BSE Shares Plunge Over 18% After SEBI Requests Higher Regulatory Fees

SEBI Asks for Higher Regulatory Fees Based on Notional Value of Options Contracts

The crux of the issue lies in the calculation of the regulatory fees that BSE needs to pay to SEBI. Previously, BSE calculated the fees based on the premium value of options contracts. However, SEBI has now mandated that the fees be calculated based on the “notional value” of these contracts. The notional value represents the underlying value of the asset on which the option is based, and it is typically much higher than the premium value.

This change in calculation has resulted in a significant increase in the regulatory fees that BSE owes to SEBI. According to BSE’s filing, the total differential fee payable for the past period along with interest comes to nearly Rs 165 crore. Additionally, the exchange might have to pay around Rs 96.30 crore plus GST for the financial year 2023-24 based on the new fee structure.

Impact on BSE Share Price

The news of the higher regulatory fees sent shockwaves through the market, leading to a sharp decline in BSE’s share price. On the NSE, BSE’s stock made a low of Rs 2,612.1, representing a drop of almost 18.6% in early trade. Despite this drop, it’s important to note that BSE’s stock has still gained over 400% in the last 12 months.

It is estimated that this move could have an impact on BSE’s profitability and that the higher fees could reduce BSE’s Earnings Per Share (EPS) by 15% to 18%. However, BSE can potentially offset this impact through price hikes and improved premium quality on derivative contracts.

Outlook

The impact of SEBI’s decision on BSE remains to be seen in the long term. While the immediate consequence is a significant increase in regulatory fees and a drop in share price, BSE has options to mitigate the financial impact. The success of these measures, such as price hikes, will determine the ultimate effect on the company’s profitability.

It’s also important to consider the broader market implications. This case highlights the role of SEBI in regulating stock exchanges and ensuring fair practices. The outcome of this situation could set a precedent for how regulatory fees are calculated for other exchanges in the future.

Shares of BSE Ltd are presently trading at Rs 2691.40, reflecting a decline of 16% compared to yesterday’s closing value of Rs 3210.35. The stock’s 52-week high stands at Rs 3264.70, while its lowest point during the same period was Rs 511. The stock has delivered 43.39% and 412.94% returns over 6 months and 1 year respectively.

Conclusion

In conclusion, SEBI’s decision to ask for higher regulatory fees based on the notional value of options contracts has had a significant impact on BSE. The company faces a substantial increase in fees and a decline in share price. However, BSE has options to potentially offset the financial impact through strategic adjustments. This case underscores the importance of regulatory oversight in the stock market and the need for exchanges to adapt to changing regulations.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.