This is nice research paper that explores how the behavior of investor changes after trading commissions are removed.
We show retail investors are highly responsive to changes in trading commission fees. Using a triple-difference research design around the removal of fees for retail investors on the international retail broker platform, eToro, we show investors responded by trading approximately 30% more frequently, in smaller order sizes, and increasing portfolio turnover. Removing fees also spurred retail investors to reallocate their portfolios and diversify. Retail investors’ gross return performance did not significantly change around the fee removal despite trading more often, but retail investors earned significantly higher returns on a net basis after accounting for fees incurred in the pre-period. Finally, using demographic information, we show removing fees disproportionately affected inexperienced investors with lower deposit amounts and lesser technological sophistication both by expanding the extensive margin of investors and changing trading activity for the intensive margin of investors. Together, our results suggest commission fees play an influential role as a speed bump for retail investor participation, trading activity, and diversification.
My most expensive subscription is definitely zerodha! I have no qualms about it because they provide an excellent service for my trading needs. Compare this to the other charges (tax,exchange,etc…), I pay more than 3X of what i pay zerodha. So, it baffles me that people complain about brokerage & overlook the real damage here
Trading is like doing a business. Lower the cost higher the net Profit. Account opening fee, annual maintenance fee and hefty charges for api use is therefore detrimental to the PnL of a trader. Smaller the account size higher the impact on cost front.
Zero oriented brokerage houses will therefore help traders in my view.
I would agree , here I punch 10 orders for 18k quantity even tough we have enough liquidity in OTMs that I think could be managed by 2 or max 3 orders( even avoiding freak trades) , so every time I am paying 3-4X brokerage for my orders which seems unfair to me . Freeze quantity should be per premium not fix for all premiums.
Even SEBI reports says approx. 20% of PNL people paying in form of Brokerage, STT ,Charges etc. This is huge Fixed cost which I think should be lowered or should be in form of fix subscription model types after certain Turnover etc.
Lot size is changed to keep notional value of contracts between 5-10lakhs & freeze quantity to keep notional below 5Cr. If these aren’t changed periodically, then contracts would become too large/small to trade as the underlying value increases/ decreases. No conspiracy here.
If you/ i accidentally press one/two extra zeros in our order quantity, it will be rejected due to insufficient funds. If institutions happen to do this without proper order checks from their risk management teams, it would be disastrous without freeze quantity!
How can the rules be set considering the institution in mind? If they have a problem get a software to double check the qty & price.
No system should favor the privileged by looting from the poor.
also the freeze qty is not really getting enforced now - its a disaster because all the brokers offer iceberg orders. ie you place an order for 10000 qty, system will split as 11 orders of 900 and 1 order of 100 for bank nifty.
only difference is that you pay brokerage 12 times instead of 1.
*well i pay zero brokerage intraday, so it doesnt really matter for me now - but i am quite sure looking at my trading pattern my broker will soon do away with this offering