The regulatory order to stock exchanges to collect uniform levies could shrink brokerage incomes by more than ₹2,000 crore, disproportionately affecting discount platforms and dashing popular zero-brokerage plans.
Shares of several brokerages fell up to nearly 9% on Tuesday after the Securities and Exchange Board of India (Sebi) instructed market infrastructure institutions (MIIs) to not differentiate among cli ents based on volumes, from October 1. MIIs include stock exchanges, clearing corporations and depositories.
“With this circular, we will, in all likelihood, have to let go of the zero-brokerage structure and/or increase brokerage for F&O trades,” said Nithin Kamath, founder and chief executive of Zerodha.
Volume-based Discounts
Sebi’s order could now force large discount brokerages to either drop the zero-payment plans or raise rates, potentially sacrificing margins or the client base. “Under the previous practice between MIIs and brokerages, the brokers would be charged aflat rate based on turnover of brokerages, at ₹3.25 per lakh of trades up to ₹1,250 crore of turnover in cash markets.
The charges would decrease each slab,” said Jimeet Modi, CEO eat Samco Securities. “These volume-based discounts benefitted large brokers, as this was their additional income, since investors would be charged a flat base rate of ₹3.25 per lakh.” Angel One, the biggest loser among listed broking firms, fell 8.6%. Shares of IIFL Securities, Motilal Oswal Financial Services, Emkay Global Financial Services and Geojit Financial Services fell between 3% and 7%.
