SEBI circular impacting zero brokerage is set to overhaul derivative trading by scrapping volume-based transaction fees on free equity delivery trades across major brokers like Groww, Zerodha, AngelOne, and Upstox.
Nitin Kamath, co-founder and CEO of Zerodha, anticipates significant changes, suggesting the company may discontinue its zero brokerage structure or increase fees for future and option (F&O) trades. Zerodha currently stands out for not charging fees on equity delivery.
Industry experts predict that nearly all brokers will adjust their pricing strategies for equity and F&O trading. The equity delivery fee applies to the physical delivery of shares to retail investors’ demat accounts.
Zerodha’s strong market presence, driven by high trading volumes, currently allows it to waive fees on equity trades. However, this could change with the new circular set to take effect from October 2, 2024.
Kamath notes that while Zerodha earns about 10% of its revenue from these rebates, this figure could range from 10% to 50% for other brokers. Despite generating 90% of its revenue from F&O trading rebates, Kamath believes the impact of the new circular will be minimal.
SEBI has recently formed a working group to address concerns over the sharp increase in retail participation in options trading. Chairperson Madhabi Puri Buch has indicated potential regulatory actions, including the potential prohibition of future trades by retail investors, pending committee recommendations.
Option trading on NSE has seen a dramatic increase, rising from 9.3 lakh in FY18 to 95.7 lakh in FY23, prompting SEBI to intensify regulatory scrutiny and establish a committee to address concerns related to the surge in F&O trades.
Avinash Dyal