencies in how charges were being passed on from trading members (brokers, depository participants) to end clients. In some cases, a slab-based, volume-driven pricing structure led to clients being overcharged, as members would collect more from clients than they ultimately paid to MIIs.
This discrepancy was not only misleading but also posed a challenge to maintaining equal and fair access to the markets. Larger brokers, benefiting from the slab system, could operate on lower costs compared to smaller participants, creating an uneven playing field. SEBI’s directive sought to eliminate these disparities by introducing uniform and transparent fee structures.
In response to SEBI’s circular, all three exchanges - NSE, BSE, and MCX have revised their transaction charges which will be effective from October 1, 2024. Here’s a breakdown of the changes made by them:
| Segment | Previous | Revised | Change |
|---|---|---|---|
| Cash (Intraday) | BSE: 0.00375% or Rs. 375 per crore | BSE: 0.00375% or Rs. 375 per crore | No Change |
| NSE: 0.00322% or Rs. 322 per crore | NSE: 0.00297% or Rs. 297 per crore | -7.76% | |
| Cash (Delivery) | BSE: 0.00375% or Rs. 375 per crore | BSE: 0.00375% or Rs. 375 per crore | No Change |
| NSE: 0.00322% or Rs. 322 per crore | NSE: 0.00297% or Rs. 297 per crore | -7.76% | |
| Index Futures | BSE: 0% or Rs. 0 per crore | BSE: 0% or Rs. 0 per crore | No Change |
| NSE: 0.00188% or Rs. 188 per crore | NSE: 0.00173% or Rs. 173 per crore | -7.98% | |
| Index Options | BSE: 0.0495% or Rs. 4950 per crore | BSE: 0.0325% or Rs. 3250 per crore | -34.34% |
| NSE: 0.0495% or Rs. 4950 per crore | NSE: 0.03503% or Rs. 3503 per crore | -29.23% | |
| Stock Futures | BSE: 0% or Rs. 0 per crore | BSE: 0% or Rs. 0 per crore | No Change |
| NSE: 0.00188% or Rs. 188 per crore | NSE: 0.00173% or Rs. 173 per crore | -7.98% | |
| Stock Options | BSE: 0.005% or Rs. 500 per crore | BSE: 0.005% or Rs. 500 per crore | No Change |
| NSE: 0.0495% or Rs. 4950 per crore | NSE: 0.03503% or Rs. 3503 per crore | -29.23% | |
| Currency Futures | BSE: 0.0009% or Rs. 90 per crore | BSE: 0.00045% or Rs. 45 per crore | -50.00% |
| NSE: 0.0009% or Rs. 90 per crore | NSE: 0.00035% or Rs. 35 per crore | -61.11% | |
| Currency Options | BSE: 0.001% or Rs. 100 per crore | BSE: 0.001% or Rs. 100 per crore | No Change |
| NSE: 0.035% or Rs. 3500 per crore | NSE: 0.0311% or Rs. 3110 per crore | -11.14% | |
| Commodity Futures | MCX: 0.0026% or Rs. 260 per crore | MCX: 0.0021% or Rs. 210 per crore | -19.23% |
| NSE: 0.0001% or Rs. 10 per crore | NSE: 0.0001% or Rs. 10 per crore | No Change | |
| Commodity Options | NSE: 0.001% or Rs. 100 per crore | NSE: 0.001% or Rs. 100 per crore | No Change |
| MCX: 0.05% or Rs. 5000 per crore | MCX: 0.0418% or Rs. 4180 per crore | -16.40% |
The crux of SEBI’s directive lies in the concept of “True to Label.” This principle ensures that when trading members charge end clients for transaction fees, the amount must be identical to what the MIIs charge the members. In other words, the fee charged to the client should match the actual cost, without any additional markup.
This regulation promotes transparency, as clients will no longer be overcharged due to volume-based slabs or other hidden fees. It also fosters a more competitive and level playing field for smaller market participants, ensuring that all brokers, regardless of size, operate under the same cost structures.
The revisions in transaction charges are largely favourable for retail investors and traders. With a more transparent fee structure, traders can better anticipate their costs, making it easier to calculate potential profits or losses. Additionally, the uniform charge structure reduces the advantage that larger brokers previously held, ensuring more equitable access to financial markets.
For frequent traders, particularly in segments such as equity options and futures, the impact will be noticeable as the exact charges they see on their trading statements will now be a more accurate reflection of the fees paid to exchanges.
In line with the new changes, Dhan will reflect the same in your trading contract notes and also transaction estimator as well. As always, we suggest our users to trade when they find relevant opportunities in the market, and also ensure they use various Trader Control’s that Dhan provides for risk management.
How will this impact the Broking Industry?
There is going to be a larger impact, and we expect the brokerages to go up as well as end of the Zero Brokerage plans. More on that is being discussed on this thread:
Thank you
Jay