All Brokers Will Be Doing Is Just..: Zerodha's Nithin Kamath On SEBI's New Rules Limiting Broker Roles

The BSDA was introduced in 2012 with the primary objective of fostering financial inclusion within the population

Brokers could soon become mere order processors as SEBI intensifies efforts to enhance investor friendliness in Indian markets, remarked Nikhil Kamath, co-founder of Zerodha, on Friday through a social media post. Kamath noted in a post on X that SEBI has implemented several changes that have substantially reshaped the broker's function. He outlined pivotal alterations, such as client fund segregation, mandatory quarterly bank reconciliations for brokers, and the abolishment of fund pooling for mutual fund transactions. 

“Since 2019, SEBI has brought in several changes that have made our markets safer and more investor-friendly. It started with segregation of client funds, compulsory quarterly bank runs on brokers (quarterly settlement), removing pooling of funds for MF transactions, and more,” he wrote.

“The latest regulation is around the direct payout of securities to investor demat accounts upon purchase. Today, when investors buy securities, they're credited by the clearing corporation to the stock broker's pool account, who in turn transfers them to the clients. With the introduction of new regulation, CCs will directly transfer securities to the client's account, bypassing the broker's pool. This also eases operations at a broker's end,” he added.

“Another move which will most likely be introduced is around increasing the limit for a Basic Services Demat account (BSDA) from the current Rs 4 lakh to Rs 10 lakh. So, investors will pay 0 or reduced AMC on their demat accounts with holdings up to Rs 10 lakh. 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 that the brokers will be doing is just processing orders,” he concluded.

The BSDA was introduced in 2012 with the primary objective of fostering financial inclusion within the population. This type of demat account is specifically tailored for individuals who possess only one demat account, wherein they are either the sole holder or the first holder. The BSDA framework ensures that such individuals maintain only one BSDA across all depositories, streamlining and simplifying their investment and trading activities within the securities market.