MUMBAI: Sebi‘s move to require stockbrokers to charge customers only the actual fees paid to exchanges, clearing houses, and depositories has had major consequences for stockbroking firms.
In its circular, Sebi had asked brokers to be ‘true to the label’ in how they levy charges. Zerodha Broking said it may be forced to end its zero brokerage structure, and shares of listed stockbroking firms crashed.Angel One – the largest listed broker – fell 8.7% while IIFL Securities fell 3.5%.

The impact of the new regulations were explained in a detailed note by Zerodha founder Nithin Kamath. “Stock exchanges charge transaction fees based on the overall turnover contributed by brokers. The more the turnover, the less the transaction fee. 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 major markets in the world,” Kamath said.
He added that this rebate accounts for 10% of Zerodha’s revenues and anywhere between 10-50% of revenues for brokers across the industry. This income stream will go away following Sebi’s new circular. “We were one of the last remaining brokers that offered free equity delivery trades. We could do this because F&O trading revenues were subsidising equity delivery investors. With the new circular, we will likely have to let go of the zero brokerage structure and/or increase brokerage for F&O trades,” said Kamath.