Pay Per Trade

January 24, 2014

How you should select the right brokerage plan? (Discount Brokerage in India )

How do you pay your stock broker? The three options that are available in the market – pay as you trade, prepaid brokerage plans and fixed brokerage per trade.

Pay as you trade

You pay brokerage for each trade, mostly a fraction of your trade value. For example, you may come across a broker who charges 0.5%, or 50 paise for every Rs 100 worth of shares for delivery trade. Of course, some put a minimum brokerage amount, say Rs 25. So if you buy shares of Rs 50,000, you will end up paying the higher of the minimum brokerage ( Rs 25) or the brokerage at 0.5% i.e. Rs 250.

In addition to Rs 250, you will also have to pay statutory dues such as securities transaction tax, service tax on brokerage and other levies. For intraday trade, the rate can be 5 paise per Rs 100 traded. “Under no circumstances can the brokerage exceed 2.5%,” adds Subhash Sharma.

Prepaid brokerage structure

This works similar to the ‘pay as you trade’ option. But you have to pay a lump sum towards brokerage in advance. The money you paid has a validity period like mobile talk-time. If you don’t use it in that stipulated period, it is not carried forward. But the advantage is – more you pay in advance, lower will be the brokerage rate.

For example, if you pay Rs 10,000 in advance, you can do a delivery trade at a brokerage rate of as low as 0.1%, or 10 paise for Rs 100. The rates for intraday trade may fall to 0.015% or one-and-a-half paisa for Rs 100 traded.

Fixed pay per trade

This is a relatively new phenomenon in Indian markets for individual investors. Here the size of the trade is irrelevant. The ZERODHA online discount broker charges you for each order executed on the exchange. For example, you may place an order to buy 1,000 shares of Reliance Industries at Rs 740 per share.

For all shares you end up paying a fixed brokerage of Rs 20. Of course, statutory levies follow. In other words, big savings compared to the ‘pay as you trade’ model of brokerage.

From Founder’s desk

“Our clients primarily include mature traders in derivatives segment – especially the options – who know their trading strategies well,” says Nithin Kamath, Founder & chief executive officer, Zerodha – an online discount brokerage offering fixed brokerage per trade structure.

‘Fixed Pay Per Trade ‘ best option for Big Trader as well as small & even for beginner as Zerodha Offer 0.01% or Rs.20 which ever is lower.

Zerodha – The Online Discount Brokerage

Zerodha start its support center in Ahmedabad & Delhi

Lowest Brokerage in Gujarat