Might be forced to start charging brokerage: Zerodha's Nithin Kamath

The company's Founder and CEO Nithin Kamath also said that Zerodha's revenues and profits took a hit last year due to regulatory actions

On completing 15 years of Zerodha, the company's Founder and Chief Executive Officer (CEO) Nithin Kamath said that the firm may soon start charging brokerage for equity delivery trades.

 

In a lengthy blog post on the company's website, Kamath shared his fears for the industry, gave insights into how the company is performing, and laid out some long-term strategies.

 

Kamath said that he has been pessimistic about the industry’s future. “Another year where I was pessimistic about the business has passed, and it’s been another year where I’ve been pleasantly surprised."

 

Highlighting that several regulatory changes in the space, including the drop in transaction charges revenue and the proposal to make futures and options trading tougher, will have a significant impact on revenues and profitability, Kamath said, "The time has finally come for business to pivot.”

Options business may be at risk

Kamath said that the options business might be at further risk. "With the regulators evaluating whether to stop weekly options completely, the options business may be at risk. If this were to happen, we would be forced to start charging brokerage for equity delivery trades to make the business tenable. Most of our competitors already charge for delivery trades," he said. 

 

Kamath reiterated that the move is not under his control. "How much we earn is dependent on market cycles, regulations, and other factors. Those who think they have some of this in control and constantly tweak their businesses and products to chase optimisation end up enshittifying their products," he said.

Revenues took a hit: Kamath

Kamath also said that Zerodha's revenues and profits took a hit last year due to regulatory actions, including the increase in Securities Transaction Tax (STT) on options and the reduction of expiries to two weekly contracts on options.

 

"The increase in the Basic Services Demat Account limit, the removal of the exchange transaction charges rebate, and a general drop in market activity meant our revenues and profits took a hit last year, as we had expected," Kamath said.

 

"This year, we are seeing a substantial hit of about 40 per cent in brokerage revenues in the June quarter compared to the same quarter last year," he added.