SEBI Asks BSE To Change Regulatory Fee Calculation Method

The exchange in a filing with the NSE on Friday shared the letter it received from SEBI on payment of differential regulatory fees for the last few periods with the interest applicable on the payments

This revision in calculation will increase the regulatory fee liability for BSE

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The Securities and Exchange Board of India (SEBI) asked the BSE to revise the calculation method of the regulatory fee paid to the former. The markets regulator urged the exchange to calculate its regulatory fee on the basis of annual turnover from ‘notional value’ of options contracts.

Notably, the exchange evaluated its annual turnover on the basis of premium value for options contracts. This revision in calculation could lead to an increase in the regulatory fee for BSE, reported Moneycontrol.

The exchange in an official filing with the NSE on Friday shared the letter it received from SEBI on payment of differential regulatory fees for the last few periods with the interest applicable on the payments. The notional value of the contracts is much higher than the premium value, as the former is calculated by multiplying the contract size with the underlying’s price. This in turn could increase the regulatory fee liability for the BSE. 

The markets regulator in its letter noted that the BSE has been paying the regulatory fee based on ‘annual turnover’ to the SEBI ever since derivative contracts were introduced. This fee has been paid considering the premium value for option contracts, rather than the notional value. 

The letter also pointed out that the fee paid for the 2006-07 fiscal year (FY07) by the exchange to the regulator covered a quarter instead of the full financial year. 

The regulator further noted, “The rate of regulatory fee was based on the annual turnover of a stock exchange. The term 'annual turnover' shall mean the aggregate value of transactions, which took place on the stock exchange during the relevant financial year.”

Therefore, SEBI urged BSE to make the payment for the differential regulatory fee for the recent periods, with the applicable interest rate of 15 per cent per annum on the unpaid balance or ‘belatedly paid or short paid for every month of delay or part thereof to the Board in terms of Regulation 11(8) of SECC Regulations, within a period of one month’ from the receipt of the letter from SEBI.

Typically, stock exchange are required to pay their regulatory fee to SEBI in 30 days of the concerned fiscal year’s conclusion.