Discount brokerage is an online share broking system with low charges. Normally, they charge per each order instead of percentage commission. Traditional brokers charge 0.25 % to 0.5 % in India.But,the discount brokerages normally charge Rs.20 per order.For an example, traditional broker charge Rs.500 for Rs.10 lac intraday share purchase.But, a trader at discount brokerage pay Rs.20 per order and Rs.60 for 3 orders.Anyway, the difference in cost is very high.This is the reason of popularity of discount brokerages all over the world. In united states, TD Ameri trade, Etrade and Interactive brokers lead the discount broking system.
Comparing with conventional brokers,branch network of discount brokerages are very less.They do not offer allied services such as the Research, IPO, Insurance or Mutual funds.They cater clients with online platforms, advanced softwares and charting tools.Factors such as Less Employee strength, centralised services and advanced technology help them to reduce cost.Most of the discount brokers offer trading account only.They make tie up with other depository participants to provide Demat account.Traditional brokers charge advanced brokerage for low cost plans. but,discount brokers does not demand any turnover commitments. I think, discount brokerages are highly cost efficient for big intraday traders or delivery traders with huge volume.Now a days, conventional brokers are struggling in business due to the high branch cost and tough competition.
In India,Zerodha has introduced the discount brokerage system with pay per order business model since 2010.Today,their average daily volume is over 3000 crores.Now, brokers such as RKSV,Trade Gini, VNS finance, Composit edge etc offer discount brokerage system.Other Charges such as annual maintenance charge and transaction taxes are almost same among both conventional and discount brokers.
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