As SEBI Norms Evolve, Zerodha Adheres to Zero Intermediation Model

Kamath said earlier this year that Zerodha may have to give up its zero brokerage structure due to SEBI’s new powers

The new instructions, which came into force on October 1, prohibit bar market infrastructure institutions from offering discounts based on transaction volumes or members’ activities

Zerodha reported a 61% increase in its consolidated net profit in FY24 to INR 4,700 Cr, while operating income rose 21% YoY to INR 8,320 Cr.

Zerodha Co-founder and CEO Nithin Kamath said that despite SEBI’s fixed free structure coming into effect on October 1, share distribution on the online stock brokerage platform will continue to remain free.

“Stock distribution will continue to be free on @zerodhaonline. As of now, we are not making any changes to our brokerage,” Kamath said in a post on X.

It is pertinent to note that SEBI had in July issued a circular mandating all exchanges to adopt a uniform fixed fee structure, termed “stick to label”, for all members of market infrastructure bodies.

The new instructions replaced the old tranche-based fees charged by different exchanges based on volume or activity. The new changes come into force as of today (October 1).

It is pertinent that in July, Kamath had said that the brokerage firm may have to give up its zero brokerage structure due to SEBI’s new guidelines banning market infrastructure institutions (MIIs) from offering discounts based on trading volumes or members’ activities. ,

The SEBI norms were largely seen as a way to tackle the massive increase in futures and options trading. As a result, many were predicting a huge increase in brokerage costs due to the new norms, especially for investors accustomed to near-zero fee structures.

The zero brokerage model for stock brokerage platforms has brought in a number of new users, but in the words of CEO Kamath, the new directions are now expected to have a 10% impact on Zerodha’s revenue.

Meanwhile, changes to the securities transaction tax (STT) regarding derivative instruments, Announced by Finance Minister Nirmala Sitharaman in the Union BudgetIt came into force today.

On this, Kamath said that while the STT for options increased from 0.0625% to 0.1%, the transaction fee decreased from 0.0495% to 0.035%. As a result, the cost of transactions for NSE increased by 0.02303%, he said. For BSE, Kamath said the cost of transactions increased by 0.0205%.

Regarding futures, Zerodha CEO said that STT has been increased to 0.02% from the previous 0.0125%, while the trading fee has been reduced from 0.00183% to 0.00173%. This will result in a net increase of 0.00735% or INR 735 per Cr in futures turnover on the selling side, it said.

Kamath’s post

Zerodha reported a 61% increase in consolidated net profit to INR 4,700 crore in the financial year 2023-24 (FY24) from INR 2,909 crore in the previous fiscal. Meanwhile, operating income increased by 21% to INR 8,320 Cr during the year under review from INR 6,875 Cr in FY23.