SEBI diktat is bad news for BSE

"BSE-listed firms' market cap races past $5 trillion'', adorned the front page of a national business daily last week. The milestone is a celebratory affair for market enthusiasts. But the hero of our story, the very stock exchange at the centre of the good news, has been under the weather in recent weeks. A recent order from market regulator SEBI asking the Bombay Stock Exchange (BSE) to pay a hefty sum in regulatory fees has thrown the latter's stock out of gear; the stock that gave over fourfold returns over the last year has crashed 19 per cent from its peak this month. We analyse what the development means for Asia's oldest stock exchange. What irked SEBI? Indian stock exchanges are required to pay SEBI a regulatory fee based on their annual turnover. In case of derivatives such as options contracts, the fee is computed on the annual turnover's notional value. However, BSE has been paying the fee on the premium value instead. Here's a breakdown of what this means: Notional value of contracts The notional value is the total value of the underlying assets in a derivatives contract. It measures the size of a contract in terms of its underlying assets' value. It is calculated by multiplying the number of contra