Zerodha may have to halt zero brokerage: Nithin Kamath on SEBI's transparent pricing order

Zerodha CEO and CO-founder Nithin Kamath in a post in X has noted that SEBI's transparent pricing move will have significant impact on brokers, traders, and investors. In a Circular, the Indian market regulator SEBI has mandated all the market infrastructure institutions including the stock exchanges to be "true to the label" in how they levy charges

Kamath in the post noted that this instruction could make brokers across industry tweak their pricing.

SEBI issued a new circular mandating all market infrastructure institutions, like stock exchanges, to be "true to the label" in how they levy charges. This circular has a significant impact on brokers, traders, and investors.

Stock exchanges charge transaction fees based on the…

— Nithin Kamath (@Nithin0dha) July 2, 2024

Brokerages may tweak prices

Usually, the stock exchanges charge brokers a transaction fee based on the total turnover they contribute in a month. The transaction fee is inversely proportional to the turnover. By this, higher the turnover, lower the transaction fees.

Brokers receive a rebate which is the difference between what the brokers charge the customer and what the exchange charges the broker at the end of the month.

Nithin Kamath in the post in X stated that the rebates account for 10% of Zerodha's revenues, while this accounts for 10-50% for other brokers across the industry. He further went on to say that with SEBI's new circular, brokers will no longer earn these rebates.

Kamath reasoned that the zerodha was able to offer free equity delivery trades because the F&O trading revenues were subsiding equity delivery investors. However, he predicts that this could now change as Zerodha may have to introduce a brokerage fee for equity delivery investments, which is currently free, or/and increase F&O brokerage.

"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. 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," Kamath said in the post

Also watch: Tough time ahead for broking industry, says Nithin Kamath as SEBI regulates options trading