Hit by falling volume, brokers hike their fees

MUMBAI: In a stark contrast to the situation about a year ago, when they were busy trying to undercut each other on broking commissions, stock broking firms are now gradually increasing fees.

This may seem a bit surprising, considering that overall traded turnover on bourses has been shrinking since the start of this year. Industry watchers, however, say broking firms are finally coming to terms with the fact that it is not viable to charge very low levels of commission. Leading broking firms are said to have hiked their fees anywhere between 15 basis points (bps) and 50 bps.

“In good times, marginal costs were quite low. Today, brokers’ costs have gone up and revenues do not justify the kind of commissions that clients were being charged in the beginning of the year,” said a veteran BSE broker on condition of anonymity.

Some outfits have also introduced a standard ‘minimum’ brokerage charge, which would be applicable for even a single trade done by a client. Regular clients will also attract a minimum monthly brokerage at some of the firms.

“As trading volumes on bourses shrink, stock brokers expect a sharp fall in their income in the coming quarters. Such a move was waiting to happen. Unlike last year, when we saw broking firms vying with each other to cut costs, this year outfits have been forced to consider a hike across various sections,” said a person familiar with the development.

Some of the broking houses, which have reportedly hiked brokerage, include India Infoline, Indiabulls, Motilal Oswal, Edelweiss and Sharekhan. India Infoline is said to have raised brokerage charge on delivery-based transactions to 50 bps from 15 bps. For F&O trades, charges are said to have been hiked from 2 bps to 5 bps. Indiabulls, too, is said to have done something similar.

In an email reply to ET’s query, India Infoline said: “There has been no increase in brokerage rates across the board. What we have done is a part of normal rationalisation measures where customers who have significant trade volumes enjoy preferential brokerage rates and simultaneously those who do insignificant volumes, (barely active customers), typically have slightly higher brokerage rates. But this is only for a small group of customers with insignificant volumes. If you open an account with us today, then you will be charged the same brokerage as was being charged as before.”

On whether they have hiked delivery brokerage to 50 bps from 15 bps, an official said: “These are customers who would have had preferential brokerage rates earlier owing to higher committed volumes and since they haven’t generated significant volumes, their brokerage rates are being reverted to the standard five paisa for intra-day and 50 paisa for delivery trades. These are anyway the standard brokerage rates that we operate with.”

Indiabulls maintains brokerage charges are client-specific and as such there are no fixed slabs. “It’s a fluid system, whereby clients are charged according to the kind of business and volume they generate. As such, clients who do large volume of trades are charged less and vice versa,” said an Indiabulls official.

Reiterating this, officials at Motilal Oswal also said their charges were client specific. “2 bps/ 20 bps to (trading/delivery) to 5 bps to 50 bps, depending on the size of the client. For larger clients, there is a volume discount, which is an industry norm,” a senior official told ET.

Sharekhan still retains the standard slab. “The standard slab is trading -0.1% and delivery -0.5%. For customers with higher volumes, there are various slabs which they can subscribe to avail of lower brokerage,” a company spokesperson said.