Consolidation among brokers: Top 10 account for 55.9% of cash turnover

The top ten brokers accounted for 55.9 per cent of the BSE cash segment turnover as per the latest July data

The Covid-19 pandemic may be accelerating the process of consolidation among stockbrokers. An analysis of the data from the Securities and Exchange Board of India’s (Sebi’s) monthly bulletin shows a larger chunk of trading turnover has been coming from fewer brokers since the virus outbreak.

The top 10 brokers accounted for 44 per cent of the BSE cash segment turnover in December 2019. It has since risen to 55.9 per cent, according to the latest July data.  On the National Stock Exchange, it has moved up from 40.4 per cent to 45.3 per cent. The share of the top 10 brokers was closer to 30 per cent for both exchanges in December 2015. 

Technology has played a greater role during the lockdown, noted Alok C Churiwala, MD of brokerage firm Churiwala Securities.  Traditional brokerages can take two-three days to complete formalities for a new customer, but a person can start trading through a mobile phone in minutes, he said, adding technology-led players capitalised on this during the lockdown. 

The fact that many charge close to zero fee makes it harder for smaller players to compete. The trend is likely to continue and “the complexion of the industry is going to change”, he said.

The regulator’s move to allow electronic know-your-customer (eKYC) facilities helped, noted Rajesh Baheti, director of the Association of National Exchange Members of India (ANMI). This allowed customers to be authenticated without paperwork.  

Smaller brokerages also had trouble in making their services available on mobile phones, on which a lot of the trading is now happening, he said. This allowed larger players, already having their mobile platforms in place, to capture a larger share of incremental trading volumes. 

Nearly 5 million new accounts have been opened this year. There were 39.4 million investor accounts in December 2019. This has since risen to 44.3 million accounts in July. 

Nithin Kamath, founder and CEO, Zerodha Broking, said legacy players often find it more difficult to change their existing way of doing business than a new player who can come in with a clean slate. This is also the case globally with newer entrants often having better technology platforms than the older ones, according to him.

The regulator does not disclose the names of the top 10 brokerages in its data of trading turnover concentration mentioned above.