Following the latest SEBI circular mandating uniform charges among market infrastructure institutions such as stock exchanges, brokerages are facing pressure.
Nithin Kamath of Zerodha said on Tuesday that the brokerage may need to reconsider its zero brokerage model or potentially raise brokerage fees for F&O (futures and options) trades.
“Since 2015, when we went 0 brokerage on equity delivery, we have subsidized equity investments with the revenue from the F&O trading activity. This structure could now potentially change. 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 said in a note.
SEBI stated that fees imposed by market infrastructure institutions like stock exchanges, clearing corporations, and depositories should be standardized and not tied to trading volumes.
Kamath further said, “This becomes all the more important given the big uncertainty around the future of F&O trading volumes. We are still trying to ascertain the second-order effects of the circular. In all likelihood, we will probably have to let go of the zero brokerage structure for equity delivery trades which we have been able to offer for the past 9 years. We are one of the few remaining brokers offering free delivery trades. Many newer brokers who started out with free delivery trades have started charging a brokerage in the last couple of years.”
Exchanges frequently offer reduced fees to brokers who generate substantial trading volumes, thereby fueling increased trading activity in segments such as derivatives.
Requesting exchanges to discontinue this practice is part of a broader range of measures under consideration by SEBI to mitigate the fervor in India’s derivative markets.
