5.1 Every listed company is required to pay to each Stock Exchange on which its securities are listed, fees for initial listing of securities and also annual listing fees. While the initial listing fees are payable at the time of the listing of securities initially alongwith the Listing Agreement, the annual listing fees are payable every year. The listing fees is a major source of income of the Stock Exchanges. The Committee was informed that many companies default on the payment of annual listing fees to the Stock Exchanges. This amounts to a breach of the Listing Agreement and enables the concerned Stock Exchange to resort to compulsory delisting of the securities of the defaulting company. It was brought to the notice of the Committee that of the total number of cases of delisting, in over 95 per cent cases the delisting has been resorted to due to non-payment of the annual listing fees. The Committee considered the suggestion that the Stock Exchanges should be permitted to recover fees from the investors through the brokers having regard to the fact that the true recepients and beneficiaries of the services given by the Stock Exchanges and their members are the investors. However, the Committee is of the view that this proposition is not feasible and would also pose operational difficulties.

5.2 One more issue the Committee considered with respect to the quantum of listing fees, was the disparity amongst various Stock Exchanges and whether this disparity needs to be eliminated. The Committee was informed that in the past, the listing fees were uniform at all the Stock Exchanges, except on BSE. In 1992, the rates of the listing fees were fixed by SEBI, and even at that time there were two sets of rates; one for the BSE and the other for the rest of the Stock Exchanges. However, of late, the Stock Exchanges have increased the listing fees at their discretion, which has resulted

into the disparity. It was also informed to the Committee that some of the medium and small sized companies find the fees prohibitive, which prompts them to resort to delisting by defaulting on the payment of the listing fees. The Committee is, however, of the view that from the point of view of competition and brand equity, there is no need to bring about uniformity in the quantum of fees and the Stock Exchanges should be free to decide the quantum of fees. The Committee is also of the opinion that the Stock Exchanges should be free to determine the manner and the periodicity of payment of the fees. Though the Committee feels that the quantum of fees should not be too prohibitive and disproportionate to the amount of services rendered by the Stock Exchanges, at the same time, the Stock Exchanges should endeavour to improve their services to all those for whom these services are meant, in particular the investors. They should strengthen their activities in the areas of investor education and redressal of investors’ grievances and provide sufficient funds for these activities.

The Committee, therefore, recommends that :

The Stock Exchanges be allowed to fix the quantum of listing fees and there need not be uniformity in this regard. The Stock Exchanges should be free to determine the manner and the periodicity of payment of the fees.