Zerodha co-founders Nitin Kamath and his brother Nikhil Kamath have expressed concern about the startup ecosystem. Kamath Brothers said excessive regulation can stifle growth and adversely affect the startup ecosystem in the long run.
In a podcast on CNBC-TV18, Kamath and his brother said – We are under regulators over whom we have no influence and we cannot take their decisions, but with their decisions they can reduce our revenue by 50% in a day. They can even put us out of business forever.
Giving an example, Kamath said that in a class of 50 children, the teacher makes rules and reprimands and scolds the children as they wish. Can innovation come from children who are already living in fear, maybe not. However, Nikhil Kamath also said that Indian regulators have fine-tuned the system over time.
Nitin Kamath said – Running a broking firm is a tough job Nitin Kamath said Zerodha's revenue is expected to decline due to the new regulations implemented by the Securities Exchange Board of India (Sebi).
He cited true-to-label regulation as an example of circular regulation that could hurt company profits. Kamath said that running a broking firm is a tough job. Despite all this, Kamath remains very optimistic about the future.
Kamath Brothers wants to turn Zerodha into a bank Kamath brothers want to turn Zerodha into a bank. He lamented that the banking license has not been obtained despite all efforts made in the last several years.
Nitin Kamath also spoke on this circular 3 months ago 3 months ago Nitin Kamath wrote on social media platform X- SEBI has recently issued a circular. It said that market infrastructure institutions (MIIs) like stock exchanges will have to charge 'as per label' from October 2, 2024.
This circular will not only affect brokers, but also traders and investors. In all likelihood, zero brokerage structure will have to be abandoned or brokerage will have to be increased for F&O trades. Brokers across the industry will also have to adjust their prices.
Why did SEBI issue new guidelines?
- SEBI issued new guidelines to ensure fairness and transparency in fees charged by MIIs. These guidelines have now been implemented. Stock exchanges, clearing corporations and depositories are called MIIs.
- Earlier, the procedure followed was that stock exchanges used to charge transaction fees based on the total turnover made by the stock broker. Brokers used to charge clients on a daily basis while they paid the charges to the stock exchange on a monthly basis.
- Earlier stock exchanges followed a volume based slab wise charge structure. That is, if a broker has a high turnover, he falls in a slab of the stock exchange where the charges are low. When the turnover of the broker is less, he has to pay more charges.
- Sebi said the slab benefit allows brokers to charge their clients more than what they pay to MIIs. This may result in misleading information reaching the end client regarding the actual charges charged by MII.
- Slab-wise charge structure can affect transparency. Creates an uneven playing field for brokers of different sizes. SEBI wants the charges that brokers charge their clients to be equal to what they get from MII brokers.
Image Credit: (Divya-Bhaskar): Images/graphics belong to (Divya-Bhaskar).
