Brokerage house IIFL (formerly India Infoline) on Friday launched its prepaid brokerage product ‘lifetime prepaid, anytime money back’, starting from Rs 10,000. IIFL said customers opting for the prepaid product would pay 25-30% lower (depending on the trade size) brokerage, compared to its other customers who pay per transaction.
In addition, prepaid customers will enjoy free access to the ‘Trader Terminal’, IIFL’s proprietary trading platform which offers the facility to trade across equities, commodities, currency and mutual funds.
IIFL did not give the details of its broking structure, but said in an e-mail response to moneycontrol.com that “normal brokerage rates as prevailing in the market are 0.4 to 0.5% for delivery, 0.04% to 0.05% for futures and intra day and Rs 75 to Rs 100 per lot for options.”
Prepaid broking, first introduced by Reliance Money and then replicated in varying forms by others, has not been a big success. Such an arrangement is more beneficial to high volume traders in the equity derivatives segment, and they form a small portion of the trading community.
Also, brokers point out low brokerage in itself is not an incentive for traders to transact.
“No high volume trader transacts with a single broker; he keeps moving his business across firms which offer him competitive prices,” said a retail broker who did not want to be named.
But IIFL is confident that it can succeed where its rivals have been unable to make much headway.
“There are various versions of such products offered by all large and successful brokers. But always the benefit of low brokerage rate is limited for a short period of say 6 months to one year,” IIFL said in response to a query from moneycontrol.com.
“Secondly unutilized amounts are usually not refunded. Whereas in our new product, the benefit of low brokerage is for life time. Unutilized amounts are refunded whenever customer demands,” it said.
IIFL shares closed at Rs 71.65 on Friday, up 1.5% over their previous close.
Leading retail broking firms have been struggling to grow their brokerage revenues over the past few quarters, even as the stock market was on a roll in 2010. Industry people said most retail investors kept away from the market fearing that they may end up buying at higher levels.
www.moneycontrol.com
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