📷 Image Credits: Moneycontrol
Zerodha founder and Chief Executive Officer Nithin Kamath hinted at potential changes in the brokerage firm’s fee structure in response to the Securities and Exchange Board of India’s (Sebi) directive for a uniform charge structure. Sebi’s recent move is aimed at standardizing charges across all market members, eliminating variations based on volume or activity. The circular issued by Sebi mandates market infrastructure institutions (MIIs) to align their charges and be ‘true to label’ starting from October 2nd, 2024.
The directive is expected to result in reduced costs for end clients, promoting a fair and transparent market ecosystem. As the first-level regulators, MIIs are now tasked with implementing the new charge structure effectively, impacting brokers, traders, and investors. Kamath, in a blog post on July 2, expressed that the industry will need to adjust its pricing models accordingly.
Kamath highlighted that with the new circular, Zerodha might have to forego its zero brokerage structure or consider increasing fees for F&O trades. The traditional brokerage model works where stock exchanges charge transaction fees based on overall turnover contributed by brokers. The difference between fees paid by customers to brokers and brokers to exchanges is commonly received by exchanges as a rebate.
The removal of these rebates, accounting for a significant portion of revenues, with the new circular poses a challenge for brokers across the industry. Kamath emphasized that the hope is for exchanges to pass on the benefits to customers and charge minimally. The impact of potential hikes in F&O brokerage fees is expected to be mitigated by this shift.
The market responded to Sebi’s directive with shares of brokerage firms such as Angel One, Geojit Financial Services, and Motilal Oswal Financial Services witnessing declines on July 2. The industry as a whole will need to recalibrate its pricing strategies in light of the new charge structure. Stay tuned as Zerodha and other market participants navigate these changes in the coming months.
