Since 2019, Sebi has been making changes to make markets safer, investor-friendly: Zerodha's Nithin Kamath

With BSDA accounts, clients may pay zero or much lower account maintenance charges (AMC), which points to a reduction in brokers' role, wrote Zerodha's Nithin Kamath.

The market regulator has been making various changes since 2019 to make the markets safer and more investor-friendly, wrote Nithin Kamath, head of Zerodha, one of the country's largest online brokerages.

On the X platform (formerly Twitter), Kamath elaborated particularly on the regulator's latest intervention of direct transfer of securities to the client's account and on the proposal of allowing Basic Services Demat Account (BDSA) to hold more than double  its current limit.

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On the various regulatory interventions, Kamath wrote, "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 added that the latest appreciable regulation was around the direct payout of securities to investor demat accounts upon purchase. According to him, this will make operations easier for brokers too.

He elaborated, "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."

According to Kamath's post, the proposed increase in holding allowed in BSDA accounts will "most likely" come to pass. Kamath is part of Sebi's Secondary Market Advisory Committee.

With BSDA accounts, clients may pay zero or much lower account maintenance charges (AMC), which points to a reduction in brokers' role. Kamath wrote that, in future,  brokers may just be processing orders.

Currently, BSDA are allowed to hold up to Rs 4 lakh in the account and the regulator has proposed raising that limit to Rs 10 lakh. The Securities and Exchange Board of India (Sebi) on June 5 released a consultation paper on this.

He wrote that the 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".

This will result in investors having to pay zero or reduced AMC on their demat accounts with holdings up to Rs 10 lakh.

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."