Sometime around 2011-12, RKSV (now Upstox), a three-year old proprietary brokerage firm at the time, opened itself to offering retail brokerage services. RKSV launched India’s first online-only unlimited trading plan for its users and began the disruption of the brokerage industry of that era. Ever since then, discount brokers have been rapidly gaining popularity all over the country. In an industry long dominated by a select class of firms with nearly no innovation, the advent of discount brokers has been a pleasant surprise.
To give you a quick recap - discount brokers offer lower brokerage rates, high-speed trading in stocks, commodities, and forex. Unlike traditional brokers, discount brokers offer all essential services with add-ons like research reports stripped away. If you’re more of an independent trader who’d rather not lose out extra money on brokerage charges, a discount broker is an ideal option.
- Larger numbers of people are now learning to invest and grow their money, especially so after events like demonetisation. For beginners stepping into the market, discount brokers make perfect sense to start with.
- Young traders are familiar with new technology, thus they prefer discount brokers built on newer, advanced platforms over traditional brokers.
Advantages of discount brokers over traditional brokers
Discount brokers are ideal for new or small investors.
- Zero/Low Commissions:Discount brokers charge very low commissions on your orders. In fact, Upstox levies zero commissions for delivery trades!
- Time and efficiency: Discount brokers need to keep costs low, and are therefore incentivised to offer efficient, new age, zippy platforms that help you place trades with no lag.
- Powerful Analysis Tools: Discount brokers give you the tools you need to analyse and study markets on your own. For example, Upstoxoffers more than 100 charts so that you can back your decisions up with tangible data!
- Better Tech: Discount brokers are more likely to be offering more convenient and updated services - such as an online demat account that eliminates paperwork and further reduces costs not only for the client but also reduce overhead costs that works in the favour of the broker’s business model.
Why are discount brokers becoming so popular in India?
The internet has had a fascinating impact on information and accessibility. Information is now democratised - everyone can get it whenever they choose to!
Exclusive insights and research reports are no longer the protected domain of large brokerage firms, and can no longer be perceived as their USP.
With faster speeds and more bandwidth, it is possible to challenge the hegemony of large brokerage firms and deliver world-class, competitive trading platforms and services at a fraction of the cost.
This has led to a surge in the popularity of discount brokers in India - since traditional brokerages no longer offer anything compelling.
Additionally, another important factor is the increasing rate of financial literacy in India. Larger numbers of people are now learning to invest and grow their money, especially so after events like demonetisation. For beginners stepping into the market, discount brokers make perfect sense to start with.
The trend of discount brokers emerged sometime around 7 years ago, back in 2010. Many people in India are investing using their own judgement.
- Investing through discount brokers is quite cheap. It is 90% cheaper than traditional brokers. Profits are not eaten up by high brokerage of traditional brokers.
- Like any other industry beginning to behave like a monopoly, the traditional brokerage industry has been no different, with business intent slowly changing to be profit-driven instead of being customer-centric. Continuous ‘buy’ recommendations from traditional brokers lure the client to buy new stocks. This results in huge brokerage charges. In the long run, this doesn’t produce great profit.
- India is a young country. The median age of our population is just 29 years. Young traders are familiar with new technology, thus they prefer discount brokers built on newer, advanced platforms over traditional brokers.
- Trading with discount brokers is all about speed. Slick, fast user interfaces and backend systems make them a lucrative option for short-term traders.
- People in India are diving deep into the stock market. Like a country beginning to announce itself on the global stage, its population too prefers to go with their own decisions rather than blindly relying on expert advice.
Types of discount brokers
Discount brokers are categorized into 2 subcategories in India with respect to their way of charging brokerage:
- Fixed price per trade: Some brokers in India charge a fixed price from you per trade irrespective of the size of your trade. These charges are very low - they can vary from Rs. 9 to Rs. 20 per trade. Upstox charges users ZERO for delivery trades, and Rs. 20 for intraday trades.
- Fixed monthly charge: Some others charge a fixed monthly fee from traders, regardless of the number of trades or the exchanges on which they perform. They will charge you the exact same amount each month, even if you perform unlimited trades.
- The number of traders and investors in India continues to increase every day at a rapid rate.
- It is obviously not affordable for all traders to trade through traditional brokers with their prohibitively high charges.
- Discount brokers offer multiple advantages that facilitate the type of investors India has.
- For reasons ranging from our demographics to the very model of discount brokerage, these firms are peaking in popularity nationwide.