What are Brokerage Charges?
Online stock trading is facilitated by stockbrokers registered with the stock exchange board of India (SEBI). They offer demat services and trading platforms to carry out smooth and quick online trading transactions on stock exchanges. For their services, they charge various types of fees. One of these fees is brokerage. A brokerage charge is a fee with stockbrokers to execute trades using its online trading platform and provide specialised trading services to its clients. Their services may include purchasing and selling securities, advisory services, delivery services, etc. A brokerage is charged for both side trades – buy and sell.
The Issue of High Brokerage
Numerous individuals are keen to engage in online stock trading. They may lack knowledge of stock investing initially and open demat and trading accounts with a brokerage firm charging the highest brokerage fee.
Typically, there are three types of brokerage plans in India that a broker offers:
- Brokerage charge as a percentage of trading volume: Full-service brokers charge a percentage of the trading volume as a brokerage fee. If individuals open demat accounts and trading accounts with these brokers, it increases the trading costs.
- Flat Rate Per transaction brokerage: Stockbrokers charge brokerage fees at a flat rate, irrespective of the trading volume.
- Subscription-based Plan: It can be a fixed monthly and annual plan where a fixed fee is charged for trades.
A high brokerage charge is a primary issue for active traders like intraday traders as they take and exit from many positions within a trading session. Day traders pay brokerage from their daily profits, and therefore; brokerage impacts their profits significantly.
The Solution – Low Brokerage Accounts with Discount Brokers
One of the factors impacting brokerage calculations is the type of broker. There are two types of stockbrokers in India – Full-service and discount brokers. Discount brokers are known for cost-effective demat and trading solutions.
There has been an increase in the number of retail participants. It has led to increased demand for more brokerage firms. As a result, discount brokerage firms were introduced with a unique model – a flat rate and subscription model. Trading and demat account opening charges are nil with their trading plans. They stay focused on improving their trading platforms.
- It can be as low as Rs.5/order for delivery, intraday and futures and options (F&O).
- Also, renowned discount brokerage firms can offer margin trade financing (MTF) at the lowest interest rates.
There are different types of subscription-based plans designed for beginners and professionals. Thus, depending on their trading requirements, they can open demat and trading accounts for free and choose a subscription-based plan.
Easy Calculation Brokerage Charges
Individuals can open a demat account with the lowest brokerage with a renowned discount broker and calculate brokerage fees online using a ready-to-use tool. One needs to enter a few details to get the brokerage account.
- Enter the number of trades one does in a month.
- Select the trading segment.
It will give results within a few fractions of seconds.
Suppose one does 6 trades in the intraday segment. The annual brokerage with traditional brokers is Rs.18,000/- and it will be just Rs.360 with discount brokers. There will be savings of Rs.17,640.
Thus, discount brokers charge a flat price which is relatively lower than full-service brokers. individuals can open low brokerage demat and trading accounts with a renowned discount broker and save on trading costs significantly. Unlike full-service brokers, discount brokers charge a fixed cost under their annual subscription plans. Leveraging technology, they ensure providing a great trading experience at the lowest possible trading cost.