How Sebi’s new rules can impact the future of discount broking in India

While discount brokers have disrupted the traditional brokerage industry, traditional brokers have also played a crucial role in providing comprehensive services to investors for decades. Traditional brokers offer a wide range of services, including trading in stocks, commodities, currency, asset management, retirement planning, as well as full-time advisory services and investment ideas.

However, SEBI’s recent regulatory changes have mandated brokers to separate advisory services from the broking business, implement risk management policies and increase disclosure requirements, bringing the sustainability of the discount broking model into question. This may lead to potential challenges for discount brokers to sustain their business models as they comply with the new regulations, which could increase compliance costs.

At the same time, SEBI’s new regulations could lead to an increase in demand for traditional brokers. The separation of advisory services from broking business may lead investors to seek out advisory services typically provided by traditional brokers. Traditional brokers are expected to see an increase in demand as investors demand comprehensive services with personalized, long-term investment strategies, including full-time advisory services and investment ideas.

Regulatory changes also provide a level playing field, ensuring the industry remains fair, ethical, and transparent, and investors are protected from unauthorized trades. By enforcing risk management policies, mandating disclosure requirements, and separating advisory services from broking business, regulators are ensuring that the industry remains stable in the long-term.

In conclusion, both discount and traditional brokers play a crucial role in the Indian stockbroking industry. While the agility and cost-effectiveness of discount brokers have disrupted the traditional brokerage industry, the latter has been providing comprehensive services to investors for decades. The regulatory changes provide a level playing field for all players in the market and protect investor confidence in the market. The industry is expected to continue to evolve and innovate, meeting the changing needs of investors.

(The author is MD of Choice International Ltd)(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)