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How do discount brokers earn? – Complete Explanation

Post Date : July 18, 2023

How do discount brokers earn?

Here are the ways in which discount brokers earn in India :

1. Commissions: Discount brokers in India typically charge a flat fee of Rs. 10-20 per executed order (Pay a flat fee of 9 per executed order). This means that they charge the same amount, regardless of the size of the trade. For example, if you buy 100 shares of a stock at Rs. 100 per share, you will be charged Rs. 200 in commissions.
2. Interest: Discount brokers in India also earn money by investing the cash that their clients hold in their accounts. They typically earn a small amount of interest on this money, which they can then use to offset their operating costs.
3. Payment for order flow: This is a newer way that discount brokers in India earn money. It involves selling their customers’ orders to market makers, who then execute the orders on the exchanges. The market makers pay the discount broker a fee for this service, which is how the broker earns money.
   

Here is an explained example of how a discount broker in India might earn money:

1. You place a trade to buy 100 shares of ABC stock at Rs. 100 per share.
2. The discount broker charges you a commission of Rs. 20 for the trade.
3. The discount broker then invests the Rs. 10,000 that you used to buy the stock.
4. The discount broker earns interest on the Rs. 10,000.
5. The discount broker also sells your order to a market maker, who executes the order on the exchange.
6. The market maker pays the discount broker a fee of Rs. 5 for this service.

In this example, the discount broker would earn money from the commission, the interest, and the payment for order flow.

It is important to note that not all discount brokers in India earn money in the same way. Some brokers may charge a higher commission, but they may also offer other services, such as research or investment advice. It is important to compare different brokers before you choose one, so that you can find the one that best meets your needs.

Are discount brokers free?

No, discount brokers are not free. They typically charge a flat fee per trade, which can range from ₹20 to ₹50. However, some discount brokers offer free trading on certain types of securities, such as stocks and ETFs.

What is rs 5 per lot brokerage? 

A lot brokerage of Rs. 5 is a very low rate that is typically offered by discount brokers. A lot is a fixed number of shares that are traded together, and the number of shares in a lot varies depending on the stock. If you are a trader who makes a lot of trades, then this low brokerage rate can save you a significant amount of money. However, if you are a more casual trader, then you may not need the lowest possible brokerage rate.

What is flat 20 RS brokerage?

Flat 20 RS brokerage means you pay ₹20 per trade, regardless of the value of the trade. This is a very cost-effective way to trade stocks, especially for investors who trade small volumes. However, it is important to be aware that discount brokers typically do not offer as much research or personalized advice as full-service brokers

Here are some factors to consider when choosing a broker with low charges:

1. Commissions: The most important factor to consider is the broker’s commissions. Make sure to compare the commissions for different types of trades, such as equity delivery, intraday, and futures.
2. Account opening fees: Some brokers charge an account opening fee, so be sure to factor this into your decision.
3. Other fees: Some brokers also charge other fees, such as fees for margin trading or research. Be sure to read the broker’s fee schedule carefully before you open an account.

Conclusion :- 

In conclusion, there are a number of ways that discount brokers in India earn money. These include commissions, interest, and payment for order flow. It is important to compare different brokers before you choose one, so that you can find the one that best meets your needs.

If you are looking for a low-cost broker, RMoney is a good option. They charge just Rs. 9 per trade, which is one of the lowest rates in India. They also offer a variety of other features, such as a user-friendly trading platform and access to research reports.

When choosing a discount broker, it is important to consider your needs and preferences. If you are a high-volume trader, you may want to choose a broker with lower commissions. If you are a more casual trader, you may be willing to pay a slightly higher commission for a broker that offers more research or personalized advice.

No matter what your needs are, there is a discount broker in India that can meet them. By comparing different brokers and their fees, you can find the one that is right for you.

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