Broking houses embark on branchless trading

Priya Sheth Mumbai | Updated on October 15, 2012

E-opener: Nithin Kamath, founder and CEO of Zerodha, the online trading platform providing free brokerage model to traders in India, at a media interaction in Hyderabad (file photo).

Offer cheaper and more viable model

The pillars of the Indian retail broking model are slowly morphing into an e-broking structure without any physical presence. While most brokers are struggling to stay afloat in this uncertain market scenario, e-broking firm Zerodha is enjoying increasing business by the day.

Traditional brokerages do offer online trading facility to traders, but they do have physical branch in that area so that if there is any problem, traders can fall back on them.

Now even a number of bigger brokerages are betting big on the online brokerage model as it is a cheaper and more viable model.

Zerodha leads

“Over the last one year we have increased our client base from 4,000 to over 15,000. Our average daily turnover also has almost tripled over the last year,” said Nithin Kamath, founder of Bangalore-headquartered Zerodha.

“This online broking model is popular in the West and now many firms are trying to adopt a similar model,” said Kamath, whose brokerage has no physical presence or relationship managers. Therefore, no one at Zerodha has a brokerage target. They incur no cost of research and no capital expenditure to set-up branches.

While most brokerages have abolished the ‘flat fee’ scheme, Zerodha is able to offer a flat Rs 20 fee on any trade. “We do about 20,000 trades a day. This is up from 5,000 trades last year,” said Kamath. Zerodha does not spend anything towards marketing; it uses a reference system for adding clients.

At present, Zerodha has a 60-member team and has partnered with one firm in Kochi and another in Hyderabad to drive awareness on e-trading.

Aims skilled traders

As there are no relationship managers, e-trading is targeted mostly towards mid-level, skilled traders who have a sense of the markets. “I trade mostly in high volumes, so if a brokerage is offering only Rs 20 per trade, it is a good option for me,” said Mahesh Shah, a resident of South Mumbai. “Through the online broking model, the customer has complete control on his account. There are significant advantages. He knows what he is buying and selling.

“He can see the charges applicable and he is able to monitor his portfolio regularly,” said Vineet Arora, Executive VP, ICICI Securities, which has an online platform, They have variable fee structures such as the I Saver plan for high volume traders and the I Secure platform for low volume traders.

Although brokerage arms of banks charge a slightly higher broking fee (about 0.75 per cent), having an account here could have some advantages. Integrated bank accounts allow traders to withdraw funds immediately, while at Zerodha a trader would have to withdraw funds through NEFT or RTGS (which would take about 24 hours).


Published on October 15, 2012

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