Discount broking came as a boon for traders and thanks to Zerodha for introducing it to us. Two years ago choosing an online broker was easy, Zerodha offer was way above the rest and most of us picked them as our first choice. Today, off course, there are many competing to secure some space in discount broking. One can now find different business model in discount broking space. There is variance in both kind of upfront charges (pay per order or fix unlimited plans) being offered by different brokers that one can easily find and then there is variance in various charges(Turnover/Transaction Charges/Clearing Charges and Service Tax Component)
Most of the brokers claiming to be transparent do put brokerage calculator on their sites for new clients to evaluate their transaction cost. This makes the task of selecting a broker a bit easy for us as far as cost of transaction is concerned. Beside variance in upfront fee (brokerage fee) one needs to look at STT, Transaction Charges and Clearing Charges being charged by brokers. One easy way to find is just compare the Service Tax component in their brokerage calculator. Service tax being charged on Brokerage and Transaction charges will give you a clear idea about transaction cost. Based on this for I found following –
For Furure Segment Service Tax on 1 cr – Zerodha -60.5, RKSV – 29,Composite -56, Achievers- 48.20, Smart Trade -29.66, VPS -30.9, Procon-48.20.
For Option segment – Zerodha -988.8, RKSV -885, Composite – 927, Achievers -927 ,Smart Trade -883, VPS -772.5 and Procon 865.2.
For Cash intraday – Zerodha -60.5, RKSV -43, Composite -56,Achievers -43.26 , Smart Trade-43.26, VPS-41.50 and Procon -64.89.
For currency service tax component is, Zerodha -55, RKSV-19.76, Composite -38, Smart Trade-20, VPS -19.77 and Procon -38.93.
This shows that there is large variance in charges being taken by various companies. Higher the service tax component, higher is overall transaction cost. The variance gets magnified when one looks at total transaction cost, e.g. for CD segment Zerodha stands at Rs 505 v/s RKSV and VPS at Rs 189.
For commodity transaction charges per Cr are Zerodha -440, Achievers -500, VPS -300 and Procon -450.
Beside this there are Stamp Duty charges. These are being charged by various brokers as per the state they have their offices. So one may find some variation here too.
If your broker is also a clearing member then clearing charges that are generally Rs 50/cr can also be reduced or waived off. All the brokers mentioned above are not clearing member, hence clearing charges of Rs 50/- cr is quite legitimate for them to charge.
Brokers may give various reasons for the variance in their charges but what it boils down to is that Customer beware and should make own judgment considering the overall cost of transaction.
Based on the business model (pay per order or Pay Fix trade unlimited for a Month) and transaction charges following are the findings:-
Zerodha and Composite - Pay per order and Higher transaction charges.( highest among the discount brokers)
RKSV – Pay fix Trade Unlimited and Reasonable charges. (Suits high volume traders as transaction charges are competitive.
Achievers and Procon – Pay fix and trade Unlimited with reasonably higher charges.( though upfront charges are low but volume trader will end up paying higher transaction cost over all as their turnover charges and clearing charges are quite high)
I did one calculation for myself -For example ,I trade 1 cr a day in future segment( total turnover for month is 20-22 Cr) Achievers/Procon – My charges for one month are Rs 500(fix)+ service tax 61.8 + Turnover Charges 390+ service tax-48.20 (20X438.20) =8764. So total amount works out to be -500+61.8+8764 =Rs 9325.8/-.
Same calculation with Zerodha/Composite – Assuming 10 trades a day- (10x20x20) = 4000 Brokerage+ Service Tax Rs 494.4 + turnover Charges 440 + service Tax 54.38(440+54.38)= 494.38, (20×494.38) =9887.6. So total cost is = 4000+494.4+9887.6 =Rs 14382/-
Calculating same with VPS/RKSV/SMART TRADE – 1700+ service Tax -210.2+turnover Charges -250+ service tax30.9(280.9×20)=5618. So total amount that I spend is 1700+210.2+5618= 7528.( saving of Rs 1800 over Achievers/Propon and saving of over Rs 7000 over Zerodha/Composite)
Above calculations opened my eyes and now I know whom to choose.
I did the same calculation at 10 cr a month, still VPS/RKSV/SMARTTRADE model works out better for me.
So if someone is planning to switch form one model to other please do above calculations for yourself to decide what works out to be better for you.
There are few who offer combo plans? Please work out over all cost with transaction/turnover charges before you jump on these plans. One plan that is really good for those who trade in FnO and Currency is Smart Plan of VPS. You work whichever way it is a very value for money plan. RKSV and SMART Trade offering 1947 and 1899 for only Equity n F&O and VPS giving you Equity and Currency both in 2000/- on same platform. Hope this plan stays for a while…(they shouldn’t change the plan)