Hi
Now I say you a mystery. Now-a-days there is a race to become discount brokers. Their brokerage plan is either volume based or order based. Yes, they have sliced the brokerage to down to earth level. Have you ever seen any old brokerage house to come with such discount schemes? No. Then why. In fact, if these discount brokerage houses successfully run their business, then they will generate more business than these old brokerage houses. How?
First, basically almost all old brokerage houses are clearing members. They are also Depository participants. So their statutory charges are very low as compared to discounted brokerage house. So they can not manipulate any thing in their statutory charges. But in case of discount brokers, there is a way to manipulate these things. Now see, they can not manipulate STT, Stamp Duty, SEBI Charges, Service Tax as they are fixed by Government. Then which one remains to be manipulated - it is turnover charges. Just see, the turnover charges which is fixed by the exchanges can not be manipulated but the extra component charged by the clearing houses can be manipulated.
Now I am explaining how it is possible.
Suppose you are a client and open an account either with a sub-broker or a franchise. That sub-broker charges you a brokerage of 0.03% intraday. Now in your contract note, you will see the brokerage rate as 0.03%. But that sub-broker or the Franchise Owner will get a lion share from that brokerage. Similarly all discount brokers are sub-brokers of some clearing member. Now these discount brokers get a lion share from these clearing members (around 70% of the transaction charges charged by the clearing member).
That's what I am saying in this forum. In fact in some segment, their transaction charges are ridiculously high. So if they want to provide service, they must think about this issue seriously.
Any way
Wish you all
Happy Trading