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Geojit Financial Services Chief Financial Officer (CFO) Mini Nair has said that the Securities and Exchange Board of India’s (SEBI) new ‘True to Label’ pricing regulations enhance transparency and customer protection while stressing that the regulations do not significantly impact Geojit Financial Services.
The regulations mandate uniform charges by market infrastructure institutions such as stock exchanges, clearing corporations, and depositories. The CFO said that these changes.
“These regulations do not significantly impact us as our business model does not rely on high-volume derivative trading like discount brokers. We focus on long-term investment strategies and ethical business practices,” Nair told ETCFO.
However, the CFO highlighted that the new SEBI circular mandating uniform charges by market infrastructure institutions will make it difficult for discount brokers to sustain their models in the long term due to rising costs and compliance requirements. “These changes enhance transparency and customer protection, making it difficult for discount brokers to sustain their models due to rising costs and compliance requirements,” she said.
The SEBI regulations
The SEBI recently issued a new circular mandating “True to Label” pricing, effective from October 1, 2024. This regulation requires brokers to charge clients exactly what they pay to market infrastructure institutions (MIIs), eliminating the practice of brokers earning rebates based on volume discounts. On July 1, SEBI issued a directive to market infrastructure institutions (MIIs) to levy uniform fees, irrespective of the size of the market participants, essentially targeting stock brokers.
Nair noted that discount brokers might find it challenging to sustain their current business models. “We were always very clear we are not getting into the space of discount broking because we believe in providing overall services, including advisory and research, ensuring the client is investing for the long term rather than speculating in futures and options,” she said.
Unique Business Model of Geojit Financial Services
Explaining the company’s unique business model, Nair said, “Maybe we are a bit unique compared to other brokers because 80 per cent of our business is from the delivery business, the cash segment. Unlike discount brokers, where about 80 per cent of their business is in derivatives like futures and options, only 20 per cent of our total volume of business is in derivatives. The rest is in the equity delivery business, so cash business.” This focus on cash transactions has allowed Geojit Financial Services to stay away from tariff and rebate issues that affect other brokers.
Commitment to Transparency and Ethical Practices
Nair elaborated on the company’s commitment to transparency and ethical practices. “Whatever charge the exchanges charge us, we pass on that to the client. There is no rebate taken by us, and there is no difference between what we are charged and what we collect from the client. Transparency and ethical business are core to our operations,” she said.
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