By Inc42 Media
Zerodha cofounder and CEO Nithin Kamath said that with SEBI’s new circular, the platform will have to let go of the zero brokerage structure and /or increase brokerage for F&O trades
Kamath said that the rebate – the difference between the amount charged by brokers to the customer and that charged by the exchange to the broker – accounts for 10% of Zerodha’s revenue
In its circular, SEBI asked market infrastructure institutions that their charge structure should be uniform and equal for all its members instead of slab-wise
Following the Securities and Exchange Board of India’s (SEBI) circular on Monday barring market infrastructure institutions (MIIs) from offering discounts based on trading volumes or members’ activities, Zerodha
cofounder and CEO Nithin Kamath has said that the brokerage might have to let go of its zero brokerage structure.
In a post on X, Kamath said, “With the new circular, we will, in all likelihood, have to let go of the zero brokerage structure and/or increase brokerage for F&O trades. Brokers across the industry will also have to tweak their pricing.”
SEBI in its circular said yesterday that the charge structure of the MII should be uniform and equal for all its members instead of slab-wise. It said that while MIIs are receiving aggregate charges from its members on a monthly basis, they are recovering such charges from the end users on a daily basis.
It is pertinent to note that members of MIIs refers to stock brokers, including discount broking platforms such as Zerodha, Groww and Upstox.
As per SEBI’s circular, MIIs will have to ensure that the MII charges recovered from end-customers by its members are deposited entirely in the account of MIIs.
Kamath, in his X post, said that 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 brokers. Such rebates are common across the major markets in the world.
“These rebates account for about 10% of our revenues and anywhere between 10-50% of other brokers across the industry. With the new circular, this revenue stream goes away. We were one of the last remaining brokers that offered free equity delivery trades. We could do this because F&O trading revenues were subsiding equity delivery investors,” he said.
(The story will be updated soon)