Stock Market Today: On Monday morning, the share price of the BSE (Bombay Stock Exchange) fell by almost 17%. Since listing, this represents the largest one-day decline in share prices.

The market regulator SEBI (Securities and Exchange Board of India) requested that BSE pay a higher regulatory charge for derivatives, based on notional turnover rather than premiums, which is why the share price of BSE fell.

According to analysts at Jefferies India, the demand for increased fees might reduce total earnings per share by 15–18% because derivatives account for about 40% of BSE's projected net profits for FY25 and FY26.

After the stock was scrutinized, it requested to pay the market regulator SEBI a higher regulatory charge based on the annual turnover calculated from the 'notional worth' of its options contracts. In a statement posted on the exchanges, BSE stated that it had determined the yearly turnover using the premium value for options contracts.

According to BSE's statement on the exchanges, SEBI would get the total regulatory fees as well as 15% interest, which will be calculated based on annual turnover and "Notional Value" in the case of option contracts. The BSE stated that the total differential SEBI regulatory fees for the previous periods, from FY 2006–07 to FY 2022–23, would be approximately ₹ 68.64 crore plus GST, which includes interest of ₹ 30.34 crore, if it is determined that the stated amount is payable.

"The company has already paid the approximate sum of ₹ 1.66 crore plus GST, which is required as per premium (turnover) for the FY 2023–2024 SEBI regulatory fee, which is due on April 30, 2024. According to a BSE announcement, "the differential SEBI regulatory fees for the year, if liable, could be around ₹ 96.30 crore plus GST."

The one-time impact of legacy arrears (since 2006–07) is estimated by Jefferies analysts to be Rs165 crore plus taxes (18%), which results in a 15% reduction in earnings per share for FY24. These increasing regulatory costs in the options sector might have a 15–18% impact on overall earnings per share in FY25 and FY26 (estimated), given that derivatives would account for about 45% of total sales by FY27 (estimated). 

However, price hikes and improved premium quality may help offset the impact on EPS. 

According to analysts at Jefferies India Pvt Ltd, the impact on EPS might be completely mitigated if derivatives volume growth continues to outpace projected price increases and improvements in premium quality. Following the inclusion of a 15% partial price increase, their FY25 and FY26 projections were lowered by 6-9%. The stock now has a Hold recommendation from Jefferies.