'All brokers will be doing is just..': Zerodha co-founder Nithin Kamath says Sebi's new rules altering broker roles

Brokers may soon find themselves reduced to mere order processors with SEBI ramping up its efforts to make Indian markets more investor-friendly, quipped Nithin Kamath, co-founder of Zerodha.

Since 2019, SEBI has introduced a slew of changes that have significantly altered the broker's role, he said in a post in X. Kamath highlights key changes, including the segregation of client funds, compulsory quarterly bank reconciliations for brokers, and the elimination of fund pooling for mutual fund transactions. "The latest regulation mandates direct payout of securities to investor demat accounts upon purchase," he explains.

Previously, when investors bought securities, the clearing corporation credited them to the broker's pool account, who then transferred them to the client's account. "With the new regulation, clearing corporations will bypass the broker's pool and directly transfer securities to the client's account. This not only enhances security but also eases operations for brokers," Kamath writes.

Another upcoming change is the likely increase in the limit for Basic Services Demat Accounts (BSDA) from ₹4 lakh to ₹10 lakh, allowing investors to pay no or reduced annual maintenance charges on accounts with holdings up to ₹10 lakh. This adjustment is part of SEBI's broader strategy to reduce costs for retail investors.

"The reduction in AMC is a reflection of the gradual reduction in a broker's role," Kamath observes. "In the not-so-distant future, I wouldn't be surprised if all that brokers will be doing is just processing orders." 

The regulator is reviewing the account maintenance charges for BSDA and the services provided through them. Currently, accounts holding up to ₹1 lakh in debt securities and ₹50,000 in other securities are not charged. This limit may be increased to ₹4 lakh, and accounts holding between ₹4 lakh and ₹10 lakh may be charged ₹100. The regulator explained in a recent note, "The BSDA facility has been reviewed to reflect the growth of benchmark indices over the past decade and to encourage greater participation of retail investors, including those holding physical securities."

BSDA was introduced in 2012 to promote financial inclusion. It is designed for individuals with only one demat account where they are the sole or first holder, ensuring they have only one BSDA across all depositories.