Discount brokers likely to increase brokerage fee post Sebi circular

Bengaluru, 3 July: Zero brokerage model has reached a dead end as many new age players are now planning to charge their customers for derivative trade, which is currently executed at a nominal cost.

In a blogpost, India’s leading discount broker Zerodha’s Founder & CEO, Nithin Kamath said that the company may have to charge customers for equity trade derivatives after the market regulator Sebi’s direction on charges levied by brokerage firms and other stakeholders.

““As a business, we may have to introduce a brokerage fee for equity delivery investments, which is currently free, or/and increase F&O (futures and options) brokerage,” Kamath wrote in the blog post. He had earlier posted in social media platform ‘X’ that the company has to let go of the zero-brokerage structure and increase brokerage for F&O trades once the new norms come into effect from October 1.

On July 1, Sebi issued a circular, stating that market infrastructure institutions (MIIs), which include stock exchanges, depositories and clearing corporations, should charge a uniform fee from their members and not offer any rebate for bringing more volume.

According to market participants, this is likely to push up cost for new retail investors, who are coming to the market through discount brokers like Zerodha, Groww, Upstox, and Angel One among others. As more retail investors are taking exposure to risky F&O instruments through discount brokers, this section of investors are likely feel the heat post the rise in brokerage cost.

Currently, a major part of revenue of most discount brokers is coming from F&O section. As the regulator is worried about losses incurred by retail investors through their exposure to such risky trade, some see it as a step to discourage such investments.

Meanwhile, the share prices of many discount brokerage firms have fallen in last two days post the Sebi circular owing to concerns over hit to profitability.