Brokerage fees go flat

Flat is becoming a rage - from TV screens to brokerage fees. As a new rate war breaks out in the brokerage industry CNBC-TV18 reports that many are finally waking up to discount broking.

Broking fees are turning 'flat' for retail investors, and blazing the trail is Kotak Securities, which has launched a broking fee of Rs9 per trade. The flat rate is available for its online customers wanting to transact below Rs50,000 flat and cheaper.

S Narayan, CEO, Kotak Securities, says, ""It should be atleast 1/3rd or 1/4th cheaper. Plus they have the benefit of accessing all our research on the site. Also in a bull market a client finds it difficult to access a broker because the broker is busy with medium or large sized customers."

In some cases like India Infoline, which charges 0.05 per cent as amounts start getting smaller - a flat brokerage may not necessarily be a cheaper option. But for the broker it is. It reduces the strain on his capital and physical infrastructure helping him offer different services to different classes of investors at different rates.

In the words of Narayan, "You are now basically saying - there are various services - and if you want to opt for a service - you need to pay for it."

Flat rates are expected to help brokers gain scalability - the way international players like e-trade and Charles Schwab have.E-trade for instance is among the top 10 brokerages in US but it has barely 20 outlets and services close to 3.5 million investors.

Many other brokerages like Anil Ambani's yet to be launched R-trade, and SBI's online trading arm are said to be planning a similar structure.