Shares of BSE plunged 18% on Monday, the most significant drop since its listing after SEBI offered regulatory clarity on the fee paid to the market regulator as a turnover charge on options volume.

What Happened: The Securities and Exchange Board of India (SEBI) sent a letter to BSE requiring the exchange to calculate its regulatory fees based on the ‘notional value’ of options contracts’ annual turnover, rather than the premium value as BSE had previously done.

Consequently, BSE must pay an additional regulatory fee of ₹165 crore for the period from financial year 2007 to financial year 2024, with ₹69 crore covering up to 2023 and an additional ₹96 crore for 2024.

What analysts say: Jefferies, a brokerage firm, notes that such increased fees could decrease BSE’s Earnings Per Share (EPS) by 15% to 18%, considering that derivatives account for nearly 40% of the profit forecasts for fiscal years 2025 and 2026.

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Despite this, Jefferies suggests that strong growth in derivatives volume, alongside price increases and improved premium quality, might offset the negative EPS impact.

Jefferies has downgraded BSE’s stock from “buy” to “hold” and reduced the price target from ₹3,000 to ₹2,900.

HDFC Institutional Research maintains a “buy” rating on BSE, with a target price of ₹3,100, and notes that the exchange could mitigate the impact of higher fees by increasing transaction charges by 25% and reducing clearing charges by 10%.

Price action: BSE Ltd. shares were trading 12.73% lower at ₹2,801.80 on Monday morning, at the time of writing this report.

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