Busy traders end up paying a lot brokerage to their brokers. A good way of saving on their brokerage is to open a trading account with discount brokers like RKSV and Zerodha. Discount brokers offer ultra-cheap brokerage rates. Some of them even offer unlimited trading for a fixed brokerage every month.

Discount brokers manage to offer such low-brokerage rates by keeping their costs under strict control. They follow a similar strategy to the frills airline services that offer cheaper air tickets. Discount airlines do not offer free meals and drinks. They neither sell tickets through travel agents nor maintain a big branch network across the country. Customers need to buy their tickets online and take their own printouts. Any additional service offered by discount airlines, including the food and drink served during the flight, are charged extra.

discount brokers india

Discount brokers too offer limited services and pass on the savings to their customers. They do not have a branch network and hence save on office rents and salaries paid to the people staffing them. For example, one of the leading discount brokers in India, Zerodha has a total staff of just 85, all stationed in its Bangalore head office. People who want to open an account with them need to download the account opening form from their website, fill it on their own, and send it their office through post or courier. Once the application is accepted, applicants will receive their login details. Any additional service offered by them is charged extra. Customers who want phone trading service or even a physical account opening forms need to pay Rs. 20 – 30 each time they avail the service.

Despite the huge savings that traders and investors can make through discount brokers, they are not for everyone. First of all, discount brokers offer no research services nor supply any third-party research reports. People who are new to trading or who desire to get research support from their brokers should prefer a full service broker. People who have accounts with discount brokers need to do their own research or maintain another broking account with a full service broker. Discount brokers do not offer some financial products like mutual funds, IPO, and bonds. Other things like a dedicated relationship manager available for HNIs too will be missing in case of a discount broker.

discount broking

Most importantly, traders who want to open an account with discount brokers should have hefty trading volumes. Traders who pay more than Rs. 10,000 in the form of brokerage are the ones who can benefit from discount brokers. Since most discount brokers charge a minimum brokerage (Rs. 1,000 to Rs. 2,000) every month, traders with low volumes may end up more brokerage than they would pay a full service broker. However, some discount brokers like Trade Smart Online offer low brokerage for each trade without the need for any monthly commitment.

Other than the service, discount brokers offer the same level of security and trading speed as full service brokers do as they too are regulated by similar statues as the latter.

Discount broking is a new concept to India. But it is very popular in USA and other developed markets. However, they are catching up very fast in India as traders realise the savings they can make. Discount brokers will not destroy full service brokers, in the same way as no-frills airlines did not annihilate full service airlines. Both of them will continue to exist side by side and cater to the needs of their respective target markets.