One of the biggest discount broking platforms in India, Zerodha, has announced that it will have to raise fees for futures and options (F&O) trades and discontinue its free brokerage service following market regulator SEBI's mandate of uniform fees regardless of volume.
A new circular from Sebi was released on July 1st, requiring stock exchanges and other market infrastructure institutions to levy charges in a manner that is "true to the label."
According to the Sebi circular, "MIIs should ensure that the same amount is received by them if members (i.e., stock brokers, depository participants, clearing members) levy certain MII charges on the end client."
Additionally, it indicated that rather than being slab-wise, or based on the volume or activity of members, the MII's charge structure must be consistent and equal for all of its members.
Co-founder and CEO of Zerodha, Nithin Kamath, stated in a post on X that "this circular has a significant impact on brokers, traders, and investors."
We will probably have to abandon the zero brokerage structure or raise brokerage for F&O trades in order to comply with the new circular. Additionally, brokers in the sector will need to adjust their prices, according to Kamath.
Brokers that produce large volumes are frequently eligible for a reduced fee from exchanges. The Securities and Exchange Board of India (SEBI) seeks to reduce the increase in trading across segments, such as derivatives, because brokers charge traders little to no fees. The revised fee schedule will take effect in October 2024.
Stock exchanges charge transaction fees based on the total amount of turnover that brokers generate.
Brokers receive a rebate at the end of the month, which is the difference between what they charge the customer and what the exchange charges them. These kinds of rebates are typical in all of the world's major markets, Kamath added further.
