Nithin Kamath: Brokers Could Become Mere Order Processors

Nithin Kamath, the co-founder of Zerodha, foresees a significant shift in brokers’ roles shortly, potentially reducing them to mere order processors.

This prediction comes as he lauds the Securities and Exchange Board of India (SEBI) for its efforts to make Indian markets more investor-friendly.

Kamath shared his thoughts on social media platform X (formerly Twitter), stating, “The reduction in the AMC is, in a way, a result of the gradual reduction in a broker’s role. In the not-so-distant future, I wouldn’t be surprised if all the brokers do is just process orders.”

Nithin Kamath Highlight’s SEBI Regulatory Changes:

Kamath highlighted several changes introduced by SEBI since 2019 that have reshaped the broker’s role. Notable changes include:

• Segregation of Client Funds: Ensuring client funds are kept separate from broker funds to enhance transparency and security.
• Compulsory Quarterly Bank Reconciliations: To maintain accuracy and accountability, brokers must now perform quarterly reconciliations of bank accounts.
• Elimination of Fund Pooling for Mutual Fund Transactions: This change prevents brokers from pooling client funds for mutual fund transactions, ensuring direct transactions.

Nithin Kamath Talks about Direct Payout of Securities:

Kamath emphasized the latest regulation concerning the direct payout of securities to investor demat accounts upon purchase.

When investors buy securities, they are credited to the broker’s pool account before being transferred to the client’s account.

The new regulation mandates that clearing corporations directly transfer securities to the client’s account, bypassing the broker’s pool. Kamath noted, “This also eases operations at a broker’s end.”

Increase in BSDA Limits:

Another significant upcoming change is the likely increase in the limit for Basic Services Demat Accounts (BSDA) from ₹4 lakh to ₹10 lakh.

Kamath remarked, “Another move which will most likely be introduced is around increasing the limit for a Basic Services Demat Account (BSDA) from the current ₹4 lakh to ₹10 lakh. So, investors will pay 0 or reduced AMC on their demat accounts with holdings up to ₹10 lakh.”

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