Zerodha founder says brokerage charges may increase as new settlement process begins

 Zerodha founder says brokerage charges may increase as new settlement process begins

Nitin Kamath, Founder and CEO, Zerodha Group.

• The idea of ​​doing this in one day, Kamat believes, is another way to test whether brokers are misusing client capital in any way.

Zerodha founder and chief executive officer (CEO) Nitin Kamath said on Thursday that as part of the new account settlement (AS) process, stockbrokers will have to transfer the unused funds back to the customer's bank account.

“From this 7th October, from the first Friday of every quarter (once in 3 months), all brokerages will have to transfer unused funds back to the client's bank account as part of the new account settlement (AS) process. I assume That it will be over ₹25,000 crore across the industry,” the Zerodha chief said.

Kamath also said that a person's account balance on Zerodha may be reduced or he may receive money in his bank accounts this Saturday. "So if your Zerodha account balance gets depleted or you receive money in your bank this Saturday, you know why," he wrote on Twitter.

Kamath believes that the idea of ​​doing this in one day is another way to test whether brokers are misusing client capital in any way.

“BTW, the AS regulation is unique to India. In most countries, brokers, like banks, can keep the unused funds forever and use them for working capital requirements as well,” said the Zerodha boss.

He also said that in India, after all regulatory changes, client funds can only be used for trades of that client.

Listing out "some issues" of the broking industry, Kamat said:

Operational risk of sending large quantities in a single day.

SEBI's new guidelines on settlement of current account

Capital markets regulator Securities and Exchange Board of India (SEBI) recently came out with new guidelines on settlement of ongoing accounts of clients' funds lying with stock brokers. This will come into effect from 1 October.

Under the new guidelines, the current account of the client's funds will be settled by the trading member after considering the end of the day (EOD) obligation as on the date of settlement across all exchanges on the first Friday. of the quarter for all customers.

SEBI said in a statement that the settlement of the fund's current account will be done on the first Friday of October 2022, January 2023, April 2023, July 2023 and so on for all customers.

If the first Friday is a trading holiday, such settlement will take place on the previous trading day.

Those who have opted for monthly settlement, their current accounts will be settled on the first Friday of every month. If the first Friday is a trading holiday, such settlement will take place on the previous trading day.

In market parlance, the process of transferring unused funds of clients back to their accounts by stockbrokers is called running AS.

As per the guidelines, stockbrokers are required to reverse the unutilized funds lying in the trading account of the client at least once in an interval of 30 or 90 days between two settlements of current accounts as per the preference of the client.

Also, for customers who have not done any transaction within 30 calendar days, the money will be refunded to the customer within the next three working days, irrespective of the date on which the current account was first settled was.

with agency input