Brokerages on equity trade may go up following Sebi circular

Explaining the impact of the circular, he says exchanges charge a transaction fee based on turnover contributed by a broker in a month.
For representational purposes only
For representational purposes only

NEW DELHI: Nithin Kamath, founder and CEO, of discount brokerage firm Zerodha has said it may have to let go of the zero brokerage structure for equity delivery trades, which the brokerage house has been able to offer for the past nine years.

This is a direct impact of the latest circular by capital market regulator Securities and Exchange Board of India (SEBI) asking stock exchanges to stop giving rebates to brokers.

“As a business, we may have to introduce a brokerage fee for equity delivery investments, which is currently free, or/and increase F&O brokerage,” Kamath says in a social media post. Explaining the impact of the circular, he says exchanges charge a transaction fee based on turnover contributed by a broker in a month.

“The difference between what the brokers charge the customer and what the exchange charges the broker at the end of the month is a rebate. Such rebates are common across the major markets in the world,” he says.

However, with the new circular, which says exchanges must receive the same amount of fee that the brokers charge from their customers, the brokers will no longer earn these rebates.

Kamath says Zerodha earns 10% of its revenue from these rebates, and that this could range between 10% and 50% for other brokers. For Zerodha, revenue from exchange rebates rose from 3% to 10% in last four years due to increase in options turnover.

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