Kolkata, July 30 (IANS): Stock-broking firms are concerned over transaction and compliance costs that are eroding growth of the secondary stock market and also deterring retail participation in it, a top official of an Indian capital market association said on Saturday.

"Transaction and compliance cost are eroding the growth of the secondary stock market and deterring retail participation in the market," said Association of National Exchanges Members of India (ANMI) President Swatantra K. Rustagi.

"Transaction cost, which mainly include securities transaction tax, stamp duty, exchange transaction charges, transaction fees, service tax on brokerage should be made reachable so that retail participation comes back in the market," he said at the sidelines of the Financial Market Conclave organised by CII.

He also said cost of earning from a fixed deposit is zero while cost of earning by making investment in stock market is relatively high, and less than one percent of the population is coming in the stock market, he said. 

About the problems faced by the broking houses, Rustagi said that the industry is over-regulated.

A study conducted internally by the association finds that compliance cost and transaction costs are eating away margins of the brokers, particularly of small brokers.

Total number of brokers having net worth of less than Rs 10 crore constitutes almost 70 percent of stock-broking houses in India. "In the small segments, brokerage income is high and other income is relatively low while brokerage firms having higher net worth have relative low brokerage income," he said.

"Broking firms are not able to expand their network in the tier III and tier IV cities due to high compliance cost," Rustagi said.

He also said many stock-broking firms might shift their registered office from Bengal unless higher stamp duty levied in the state is rationalised.

Bengal charges Rs 1,000 per crore as stamp duty, which is five times the rate in states like Maharastra, Rajasthan, Delhi and Gujarat, he said.

"Out of 1,142 active stock-brokers in the country, only 160 have registered offices located in West Bengal as stamp duty has to be paid to the state where the registered office is located," he said.

He, however, expressed hope that the Bengal government would do something to rationalise the duty.