Stock brokers have seen their margins squeezed in the March quarter, with trading volumes shrinking and income falling — partly due to a raft of regulatory changes such as increased margin requirements, the removal of volume-linked rebates, and higher limits for basic demat accounts taking a toll.
Over the past few months, the Securities and Exchange Board of India (SEBI) introduced six measures aimed at tightening the futures and options (F&O) market, the impact of which is now fully taking hold. A combination of these steps and volatile global cues have shrunk both cash and derivatives market volumes by over 30%, market experts said.
The impact is visible in the March quarter earnings, with discount broker Angel One reporting a 48 percent year-on-year fall in net profit to ₹174.5 crore, along with a 22 percent drop in revenue to ₹1,056 crore. HDFC Securities also saw its revenue fall by nearly 14 percent to ₹742 crore and net profit slip over 21 percent to ₹251 crore from the previous year.
“Broker’s performance has been dented due to a drop in cash market volumes and SEBI’s F&O rules,” said Sandeep Chordia, chief operating officer at Kotak Securities. “Cash markets’ average daily volumes have declined almost 30 per cent from the levels seen before September 2024, largely following global cues. Meanwhile, the derivative segment has seen a substantial fall in the number of contracts traded due to the regulatory changes,” Chordia said.
Demat limits
Another blow to broker revenues came with SEBI’s move in September 2024 to raise the investment cap for basic demat accounts five fold — from ₹2 lakh to ₹10 lakh — preventing brokers from charging normal annual maintenance fees.
“Enhancement of the Basic Services Demat Account (BSDA) limit has dented at least 30-35 per cent of brokers’ revenues from demat charges, especially annual maintenance charges,” said Ashish Rathi, Whole-Time Director at HDFC Securities. “Apart from the drop in derivatives volumes, regulatory changes like true-to-label and basic demat accounts have equally pressured brokers’ margins,” he said.
No more rebates
Adding to the pressure, SEBI mandated a uniform fee structure for brokers from October 2024, scrapping the earlier volume-linked incentives. This move hit zero-brokerage players particularly hard, forcing them to tweak their fee structures to cushion the impact.
“True-to-label rules have impacted zero-brokerage houses by at least 10–15 per cent, as the major benefit earlier was getting discounts by bringing large trading volumes,” said an official at a discount brokerage firm. “This incentive had powered the boom in discount broking, especially after the retail investor surge post-COVID.”
Groww, one of the largest discount brokers, revised its brokerage fee to 0.1 percent or ₹20 per order, whichever is lower, from the earlier 0.05 percent. Angel One too updated its pricing to a flat ₹20 or 0.1 percent per executed order.
To offset margin pressures, discount brokers are now started expanding products like margin trading facilities (MTF), which allow up to 5x leverage in cash market trades. They can also consider cross-selling, distribution models, and diversifying their revenue streams, said Rathi.
Published on April 27, 2025
