BSE may see a big jump in regulatory fee; Sebi asks it to calculate annual turnover based on notional value

The market regulator has asked the exchange to pay its pending fees.

BSE may have to pay a huge bill for its regulatory fee, going by a letter it has received from the market regulator on April 26.

As per the letter, BSE has been asked to pay its regulatory fee to the Securities and Exchange Board of India (Sebi) based on annual turnover calculated from the "notional value" of options contracts. The regulator's letter says that BSE has been calculating the annual turnover based on premium value for options contracts.

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Notional value is much higher than the premium value, since notional value is calculated by multiplying the contract size with the underlying's price.

Through a filing with the National Stock Exchange (NSE) on April 26, BSE shared the market regulator's letter on payment of differential regulatory fee for the past periods along with applicable interest.

Sebi's letter said that, since the introduction of derivative contracts, BSE (including the erstwhile United Stock Exchange (USE), which got merged with BSE during the FY 2014-15) has been paying the regulatory dee on "Annual Turnover" to the Board considering premium value for option contracts, instead of the notional value.

The letter also said that the fee paid to the regulator by the exchange for FY 2006-07 was for a quarter rather than for the full financial year.

BSE has been asked to pay the differential regulatory fee (including differential regulatory fee of USE, if any) for the past periods along with applicable interest (that is, 15 percent per annum on the amount remaining unpaid 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 date of receipt of Sebi's letter.

Stock exchanges have to pay a regulatory fee to Sebi within 30 days of conclusion of the relevant financial year.

Sebi's letter read, "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."

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It added, that 'the annual turnover' for option contracts is to be computed and was always deemed to have been computed on the basis of the notional value of the option contracts for the purpose of payment of regulatory fee to the Board.