India's BSE set for worst day ever as markets regulator seeks higher fee structure

BENGALURU (Reuters) -Shares of BSE sank 19% on Monday and were set for their worst day ever, after India's markets regulator sought a higher regulatory fee structure for options contracts, which, analysts said, could eat into the exchange operator's profits.

BSE's stock trimmed some losses to trade down 12.5%, but was still the top loser on the Nifty mid-cap 100 index, which was up 0.3%.

The Securities and Exchange Board of India (SEBI) on Friday directed BSE to pay the regulatory fee on the annual turnover based on the notional value of options contracts, along with differential payment for past years with interest.

The company has been calculating annual turnover based on the premium value for options contracts.

India's biggest commodity exchange, the Multi Commodity Exchange (MCX), also received a similar directive from the SEBI on regulatory fees over the weekend, with a demand of 17.7 million rupees for the past years.

MCX shares, which are up 27% year to date, fell as much as 6.5%. They were last down 2.5%.

Derivatives make up for about 40% of BSE's financial year 2025 and 2026 profit and higher fees could hit the overall earnings per share by 15%-18%, Jefferies analysts said in a note.

The brokerage lowered its price target on BSE's stock to 2,900 rupees from 3,000 rupees and downgraded it to "hold" from "buy".

BSE said the total demand from SEBI stood at 1.65 billion rupees and was evaluating the order.

The SEBI's move made it necessary for BSE to hike its transaction charges on options to offset the profitability impact, multiple brokerages said.

The exchange operator's shares are still up 27.4% this year, including the day's fall, outperforming the 9.6% gain in the mid-cap index.

(Reporting by Sethuraman NR in Bengaluru; Editing by Sohini Goswami)