Zerodha to end zero brokerage structure? What Nithin Kamath said on Sebi order

Zerodha co-founder Nithin Kamath said that the brokerage may have to let go of zero brokerage structure or increase brokerage for F&O (futures and options) trades. This comes after a new Sebi circular mandates uniform charges by market infrastructure institutions like stock exchange. The markets regulator said that charges levied by market infrastructure institutions such as stock exchanges, clearing corporations and depositories should be uniform and not based on volumes.

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"This circular has a significant impact on brokers, traders, and investors," Nithin Kamath said, adding 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," he said.

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Zerodha is one one of the last remaining brokers that offered free equity delivery trades, he said explaining that the brokerage could do this because F&O trading revenues were subsiding equity delivery investors.

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"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," he said.