MUMBAI: Hinting discount broking is not the way forward and that investors have to pay for their services as there can be no free lunches in business, a senior Sebi official has called for adopting an explicit and transparent fee structure.
“Since brokers are not scheduled commercial banks, and do not have the full set of capital and other regulatory safeguards that banks have, from a transparency, efficiency, and risk perspective, we would all be better off if the implicit broking revenues from having client float balances were to eventually be replaced by explicit and transparent fees set in a competitive market,” Sebi whole-time member Ananth Narayan G said here on Thursday at the ongoing global fintech summit.
Stating that the securities ecosystem has come a long way, playing a stellar journey. “But in the medium term, we still have a distance to go in our journey towards the same capital formation, where there are nearly 12 crore unique investors accessing capital markets via SEBI regulated entities, he said.
From 25% of GDP in March 1993, the BSE market capitalisation has risen to over 150% of GDP as of July 2024. “From less than 1 crore demat account holders as of March 2011, we are nearing 10 crore unique demat holders today. It is impossible to imagine all this happening if the transaction costs, inefficiencies, and risks of three decades ago persisted today,” he said.
He said “brokers together currently hold about `2 trillion of client funds on their books on a given day.