Impact of proposed ABSA rule

@nithin, any comment on how this might impact us?

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Zero brokerage model will probably not be sustainable if this proposal comes into effect for F&O.

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Nothing much as long as this is optional, which is what it is now. If it were to be made mandatory, it potentially can affect significantly. We will have to figure out how the final circular is drafted to get a sense of impact. It is still a discussion paper by the way.

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Pls fight it “tooth and nail”, cos we count on you (discount brokers) to be profitable and not increase transaction costs.

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I wonder how they get these blooming ideas (even for a discussion paper). I really hope they don’t make it mandatory. I understand they are trying to safeguard investors but this is just another of those right idea, wrong implementation ones.

It was an unmitigated disaster when they rolled out pooled account discontinuation last year for mutual funds… i.e Money from an investor’s account now goes directly to the fund house routed through the BSE Star MF platform (or similar) and via the clearing corporation. The final units are only allotted once a fund house receives the money. Globally none of the exchanges deals directly with the investors. Intermediaries exist for a reason. A decade back, the brokerage industry was disrupted by Zerodha’s discount broking model so much so that many banks and traditional players have also slashed brokerage to remain competitive. Obviously it will be unsustainable and everyone will have to hike their rates. Making this brokerage business more capital-intensive would only create substantial financial barriers for small- and mid-sized brokers… In a relatively new market like India, the regulator should continue to allow the discount brokerage model to exist if they want to encourage equity investing.

This reminds me of that Twitter thread you posted a year back explaining why Indian brokers can’t follow the US model of 0% brokerage on trades & why you think brokerage rates will go up in India in future. Looks like your prediction was spot on!