How Do DP's & Stocks Exchanges Earns Themselves? What Are The Sources Of Income Of These Major Financial Bodies? (#18)

 

Everyone in Share Market comes with a motive of earning profit. Right?

Actually, nobody at all is doing something for free. It always costs something. MONEY or TIME!

Stock Exchanges & Depository Participant's play a very important role in the entire Share Market! Have you ever wondered how do they themselves make money? Let's find out:

How Do DP's (Depository Participant's) Make Money?

To those who don't know what is a Depository Participant than I'll like to tell you that DP's basically is something with which we can open our trading account. It can be a trading app or something like that which basically helps you to trade!

So DP's have brokerage charges which they themselves are charged. & You know whenever you'll invest either in Intraday OR/& Delivery they have different charges set. This is an income source for them. Different DP's have different prices for each. So whenever we pay a commision our main motive is to earn more than they've charged in order to make some profit.

How Do Stock Exchanges Earn Money?

According to me, Stock Exchanges have multiple sources of income in comparison to DP's. Here's a list of those income sources:

1. Stock Exchanges charge a Transaction fee.

While securities are being exchanged then the Stock Exchange charges a small amount of fee from the Depository Participant. (However the DP also charge us back in order to claim back the amount charged. {As already mentioned.})

2. Stock Exchanges charge brokers for membership.

In order to get a membership in Stock Exchange, brokers (DP's) are supposed to pay.

3. Sharing Market Data.

We often see that in news channels they show us the live values of shares. So this data is owned by Stock Exchanges themselves & hence provided by them to the news channels. In exchange of this Stock Exchanges get paid.

4. Subsidiary Companies.

Here, Subsidiary Companies are the companies owned by the Stock Exchanges themselves. Different Stock Exchange's can have different subsidiary companies of their own. These subsidiary companies are quite profitable within themselves & hence, are back listed on the Stock Exchange.

5. IPO's (Newly Listed Companies) & Listed Companies (Old Companies).

The new companies are supposed to pay the ONE TIME ENTRY FEE in order to enter a Stock Exchange. & The already listed companies are supposed to pay the ANNUAL FEE, each year.

This is one of the major sources of income for Stock Exchanges!

However, some Stock Exchanges charge more, while some charge less ONE TIME ENTRY FEE & ANNUAL FEE. The fees are different for different Stock Exchanges!

Stock Exchanges plays a vital role in the Economy.

& not any company can come & open or run a Stock Exchange at all. Which means, that the Stock Exchange don't really have any real competitive opponent!

Stock Exchanges are under a government body who have statutory powers & is the the regulator of the Capital Market (of a country).

Thanks For Reading!