Zerodha's Nithin Kamath praises Sebi: 'Brokers' future role may reduce to just…'

Nithin Kamath highlighted changes like segregation of client funds and compulsory quarterly bank reconciliations for brokers.

Nithin Kamath, co-founder of Zerodha, said that brokers could soon find themselves reduced to being mere order processors as he praised market regulator Sebi for ramping up its efforts to make Indian markets more investor-friendly. In a post on X (formerly Twitter), Nithin Kamath wrote, “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.”

Zerodha CEO Nithin Kamath said that Sebi has introduced a slew of changes that have significantly altered the broker's role since 2019. (X/Nithin Kamath)

Sebi has introduced a slew of changes that have significantly altered the broker's role since 2019, he said, highlighting changes like segregation of client funds, compulsory quarterly bank reconciliations for brokers and elimination of fund pooling for mutual fund transactions.

He explained, “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 observed, “Another move which will most likely be introduced is around increasing the limit for a Basic Services Demat account (BSDA) from the current ₹4 lakh to ₹10 lakh. So, investors will pay 0 or reduced AMC on their demat accounts with holdings up to ₹10 lakh.”