Sebi to examine discount brokers’ concerns over new UPI MDR
Sebi is set to investigate the issues raised by discount brokers regarding new UPI charges that will impact large fund transfers starting October fifteenth. Brokers are particularly concerned that these additional costs may heavily burden them, as trades are not insured after the transfers are made. Additionally, the complexity of quarterly settlements could further escalate their expenses.
The Securities and Exchange Board of India (Sebi) will investigate the concerns raised by discount brokers regarding the new merchant discount rate (MDR) for large fund transfers through UPI (unified payments interface), said Sebi chief Tuhin Kanta Pandey. Sebi is considering the impact of this new framework on capital market transactions, including payments to brokers, mutual funds, investment advisors, and dealers, which will attract an MDR of 0.02%, capped at ₹300 per transaction, starting October 15.
Discount brokers like Nithin Kamath, founder of Zerodha, have expressed fears that the charge could disproportionately increase their costs, as money transferred by a client to a broking account may not result in a trade. Brokers cannot compel customers to trade after transferring funds, and they cannot pass the UPI charge onto the customer without generating revenue.
Additionally, quarterly settlement regulations require brokers to return unused funds to clients every month or quarter, often through UPI, which could lead to brokers bearing the cost without any additional benefit or revenue. Sebi has not received any proposal from the National Stock Exchange (NSE) to trade on its own platform after getting listed, according to Pandey.
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