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SEBI Bans Volume-Based Discounts to Enhance Market Fairness

2 July, 20242 min read

The SEBI has recently bans volume-based discounts aimed at ensuring market fairness and transparency.

One of the key directives issued by SEBI is the prohibition of MIIs from offering volume-based discounts to brokers. This regulatory move, slated to take effect from October 1, 2024.


It marks a significant shift in how brokerage services are priced and accessed in the Indian financial markets.

Impact on Market Dynamics

SEBI's decision stems from concerns over the potential impact of volume-based pricing on market transparency and fair access.

By eliminating these discounts, SEBI aims to level the playing field among market participants, thereby fostering a more equitable trading environment.

This move expected to resonate across the financial sector, particularly affecting newer entrants in the brokerage space such as Zerodha, Groww, Upstox, and Angel One.

Challenges for New-age Brokers

The directive could pose challenges for new-age brokers who have thrived under the current pricing structure.

These firms have been able to offer competitive rates to retail investors due to the discounted fees charged by MIIs based on trading volumes.

With the abolition of such discounts, these brokers may face pressure on their profit margins. Also they may face a need to reconsider their pricing strategies to maintain competitiveness in the market.


Regulatory Rationale and Industry Response

SEBI's rationale behind this decision revolves around enhancing market integrity and preventing potential conflicts of interest that could arise from volume-based pricing models.

By standardizing fee structures across all brokers, SEBI aims to ensure that investors receive fair treatment. It also focus on transparency in market dynamics.

Looking Ahead

As the October 1 deadline approaches, stakeholders in the financial markets, including MIIs and brokerage firms, are gearing up to comply with SEBI's directives.

Industry experts anticipate a period of adjustment as market players navigate the implications of these regulatory changes.

For investors, the focus will be on how these adjustments may affect the cost of trading.

Final Words

In conclusion, SEBI decision to bans MIIs from offering volume-based discounts to brokers represents a pivotal moment.

While aimed at bolstering transparency and fairness, the move is poised to reshape the competitive dynamics within the brokerage industry.

It will particularly impact newer players who have relied on discounted fee structures.

As stakeholders prepare for the implementation of these regulations, the broader implications for market accessibility and investor outcomes remain a focal point of discussion.

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