BSE transaction charges may rise, fear some analysts

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Brokerage firm HDFC Securities called the recent issues surrounding the Bombay Stock Exchange (BSE) Ltd., a regulatory setback, adding that it will have to pay a regulatory fee of up to ₹310 crore in financial year 2026, which is nearly 22% of its projected net profit for that financial year.

A way to offset the impact the higher regulatory fees is to increase the transaction charges by 25% and reduce clearing charges by nearly 10%, which will reduce the impact to only 5% and 2% for financial year 2025 and 2026 respectively, the brokerage wrote in its note.

BSE currently charges ₹26 per billion on options premium and the clearing and regulatory cost is 29% and 38% of the derivative revenue.

“The regulatory fee impact for BSE is amplified because it collects nearly one-third premium for the same notional volume compared to NSE and pricing is nearly 25% lower,” the brokerage said.

BSE shares witnessed their biggest single-day drop since listing after it was asked to cough up a higher regulatory fee to SEBI, based on the annual turnover calculated from the notional value of its options contracts.

Until now, both BSE and MCX were calculating the annual turnover based on the “premium value” for options contracts.

For example, consider a Call option with a lot size of 10, a strike price of ₹1,000 and a premium of ₹100. Buying one lot would mean a premium turnover of ₹1,000, but the notional turnover will be the sum of the strike price and premium multiplied by the lot size, which will come up to ₹11,000.

HDFC Securities said that it has not changed its estimates on BSE despite the developments and will await more clarity on the same. It projects BSE’s revenue and Earnings per Share (EPS) to grow at a Compounded Annual Growth Rate (CAGR) of 34% and 42% respectively, over financial year 2024 and 2026, led by a revival in transaction revenue.

The brokerage has retained its “buy” rating on the stock with a price target of ₹3,100.

Shares of BSE have recovered marginally from the day’s lows, but continue to trade with losses of 12.6% to ₹2,806.55.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow