The stock brokerage industry is broadly divided into 2 sub segments – Traditional Full-Service brokerages and Low-Cost Discount Brokerages. Samco Securities is one of India’s best discount brokers, as awarded by CNBC! Open a free online discount brokerage account and get unlimited cashback for 1st month!
What is a discount broker?
A Discount broker is a Stockbroker who executes buy and sell orders at a extremely low or flat brokerage as compared to traditional brokers who charge a percentage of the transaction size. Discount brokers can provide similar services or better in some cases because they leverage technology, do not invest in branches and use digital platforms to fulfil customers needs and pass on all the cost saved to the customer in form of a reduced brokerage commission.
Since the brokerage charges are low or discounted, they are termed as discount brokers. Samco is one of the leading discount brokers in India.
Discount brokers have evolved over years and provide service which are at par or better in some cases from traditional brokers. Discount brokers are targeted towards self directed traders and investors. They also offer a lot of training material and videos to help customers learn and invest.
How did the concept of discount broking emerge?
On 1st May, 1975, the SEC (Securities Market regulator) in the US permitted free market commission rates for stock trading transactions. Enter - Charles Schwab which aligned it’s business to the new regulations and went on to setup one of the World’s discount brokerage firms.
How do discount brokerages like Samco charge fees and how are they different from traditional full service brokers?
Discount brokers like Samco charge a flat fee on the number of transactions or executed orders unlike full service brokers who charge a fee on the value of each transaction.
Let’s take an example to explain this better. Let’s say you wanted to place an order for 1000 units of NIFTY Futures and your friend wanted to place an order for 5000 units of NIFTY Futures. You both called your broker-dealer who placed the order which got executed. The amount of effort required for your broker-dealer to place the order does not change for a 1000 unit or 5000 unit order yet the brokerage charged would be Rs. 2,400 (For you) and Rs. 12,000 (For your friend). Despite the amount of effort involved being the same – your friend paid 5 times the brokerage that you paid and you paid 120 times the brokerage that would have been paid by a Samco Client.
In Today’s technology driven world, the cost of executing transactions for a broker is extremely low and discount brokers like Samco have unbundled complex brokerage services to pass on the cost benefits to customers by lowering the brokerage costs per transaction.
Benefits of Samco’s discount brokerage services!
What are the service differences between discount brokers v/s full service broker?
Unlike a full-service traditional broker, Samco doesn’t offer a dedicated relationship manager.
Here’s a comparison table between discount brokers like Samco v/s traditional full-service brokers
|Comparison between discount brokers and full-service brokers|
|Service aspect||Samco – A Discount Broker||Traditional Full service brokers|
|Brokerage Calculation Method||Flat Fee Trading irrespective of order value||Percentage Brokerage applicable on value of transaction|
|Options Brokerage||Applicable on Executed Order – Flat Rs. 20 per order. Irrespective of quantity traded – 7500 or 75, brokerage shall be flat Rs. 20 only.||Applicable per Lot - usually Rs. 20 per lot. So if 7500 quantity of NIFTY is traded i.e. 100 lots, brokerage would be Rs. 2000/-|
|Brokerage Charges||In case of small trades, brokerage applicable is 0.2% (Delivery) / 0.02% (Intraday or Derivatives) or Rs. 20 – Whichever is lower||Minimum per share or Per Transaction Value: Usually have a minimum per share charge or minimum fee per contract|
|Margin Policies||Standardised margin policies||Relationship-based Margin Policies - Adhoc margin policies that vary from client to client|
|Branches||No Branches Available||Branches are available for offline physical support|
What is an Executed Order and how do I get charged in case of trading with Samco?
We are often asked – how does Rs. 20/transaction (or Per Executed Order) work. What happens in case of multiple trades for a single order? What if an order doesn’t get traded at all – do I still get charged? How do brokerage charges apply with discount brokers in India?
- An Order which gets executed either fully or partially is called an executed order. It doesn’t matter if an order of 900 Nifty for executed in 12 trades of 75 units each. It still counts as one executed order since it was only one order that got executed in multiple trades. With Samco, irrespective of the number of trades that get generated, you get charged per ORDER only! Understand the mechanics of this on our post on how share trading works.
- If your order doesn’t get traded at all, that means it’s not an executed order. Since it’s not an executed order, you do not get charged at all.
How does Samco operate its business model and survive with such a low brokerage fee?
Samco is a technology driven business model with technology at the forefront of its business operations. Our constant endeavour and vision is to be the best online discount broker in India and continuously drive fintech innovation to enhance a customer’s wealth creating and trading experience. In the process, we have built a lean, agile and dynamic customer-centric organisation with low overhead costs (such as branches, expensive relationship managers, etc) which allows us to operate at low costs and be profitable even by offering these low brokerage charges. Also one of the largest costs for a traditional full-service broker are commission expenses that are paid to intermediaries like Authorised Person or Sub-Brokers. In an increasingly online world, access to the markets for customers is now direct and this direct access has allowed us to eliminate the intermediation costs of offering these services and completely pass on the benefit to the customer.