Zero brokerage trading is the recent trend in the financial market which is a new way of running the brokerage business. It has eliminated the traditional brokerage models and also the scaling charges related to it. Basically, the zero brokerage trading model is a unique model that offers no brokerage on Equity delivery trading which is very appealing to the investors. It works by charging a flat fee per order traded.Companies have offered this option as an incentive to more people to participate in the Indian equity market.
How does it work?
In a traditional brokerage, a certain amount known as the brokerage fees, is charged on every trade that you make, depending on the size of the trade. For example; If you trade 20 lots of Security A on NSE, you will pay 20 times as much as when you trade 1 lot of Security A on the NSE. This model is disadvantageous to all investors, big or small, as they end up paying a steep fee for the volume that is involved in share trading.
In a zero brokerage model, a flat fee is charged by the stock broker to the customer for all trades, regardless of volume traded. In some cases when the size of the trade is very small, a percentage of the trade is charged as brokerage, as opposed to the flat fee. The main advantage of this to the investors is a lesser cost of trading which may also encourage more trading activity and turn beneficial to the brokerage company. Therefore, you can trade an unlimited amount for a fixed monthly fee paid at the beginning of the month to your broker.
The main disadvantages to this sort of an account are the fact that there exists no personal touch as most zero brokerage account givers work as online trading companies. No investment advice is provided and the withdrawal procedure is complicated.
Zero brokerage accounts offer account opening across many different segments including the BSE, NSE, MCX, NCDEX etc.Besides just equities, zero brokerage plans are available for options trading, and even derivatives trading in India (one-time life fees for some accounts).
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