Angel One, 5Paisa shares fall after SEBI mandates brokerages to levy uniform charge

Brokerage stocks saw a significant decline on Tuesday, a day after the Securities and Exchange Board of India (SEBI) instructed stock exchanges to implement uniform charges on brokers, independent of trading volumes.

Shares of leading brokerages including Angel One, 5Paisa Capital, SMC Global Securities, Motilal Oswal, Geojit Financial, and Dolat Algotech dropped between 3 per cent and 8 per cent in early trading sessions. Exchange operator BSE also recorded a decline of 2.5 per cent.

The move aims to standardise charges imposed by exchanges, which traditionally offered lower fees for higher trading volumes, thereby encouraging increased trading activity, particularly in derivative segments, which SEBI intends to moderate.

Effective from October 1, the new regulation comes amid SEBI's concerns over escalating risks associated with the surge in derivative trading volumes, which has attracted small investors to high-risk options contracts.

"A 100 per cent pass-through of exchange transaction charges threatens to destabilise the discount brokerage business model," remarked Tejas Khoday, cofounder and CEO of FYERS, a discount broking firm.

While retail customers are typically charged standard rates, brokers have benefited from reduced fees due to high turnover, Khoday explained. The exchange transaction charge, constituting a significant portion of revenues for both large and discount brokers, is crucial for their financial sustainability.

Zerodha, one of India's top discount brokers, did not immediately comment on the potential impact of the new regulation on its business operations.

Throughout the year, brokerage stocks have experienced notable gains, with increases ranging from 50 per cent to 124 per cent, reflecting heightened trading activities amidst record highs for India's benchmark indices, the Nifty 50 index and S&P BSE Sensex.

Dolat Algotech leads the pack as the top performer among brokerage stocks this year, surging by 124 per cent, while Angel One has faced significant challenges, declining by 26 per cent.

(With Reuters inputs.)