Zerodha May Start Charging for Equity Delivery Trades After Derivatives Curbs Slash Revenue — What Investors Should Know

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Zerodha is weighing its first-ever brokerage charges on equity delivery trades after regulatory curbs on derivatives reduced its brokerage revenues by 40% in the latest quarter. Founder Nithin Kamath says the changes to options rules, higher STT, removal of fee rebates and a slowdown in activity have crystallised a revenue risk that may force a business pivot.

Zerodha, the discount broker that pioneered zero brokerage on equity delivery trades in India, is signaling a major shift. Founder Nithin Kamath revealed that regulatory action on derivatives has reduced brokerage revenues by 40% in the latest quarter and warned that if regulators move to end weekly options trading, the firm may be forced to start charging for equity delivery trades for the first time in its history.

What changed: the regulatory squeeze on derivatives

According to the company, a combination of measures has hit revenues since October 2024:

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• Higher securities transaction tax (STT) on options
• Reduction in weekly expiries for options
• Removal of exchange fee rebates
• A broader slowdown in market activity

These moves have disproportionately affected income derived from options and other derivatives, a long-standing revenue pillar for discount brokers. Kamath noted that this risk has now crystallised and that the industry relied heavily on options trading volumes in prior years.

Why equity delivery charges would be a big deal

Zerodha launched in 2010 by offering zero brokerage on equity delivery trades, forcing incumbents to dramatically cut fees. Charging for delivery would represent a fundamental pivot in its business model and could reshape the retail broking landscape.

Some reasons this would matter:

• Price sensitivity: Many retail investors have built habits around cheap or free delivery trades. Introducing charges could change trading and investing behavior.
• Competitive dynamics: Most competitors already charge for delivery trades, but Zerodha’s move would mark the end of a widely recognized market differentiator.
• Derivatives dependencies: If weekly options are curtailed or ended, revenue streams currently subsidizing low-cost delivery could evaporate.

How big is the problem for Zerodha?

Kamath said regulatory restrictions slashed brokerage revenues by 40% in the most recent quarter. The broker flagged that higher STT, expiry changes and fee adjustments began impacting results from October 2024. Regulators are also reportedly evaluating whether to end weekly options trading entirely, a step that could further erode derivative-related revenue.

Zerodha’s financial position and diversification

Despite the revenue hit, Zerodha remains financially strong compared with many peers. Key points the company shared:

• Net worth exceeds Rs 13,000 crore (about $1.56 billion).
• Its net worth is more than 50% of the client funds it handles on any given day.
• The firm carries no debt and is privately held, which the founder says means it has ‘more skin in the game than any other broker in India’.

Beyond broking, the firm is diversifying through Rainmatter, its investment vehicle. Rainmatter is expanding past fintech into climate, health, media and deep tech investments. On its 15th anniversary, the company also launched a Rs 100 crore Zerodha Rewilding Fund, beginning with an 800-acre restoration project in Maharashtra’s Tadoba region in partnership with the state forest department and NGOs.

New product traction: the Margin Trading Facility (MTF) launched nine months ago has already captured around 5% market share with a Rs 5,000 crore book, showing Zerodha is building alternate revenue sources.

Industry and investor implications

If weekly options are reduced or eliminated, expect several knock-on effects:

• Discount brokers could see a sustained revenue shortfall, prompting fee changes on the retail side.
• Retail trading behavior may shift away from high-frequency derivatives strategies toward longer-term delivery investing or other instruments.
• Smaller or highly leveraged brokers might be more vulnerable to prolonged revenue declines.

Zerodha has also noted a slip in its share of the exchange’s active client base, which the firm partly attributes to rivals using aggressive notifications and ‘dark patterns’ to nudge trading activity — tactics Zerodha says it avoids.

What retail investors should consider now

• Review trading costs: If brokers begin charging for delivery trades, recalculate the cost of your typical trade sizes and holding periods to determine the impact on returns.
• Revisit strategy: High-frequency or lottery-like options trading was a significant driver of volumes. Investors should reassess whether their strategies are sustainable under a higher-fee regime.
• Watch regulatory developments: Any formal decision on weekly options would have immediate market implications. Stay informed through official exchange and regulator announcements.
• Consider broker strength: Financially robust brokers with diversified revenue — and no debt — are better positioned to manage shocks without abrupt service or fee changes.

Frequently asked questions

Is Zerodha definitely going to charge for equity delivery?

Not yet. The company said it would be forced to start charging if regulators end weekly options trading and derivative revenue falls further. For now, this is a potential outcome tied to regulatory developments.

Why do options rules affect delivery brokerage?

Many discount brokers built low-cost delivery offerings while generating significant revenue from derivatives trading, particularly options. When derivatives revenues shrink due to policy changes, brokers may need to offset the shortfall by introducing or increasing fees in other areas.

What can investors do to prepare?

Assess trading costs, consider longer-term investment approaches for delivery trades, and monitor announcements from brokers and regulators. Shifting some activity to tax-efficient or lower-fee instruments may be warranted depending on individual goals.

Conclusion

Zerodha faces a pivotal moment. Regulatory curbs on derivatives have already dented brokerage revenue sharply, and a further tightening — especially elimination of weekly options — could force the company to abandon its landmark zero-brokerage delivery model. For investors and the broader broking industry, the coming months will be important as policy decisions and broker responses reshape costs and behaviour in India’s retail markets.

Note: This post summarizes company statements and reported changes to derivatives rules and market conditions. Investors should confirm details and consult financial advisors before making decisions.

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