Learn About Zero Brokerage Trading Online in India | My Espresso

What is Zero Brokerage Trading?

Zero brokerage trading has become the new buzzword among the investors of the financial market. Despite the popularity, however, there is little knowledge about zero brokerage trading online and the benefits associated with it.

Published on 06 February 2023

For the novice as well as a regular investor, knowing about zero brokerage trading can help with choosing a suitable trading account. It is easy to understand zero brokerage trading when it is compared to the traditional brokerage model for trading online.   

How Do the Traditional Brokerage Charges for the Capital Market Work?

To buy or sell stocks in the capital market, one needs to open a trading account. Typically, when you open a trading account, stockbrokers levy a charge on their clients (investors) to execute transactions while trading online.

Investors need to pay a charge to open a trading account (some brokers enable free account opening) with a choice of their depository participant (DP). In addition to the trading charges, other charges are levied for the provision of certain specialised services.

Some of the services rendered under a full-service account include market research to provide a list of favourable investments or providing investment advice to investors. The brokerage fee includes charges for trading online (buying or selling of shares), consultation services, and delivery of shares. It is meant to compensate a broker for the execution of a transaction. These fees are paid on a percentage basis for each transaction.

It is recommended that when you open a trading account, you check with the DP about all the charges that you are expected to pay.   

What is the Zero Brokerage Trading Model? 

The concept of zero brokerage trading online started by keeping in mind the rising number of investors in the Indian financial market. To put it simply, with zero brokerage trading, an investor does not have to pay any charge for trading online. However, because there is inadequate knowledge about zero brokerage trading, brokers sometimes take advantage of this and package their services as zero brokerage when in reality, they have hidden charges involved.

To prevent this from happening, investors must ask their broker about the charges for their trading account upfront.

Zero brokerage trading exists to restructure the traditional brokerage model into something that is more cost-effective for investors. With zero brokerage trading online, the scaling charges are eliminated by the broker by doing either of the following: -

  • Charging zero brokerage fee for equity trading or
  • Charging a flat fee for each trade

The 3 Parts of Demat Account with Zero Brokerage Trading

When it comes to the zero brokerage trading account comes in three different parts, which are:

1.    No Brokerage Across Segments

This is a normal Demat account, and it has some charges levied when trading with debt, equity, and various other monetary commodities. But with a zero brokerage trading account, you can easily trade all these monetary commodities without providing any brokerage charge. To opt for this specific facility, which is unique to zero Demat accounts, you need to look for a trusted and reliable broker who provides this type of service.

2.    No Brokerage for the Delivery Trading

After the massive success of the Robinhood trading app in the US, Indian brokers began trading accounts. All these accounts have a delivery segment that is brokerage free.

You will come across many discount brokers on the online platform. Here, you can buy and sell individual stocks on the cash segment at INR 0 for each trade. Based on the market analyses, several investors don't place their funds when it comes to delivery trade.

But keeping them free is an excellent marketing strategy as it will pull in a lot more investors. The actual idea is to keep all the trading brokerage free to let all the new investors try out equity delivery trading for free. When these new investors become a lot more experienced, they will carry forward with the intraday trading and derivatives, and both of them are not free.

3.    The Discount Plans

There are many people out there who love discounts. But when it's about investments, these discounts are well-appreciated by everyone. Right before you open a zero brokerage trading account, you should check the yearly and monthly plans that run throughout the whole year. All these plans contain enticing deals and heavy discounts, which are extremely beneficial for all the investors within the stock market who trades in high volumes.

What is a Discount Broker?

The zero brokerage trading account was started in the interest of the traders in the Indian share bazaar, and ever since its inception, it has been a matter of curiosity among investors. Where a zero brokerage trading account charges no brokerage fee on any trade, a discount broker facilitates the buying and selling of orders at a reduced commission fee. However, under a discount broker, other facilities such as research and advisory services are not provided to the investor.   

How to Find a Zero Balance Demat Account in India?

By now, you're well aware of what is zero brokerage or balance account, and you should also know how to find one. Here are some useful tips that can help you find a zero-brokerage account:

  • Enlist all the brokerage companies: When looking for a Demat account, you will encounter many companies offering this type of account. But you will come across a few companies that offer a zero brokerage Demat account. That's why before you choose a Demat account, make sure to do some research on it.
  • Compare all the plans: When it comes to trading with zero brokerage accounts, you must compare the offerings of these accounts from various brokerages. Doing so will help you get a service at a competitive rate.
  • Check the pricing structure: The pricing structure of Demat accounts from different brokerages is not the same. Make sure to check them out before you opt for them.

Understanding Brokerage Charges for Trading Online

In India, for all financial products other than options, the brokerage fee is calculated as a percentage of turnover on the trade executed. For options, this is charged by the lot. To understand how zero brokerage trading online works, you can compare it with the traditional pricing model.

For example:

Consider that a broker charges 1 paisa on intraday equity trading and 10 paise on delivery trading. As an investor, you have placed the trade of: -

  1. Purchasing 1000 Reliance equity shares at ₹980 and
  2. Selling these shares at ₹990 on the same day

In this case, your brokerage charge would be (1000 x 980) x (0.01%) + (1000 x 990) x (0.01%) = 98 + 99 = ₹197

Contrarily, continuing on the same example as above, when a stockbroker charges a flat fee of, let’s assume ₹20 on each trade as part of the zero brokerage model, then the total charges would only be ₹40. This way, the investor will have saved ₹157 behind their trade.  

Benefits of Zero Brokerage Trading

When you go to open a trading account, it is advised to check the services offered by different providers so that you find the one that is most suitable to your style of investing and trading online. Following are some of the benefits of the trading account with zero brokerage:

  • Investors having a trading account with zero brokerage need not worry about the size and volume of the trade
  • The chances of profitability are higher because the break-even point for a trading account with zero brokerage is lower
  • A pure zero brokerage trading account is transparent and does not have any hidden charges
  • Investors can engage freely on all major exchanges in India
  • No pesky persuasion by relationship managers to increase the trading volume so the broker can benefit from a higher brokerage
  • The procedure to open a trading account with zero brokerage is easy and hassle-free
  • When you are trading online with your zero brokerage account, the fund transfer to and from your account is seamless
  • If the investors get stuck somewhere, the stockbrokers offer instant phone and email support.

Parting Words

When you're searching for a zero balance or brokerage Demat account, you must go through all the documents, which include all the fine print. You must also compare the plans that are provided by various brokers in the market. Also, don't forget to compare the pricing of these accounts before you make the final call.


Chandresh Khona
Team Espresso

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