Market exchanges have introduced a major rule change: brokerages can no longer offer free trading services.
This decision significantly impacts the brokerage industry, which is already dealing with mounting challenges.
According to the Zee Business research team, exchanges have started imposing “True to Label” charges, leading to financial losses for discount brokers.
These brokers, known for offering free trading services, had previously benefited from higher trade volumes and received significant transaction charge discounts from exchanges.
Challenges for Discount Brokers
Discount brokers often passed on their savings to clients, enabling many to trade for free, especially in the futures and delivery markets.
However, with the new rules, transaction charges are now uniform across all brokers. This removes the advantage that discount brokers once had.
Additionally, the growing popularity of weekly options has posed a new challenge. Larger brokerages previously earned substantial amounts by promoting over-trading on expiry days.
With the changes, it remains uncertain whether this revenue stream will persist.
Rising Costs and Future Impact
The effects of these changes will become more apparent after January 1, when larger lot sizes are introduced.
Brokerages are expected to face reduced trade volumes while their costs continue to rise.
To offset these challenges, many firms have already started increasing their Annual Maintenance Charges (AMC).
For instance, Shunya Broker recently introduced a fee of Rs 5 per intraday trade. Experts predict that these charges could go up further, possibly reaching Rs 20 per trade in the future.
This marks the end of the era of free trading, with brokerages needing to adapt to the evolving financial landscape.
