Revenues of brokers may take a hit from two key regulatory changes.
First, SEBI’s new rules mandating stock brokers to levy uniform and “true to label” charges have kicked in from October 1.
Stock exchanges charge transaction fees based on the overall turnover contributed by brokers. The difference between what the brokers charge the customer and what the exchange charges the broker at the end of the month is a rebate, which goes to the brokers. This will no longer be possible.
“The rebates account for about 10 per cent of our revenues and anywhere between 10-50 per cent of other brokers across the industry. With the new circular, this revenue stream goes away,” Nithin Kamath, co-founder of Zerodha had said earlier.
“Equity delivery will continue to be free at Zerodha. As of now, we are not making any changes to our brokerage,” Kamath said on Tuesday.
“Brokerages and charges increased by a few. Others may increase it too,” said Ashish Nanda, President and Head-Digital Business, at Kotak Securities, in a post on platform X.
Second, the SEBI board on Monday made it mandatory for qualified stock brokers to provide either the facility of trading supported by the blocked amount in the cash segment using the UPI block mechanism or the 3-in-1 trading account facility, with effect from February.
The ASBA-based blocking of funds will be in clients’ bank accounts, obviating the need to transfer money to brokers. Currently, only some of the bank-based brokers provide a 3-in-1 account facility, which means many customers could opt for the ASBA blocking.
“This will reduce broker income which they would otherwise earn on idle balances that they have. This can be substantial for large brokers,” said Deepak Shenoy, Founder & CEO of Capitalmind, in a post on X.
“Brokerage rates will not increase as competitive intensity is high. Some brokers offer fixed brokerage per month irrespective of turnover, those only might see an increase. Top discount brokers may see about a 14 per cent drop in revenues. The UPI block rule will impact another 15 per cent,” said a broker.
Clients, however, stand to benefit from the move. Rahul Jain, CFO of NTT DATA Payment Services India, said: “This initiative will empower and benefit investors with enhanced security, improved transparency, interest earnings and ease of making payments at a time when UPI payments are witnessing significant growth. This move will improve fund management and further enhance investors’ convenience, allowing them to create a payment mandate by blocking funds for trading which will safeguard their amount from misuse.”
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