Zerodha co-founder Nithin Kamath said his firm will stop sharing brokerage revenue for referrals following an NSE circular.
NSE had issued the circular last week, stopping brokers from sharing any brokerage as a referral incentive unless that "person is registered as an authorized person with the exchanges".
"This is another one of those circulars that will hurt the business," he wrote in a post on X, adding that Zerodha was stopping the referral programme and making one-time payouts for whatever is due.
Zerodha's decision aligns with the NSE's intent to prevent trade inducement, a concern that has been growing within the regulatory framework.
The circular emphasized that only those formally registered could be involved in referral activities, explicitly banning any schemes promising fixed returns or operating unauthorized investment schemes.
However, Kamath assured users that the company would continue to offer reward points for referrals, which could be redeemed for various services, ensuring some continuity in their referral incentives. "By the way, 12.4 lakhs of our customers have referred at least one client to date," he added.
The NSE's circular is part of a broader effort to protect investors and ensure that all activities within the trading environment adhere strictly to the regulatory standards set by SEBI and the exchange.
By enforcing this, the NSE aims to mitigate risks associated with unauthorized schemes and ensure that all promotional activities are conducted transparently and within the legal framework.