MUMBAI, February 5: Good news for investors. With demat trading catching on rapidly, brokers have started slashing brokerage fees levied on investors owing to lower risks in dealing in a paperless environment.In fact, the charge is lower in the event of the broker also being a depository participant (DP) with the National Securities Depository Ltd (NSDL).
One such example is that of Action Financial Services Ltd, a Mumbai-based broking house, which is a member of the National, Bombay and Bangalore stock exchanges.
Action Financial, which is a DP with NSDL, has slashed its brokerage charges in the demat segment to one-third of that in the physical segment. It is now charging a brokerage fee of 0.25 per cent in the demat segment as against 0.75 per cent in the physical segment.
In fact, taking the various cost benefits into account, Action Financial officials say that the total cost incurred in dealing in dematerialised shares is at least one-third less than the cost incurred by an investor in thephysical segment.
"The brokerage charge is much lower due to the riskless environment of trading. There is no share transfer stamp duty applicable. There is also no cost incurred in the form of postal and courier charges involved when sending the shares for transfer. In our case, trading through the demat mode costs one-third the amount incurred in paper-based trades," said an official at Action Financial.
The broking house has in fact gone a step ahead and decided not to charge any fee for dematerialisation of a security. It is charging a nominal 0.05 per cent per annum as custody charge.
According to depository sources, several brokers across the country are slashing brokerage charges to grab a share of the market which is growing by the day.
"Contrary to market expectations, brokers have braced themselves for providing good service as a depository participant. One such DP (Geojit Securities) has even got three banks opening depository accounts with it," said a top depository source.
Given therecent trend, NSDL has decided to add lower brokerage charges as an added incentive of dematerialisation in its marketing drive in order to attract investors to the depository mode.
"Lower interest charges on loans against shares was till now the major added benefit of dematerialising one's holdings. The advantage of having a much lower brokerage fee is also now being marketed as an additional benefit," said NSDL sources.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
