Maximum Brokerage On Trading
Maximum Brokerage that can be charged for trading done on stock exchanges in India has a upper limit of 2.5%. Although, it is commonly believed that the maximum brokerage limit is fixed by SEBI, this is done by Stock Exchanges. Maximum brokerage that can be charged by its members is decided by concerned exchange and is mentioned in the Bye-Laws of the Exchange. As per NSE and BSE bye laws, brokers on these exchanges can not charge more than 2.5%. This is the maximum a broker can charge from investors who trade in Indian Stock Exchanges.
Statutory levies on Trading
Statutory Levies are the charges that are levied by either Central Government or State Government. These charges are to be collected as per actuals to be payable to Government or Paid. Examples of Statutory charges that are payable on trades are Service Tax, Stamp Duty, Security Transaction Tax (STT), etc.
Regulatory Charges / Levies on Trading
Regulatory charges on trading are charges that are levied by SEBI / Exchanges / Clearing Corporations etc., Examples of Regulatory Charges / Levies are SEBI turnover fees, Exchange transaction charges, etc. These are also to be collected from clients as per actuals paid or payable.
Brokerage charged in Cash Market (Capital Market)
The maximum brokerage chargeable by a Trading Member in relation to trades effected in the securities admitted to dealings on the Capital Market segment of the Exchange shall be 2.5 % of the contract price exclusive of statutory levies. Where the sale / purchase value of a share is Rs.10/- or less, a maximum brokerage of 25 paise per share may be collected.
Brokerage Charged on Futures Contracts
The maximum brokerage chargeable by a trading member in relation to trades executed on the Exchange shall be 2.5% of the contract value exclusive of statutory levies. This limit of maximum is applicable for stock futures, index futures and currency futures. The contract value of future contract is calculated as Lot size * Trade Price. For example if a single lot of Nifty (50) is traded at 6000 then the contract value will be 3,00,000 rupees.
Brokerage charged on Options Contracts
The trading member (Broker) shall charge brokerage for option contracts on the premium amount at which the option contract was bought or sold and not on the strike price of the option contract. For example if Nifty call option of 6000 strike is bought at 10 rupees then brokerage shall be chargeable on 50 (Nifty Lot Size) * 10 (Premium) = 500 but not on total contract value like in futures.
Further, brokerage on options contract can be a maximum of 100 rupees or 2.5% which ever is higher. And this brokerage is chargeable by trading members only for trades executed on exchange. No brokerage should be charged on assigned / exercised or expired option contracts.
Brokerage charged should be mentioned for each trade separately against the trade in contract note to be issued to investors. Regulatory and Statutory charges / levies can be shown as other charges in contract note. This provision of showing other charges should be noted carefully by investors. A breakdown of these Other Charges will reveal that some brokers charge it on higher side than most others. Often, traders do comparison of brokerage and judge who is the lowest brokerage charging broker. But one should take complete picture of charges, taxes plus brokerage while coming to a conclusion to decided best low brokerage broker.