New norms for brokers to hit BSE

A committee, set-up by Sebi to re-visit the eligibility norms and other functional aspects for brokers, recommended that a corporate stock broker should have a minimum net worth of Rs 1 crore while setting the limit at Rs 75 lakh for others.

BSE had reduced membership deposit and fee needs for new members in cash & equity derivatives segments to expand its membership base. Under the offer, a broker can obtain membership by paying a deposit of Rs 10 lakh instead of Rs 1 crore earlier. The minimum networth criteria for becoming a trading member is currently Rs 30 lakh.

However, if Sebi committee’s suggestions on networth are accepted, new entries could get reduced due to high cost.

For the National Stock Exchange networth requirement is Rs 1 crore in the capital market segment.

While the recommendation made by Committee on Review of Eligibility Norms (CORE) have gone down well with big and medium sized broking firms, smaller firms see it as a barrier to entry. The committee also recommended that the networth norm be increased to Rs 3 crore for all brokers by 2012.

Debate on MF products

Meanwhile, another Sebi committee will consider the issue of restricting mutual funds from selling an equity product that involves betting on future prices.
The Sebi Mutual Fund Advisory Committee is concerned that this is not mutual funds’ core activity and may take a decision on May 31.

In a letter sent to all fund houses recently, Sebi had sought proposals from asset management companies (AMCs), regarding selling of equity options and increased disclosure of their investment in this segment, sources in fund houses said. Mutual funds have already submitted their view to Sebi and they may be reviewed at Sebi’s Mutual Fund Advisory Committee meeting scheduled on May 31.

Sebi wants fund houses to control risk exposure and clearly demarcate their risky exposure. Industry players said, “Sebi has been looking at ways and means of regulating distribution of MF products and also MFs investment in derivatives.”