Mint Quick Edit | Are no-brokerage stock platforms in trouble?
A fresh circular from the Securities and Exchange Board of India (Sebi) seems to have sent discount brokers into a tizzy. Zerodha co-founder Nithin Kamath said the company may have to reconsider its zero-brokerage model, or even increase brokerage fees for trades in the futures and options (F&O) segment, after Sebi’s directive that all market infrastructure institutions, including stock exchanges, must charge members a uniform fee unlinked to trading volumes.
A fresh circular from the Securities and Exchange Board of India (Sebi) seems to have sent discount brokers into a tizzy. Zerodha co-founder Nithin Kamath said the company may have to reconsider its zero-brokerage model, or even increase brokerage fees for trades in the futures and options (F&O) segment, after Sebi’s directive that all market infrastructure institutions, including stock exchanges, must charge members a uniform fee unlinked to trading volumes.
As Kamath’s remarks suggest, this may shake up the pricing models of discount brokers, since they don’t charge brokerage for equity investments but make up for it through F&O trades and other services. The zero-brokerage model has been their key selling proposition. It appeals to customers who prefer low-cost market access even if it means forgoing research notes and advice that full-service brokers offer in lieu of higher charges.
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As Kamath’s remarks suggest, this may shake up the pricing models of discount brokers, since they don’t charge brokerage for equity investments but make up for it through F&O trades and other services. The zero-brokerage model has been their key selling proposition. It appeals to customers who prefer low-cost market access even if it means forgoing research notes and advice that full-service brokers offer in lieu of higher charges.
But under Sebi’s new mandate, discount brokers may be forced to charge more. This could blunt their cost edge over full-service brokers. But then, with large user bases already built and other claimed advantages, especially in youth engagement, they have space to adapt.
