Brokerages revise charges as Sebi's true-to-label norms take effect

Leading brokerages have revised their charges with the true-to-label norms by the Securities and Exchange Board of India (Sebi) kicking in from Tuesday.

Angel One has revised upwards its charges, while Zerodha has maintained the status quo on rates for now. Other leading players are expected to make formal announcements in "due course."

 Shares of Angel One rallied nearly 4 per cent intraday but gave up some gains to end at Rs 2,600, up 1.5 per cent. IIFL Securities' shares closed at the 10 per cent upper circuit, while those of ICICI Securities also surged over 2 per cent.

In a statement, Angel One informed clients that it will charge a flat Rs 20, or 0.1 per cent + GST of trade value as brokerage, whichever is lower, in the cash/equity delivery segment.

The discount broker also notified the details of other changes in transaction charges, interest charged for several services, annual maintenance charges, among others.

Zerodha founder Nithin Kamath wrote on his social media platforms that equity delivery will continue to be free for now.

Kamath had earlier pointed out that they expect a 10 per cent dip in revenue on account of Sebi’s true-to-label norms effective October 1.

Sebi had in July issued a circular mandating that market infrastructure institutions (MIIs) such as stock exchanges and clearing corporations recover charges from the end client on a true-to-label basis—meaning that if they levied charges on the end client, they should ensure the same amount was recovered.

Until now, the MIIs were collecting charges slab-wise, depending on the volume or turnover of the stock broker.

The practice is now being discontinued, and a uniform charge will be levied, removing the benefit or rebate earlier enjoyed by discount stock brokers who paid lesser charges compared to other peers due to higher turnover from their clients.

 The National Stock Exchange (NSE) and BSE have revised their charges to levy uniform fees.

 Other brokerage firms also expect a hit.

 “We estimate the broking industry revenue (and in turn profitability) to be hit by around Rs 2,000 crore due to the implementation of Sebi's circular on true-to-label. This will lead to an increase in brokerage rates or other charges, as it will become unsustainable for the broking companies to take such a big hit on their profitability,” said Nilesh Sharma, executive director and president, SAMCO Securities.

However, bank-backed brokers believe that the mandate will not impact them.

 “We do not see any impact on revenues since true-to-label does not affect us—we were passing on the benefit on account of exchange transaction charges due to high volume to customers. Securities Transaction Tax (STT) changes we will implement and recover the same from customers since it’s a statutory levy,” said Ashish Rathi, whole-time director at HDFC Securities.

The surge in STT on futures & options (F&O), which was announced in the Union Budget, also became effective from Tuesday. It has been increased to 0.02 per cent for futures and to 0.1 per cent for options contracts.