Why is brokerage charged to my trading account?Any broker offers you services like executing your trades, settling your transactions, giving you trading and investment ideas, etc. To service customers, the broker needs to maintain office, staff, and computers. It is to cover all these costs that the broker charges brokerage. That is the broker’s source of revenues.
Then why does the broker also charge me STT and GST in the contract note?
- The GST, STT, and stamp duty are not the income of the broker.
- The broker only collects these charges on your behalf and pays it to the government.
- Taxes like GST, STT, and stamp duty are levied by the central and state governments and it is revenue for them.
Do brokers charge the same brokerage from all their clients?The broker has an indicative brokerage rate. Your actual brokerage charged will be based on your relationship with the broker and the volumes traded by you.
Why is my broker charging a high brokerage for equity and low brokerage for futures?That is because equity trades on actual value while futures trade on notional value. If you buy 1500 shares of Tata Motors at Rs.400 it will cost you Rs.600,000 in the cash market. However, in the futures market, you only pay a margin of say 20%. So when the brokerage on Rs.120,000 is expressed in terms of the notional value (Rs.6 lakhs), it appears that the brokerage rates on futures are very low.
Who decides the rate of the brokerage on my account?The client agreement that you sign with your broker clearly lays out the specific brokerage rates for equities, futures and for options. Any change in the brokerage rates will be intimated by the broker to you in advance.
Can you ask for a change in brokerage rates?If your actual trading volumes turn out to be much larger than you originally anticipated and you feel you are being overcharged, you can negotiate with your broker for a lower brokerage.
What is the concept of per lot brokerages that I get to hear?Per lot, brokerage arrangement is more applicable in case of futures and options. F&O is traded in lot sizes that are defined from time to time. For example, Tata Motors is currently quoting at Rs.400 and has a lot size of 1500. The broker will fix the total brokerage for this 1 lot at about Rs.30/lot. This type of per lot brokerage is very common among brokers in futures and options.
How are some brokers able to offer near-zero brokerage?
- Discount brokers only give pure execution of trades. They do not offer research, trading calls or advisory services. Since they are predominantly net traders, they are able to sustain.
- Full-service brokers provide you with reports, research, updates and timely advisory. That is why they charge higher brokerage.
I was approached by a broker with higher brokerage and assured returns
- Rate of brokerage is entirely your judgment as you need to be satisfied that the broker is giving you value for the higher brokerage.
- But you must not fall for assured returns in equity markets.
- Remember, the stock exchanges and SEBI clearly prohibit assured returns in equities and hence it is not legally permitted.
How do I know the brokerage that I am being charged on my trade?Your broker will provide you the contract notes on a daily basis for all the trades executed. The contract notes clearly lay out the price of execution, the value of the trade, the rate of brokerage charged and other statutory charges.
Brokerage Options – Summing it up:
- Your brokerage rates will depend on volumes you give
- You can opt for fixed or variable rates of brokerage depending on volumes
- There is a difference between discount brokers and full-service brokers
- Avoid the temptation of assured returns
|Type of Charge||Charges|
|Equity Intraday||₹ 20 / Executed Order Or 0.25% (Whichever Is Lower)|
|Equity Futures & Options||₹ 20 / Executed Order Or 0.25% (Whichever Is Lower)|
|Currency Futures & Options||₹ 20 / Executed Order Or 0.25% (Whichever Is Lower)|
|Commodity Futures & Options||₹ 20 / Executed Order Or 0.25% (Whichever Is Lower)|
What are these broking charges that my broker keeps talking about?
In the Indian system, investors invest in the stock market through stockbrokers. Brokers collect brokerage fees for carrying out trading instructions and for providing specialised services. A brokerage charge levied on every transaction is either a percentage, flat fee, or a hybrid based on investor’s contract.
What are the brokerage charges I have to pay?
Let’s understand brokerage charge with an example.
For instance, stockbroking firm, ABC, charges a brokerage fee of 0.55 percent on total turnover for intraday. If an investor buys 100 stocks of a company at Rs 120 and sells at Rs 126, total turnover is (126*100+ 120*100) or Rs 24,600. Brokerage charge will apply on the turnover value, which is (24,600*0.0055) or Rs 135.3.
Modern online brokerage charge calculators are simplified tools that help investors calculate the total charge of a transaction.
Why is my account debited for more money than actual trading volume?
What are the differences between a full-time broker and discount broker?
The main difference between full-time and discount brokers is the fees structure. Brokerage charged by discount brokers is approximately 60 percent less than full-time brokers. But a discount broker will act only as a facilitator, carrying out the trading instructions. On the other hand, full-time brokers offer a range of services, including market analysis and research reports, algorithm-based trading indications, customer service and dedicated account managers, technology-enabled trading, and more.
How are brokerage charges calculated?
A brokerage calculator is an invaluable tool with several advantages. Using this simple tool one can accurately calculate the cost of transaction.
Try our easy-to-use online calculator.