BSE Ltd.’s recent hike in trading charges of Sensex and Bankex future options contract may reduce the impact of the Securities Exchange Board of India’s higher fees on the exchange’s earnings, according to analysts. Following the price hike, Jefferies and Investec raised their target price on BSE.
The exchange based on monthly turnover from May 13 has raised prices on its equity derivatives transaction charges in the range of Rs 500–2,950.
After BSE announced a blended 20% price hike for its derivative products, it is now on par with NSE, Jefferies said. This hike will reduce the impact of SEBI’s fee to just 2-4% on EPS.
Jefferies thinks the margin expansion will be gradual, as with similar pricing, BSE’s gross margin on derivatives will be lower than NSE due to its lower market share and SEBI’s fees.
SEBI has directed BSE to pay higher fees based on notional turnover, as opposed to the present practice of basing the fee on premium turnover.
Investec has upgraded the stock to ‘buy’ as it also sees a lower impact of SEBI’s fees because of BSE’s price hike. Additionally, the exchange has introduced the same charges on Bankex coupled with a higher market share of 8.4% as of April 2024, which will translate to a 13% and minus 2% EPS estimate change for FY25 and FY26, respectively.
Jefferies cautioned about regulatory risks staying in focus going forward as a regulatory panel has been set up to review the derivative markets.