Traditional brokerage charges have been around for many years in stock markets. We all know the importance of a trading account for buying and selling securities in the stock market. Stockbrokers facilitate the opening of trading accounts for traders within the country. A brokerage charge is applied whenever a trader makes a transaction (buy or sell securities). The brokerage charge might be a small portion of the total trade value. Before the launch of zero brokerage trading, middleman charges were applied whenever an investor bought or sold securities.
Over the years, the number of investors increased in India due to the launch of multiple trading platforms. To fulfil the increasing demands of traders in India, zero brokerage trading accounts were launched. At present, there are around 20 million trading accounts in India. The numbers are expected to rise sharply with the launch of zero brokerage trading in India. Let us delve deeper and understand the concept of zero brokerage trading.
Understanding the zero-brokerage trading model in India
Since the number of investors increased in India, traditional brokerage models were no longer feasible. It was when stockbrokers came up with the zero-brokerage trading model. According to the zero-brokerage model, no commission charges were applied to traders on transactions. Traders could sell or buy financial securities via their trading account without paying a commission to the trader. While some stockbrokers charged zero brokerage on equity deals, some levied a flat fee for every transaction via the trading account. By doing so, stockbrokers facilitated thousands of small-scale traders to earn maximum returns on their trades.
With the zero-brokerage model, stockbrokers have to find new ways of generating revenue. Most stockbrokers applied custodian, maintenance, dematerialisation, and rematerialisation charges to generate revenue. The rise of discount brokers means there were new ways to generate revenue. Discount brokers offer trading services to individuals at a discounted rate. There might be little or no charge for a transaction via the trading account. Discount trading brokers in India generated revenue via their value-added products. They offer AI-led trading platforms, research reports, data analytics reports, and other value-added products to investors and generate revenue.
How will zero brokerage trading be the future?
Now that you know the meaning of zero brokerage trading, let us understand how it will be the future of investing in India:
- As more and more people adopt technology in India, it is easier for stockbrokers to offer trading services. They can penetrate new markets with the help of new-age trading platforms running on the zero-brokerage model.
- Investor preferences have changed, and there is a need for low-cost investments. Investors are now preferring discount brokers for low-cost investments without brokerage charges.
- Indian stock markets are getting more competitive with the launch of several trading platforms. To attract customers in the future, many stockbrokers will adopt the zero-brokerage model.
- The Indian government is taking initiatives to promote digital investing. As a result, more and more people will switch to online trading in the country in the coming years.
Final words
With progressive technology adoption, India is witnessing the rise of discount brokers. These stockbrokers offer zero brokerage trading accounts and generate revenue from value-added services. Traders looking for a suitable stockbroker can choose a reliable firm like Religare Broking Limited. You can expect minimal custodian and transaction charges by opening a trading account with such a firm. It’s time to switch to digital trading now!
