A brokerage agent or brokerage agent company charges a fee to facilitate transactions between buyers and seller. This fee is levied on sales, purchases, delivery or advisory services on these transactions.In a traditional brokerage system, the broker charges a brokerage fee for every time an investor places a trade. The amount of the brokerage varies depending on the size of the trade. For example, if an investor buys five lots on of a stock, he would be charged five times more than what he?d be charged for one lot of the same stock. The zero brokerage model changes this concept.
The broker can eliminate his scaling charges by offering zero brokerage on equity delivery trading and charging a flat fee for every order traded, or a small percentage in case of orders that are very small.
Advantages of zero brokerage
1. A zero brokerage account can come at a lower price than a traditional brokerage account offered by many agents
2. There is lesser discrepancy between the amount charged for a trade of a smaller quantity or a larger trade
3. Lesser overhead costs to brokers due to online share trading facilities translates into lesser costs being transferred to investors
How it works
A zero brokerage account opened at an agency of stock brokers charges a flat fee of a pre-determined amount per executed order. This ends up in saving around 90% of the brokerage fee you would pay to a traditional broker. It is easily calculated by multiplying the number of trades with the fixed brokerage to find out the total amount payable. Taxes charged on the brokerage are also not as much as the brokerage itself. Most brokers that offer this facility are listed on all the main exchanges in India, and an investor can easily trade in them. However, since a majority of them are provided online, advice and investment suggestions are hard to come by. Some brokers may also have some hidden charges, and an investor must look into this and gather full information before choosing a brokerage to operate their trading account with. For a more experienced investor, a zero brokerage account is ideal.
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