Discount broking: New approach to stock markets

Just like evolution in travel industry, radio cab industry wherein technology has reshaped the way customers can travel and book a basic requirement. Similarly, broking industry too has evolved from personalized services to standardized services delivered through digital platform. With such evolution happening, costs obliviously go down due to economies of scale which enables the consumers to avail services at low cost. Technology made it possible to scale up the businesses and make online low cost trading feasible. This has given rise to flat fee broking services which can now reach the masses digitally and explore the entire geography for financial inclusion of the masses in the main stream capital market. 

In India, typically brokerage is charged in the range of 0.3%-0.5% on delivery transactions. Why this number is so high? Traditionally, the broking houses charge for three major services - the cost of execution, the cost of advice and the cost of funds. The current pricing structure of the brokerage industry is that of bundled pricing with services such as funding, advisory and execution fees being bundled together. However, there are several problems with this pricing structure - lack of transparency, excessive pricing and no option to the consumer to cut his costs by doing away with services not being consumed. Technology has enabled the unbundling of these services and now resulted in lower costs and better transparency for customers.

However, SAMCO securities flat brokerage plan has helped saved this transaction cost by charging only flat amount of Rs 20 per order irrespective of the transaction size, resulting in savings of over 90% in brokerage costs.  These savings have crossed over Rs 70 crore since the inception of the company. This flat fee structure is applicable for trading across all asset classes – Equities, Derivatives, Commodities and even Currencies.

According to Jimeet Modi, CEO, SAMCO securities, “An era of complete unbundling of services has began and customers will have the power to choose what they want, keeping their costs practically negligible in broking thereby giving them complete freedom in trading and investing in the capital markets.”