Stock brokers are meant to provide you with a reliable platform to trade and invest in the market. If your broker is a full-service broker, they should also provide you with research tips and advisory services to help you make better trading decisions.
But are they providing you trading tips for your profit or just to make brokerage by encouraging you to take multiple positions in a day?
If you can relate to this, then it is time to rethink.
Recently, we came across two cases involving the same stockbroker where either the research advisor tips or an app glitch led a trader to pay hefty brokerage fees.
Case 1: Sub Broker Asked to Place Multiple Orders and Charged High Brokerage
This is a case of Anurag (name changed), who opened an account with one of the sub-brokers of a renowned full-service broker. The sub-broker charged him a brokerage fee of ₹50 per trade, while the broker generally charges ₹20 per trade.
When Anurag asked about this difference, they explained it was due to the add-on services of research tips and advisory. Anurag agreed and started using their services.
One day, he received a call from his sub-broker, who provided him with multiple tips on different stocks and options. The sub-broker also instructed him to close these positions after just a few minutes.
Due to these early exits, Anurag was unable to make a high profit but ended up paying ₹22,000 in brokerage fees.
What can be concluded from this?
Did the research analyst of the sub-broker intend to assist his client, or was it done for his own benefit?
The picture is clear: the sub-broker had nothing to do with the client’s profit or loss. He was just trying to meet his brokerage target to earn incentives over his salary.
And this is not the story of one single sub-broker or a stockbroker; almost every big and small stockbroker follows the same path. So, for a retail trader, it is important to stay alert.
There is nothing wrong with following research tips from a registered entity or opening multiple positions, but this should be done when you choose to do so and with a plan in your head of when to stop.
Following someone blindly just because they know better will only lead to your financial losses.
Now, let’s talk about another case.
Case 2: Stockbroker’s App Didn’t Allow to Place a Single Order to Exit
This is a case involving Vikrant (name changed), who was using the app of a renowned stockbroker that charges flat brokerage fees.
He is an experienced trader and generally trades in large quantities.
It was a Bank Nifty expiry day, and he bought the maximum lots (60 lots) of Bank Nifty. Fortunately, he made a profit.
But as soon as he tried to exit, the app didn’t allow him to place an order for 60 lots together. According to the rules, one can take and exit Bank Nifty positions with a maximum lot size of 60 but unfortunately he couldn’t.
Trading more than 60 lots is broken into multiple orders.
This was unusual. He tried different lot sizes but was only able to exit the trade with 20 lots at one time. This eventually reduced his profit.
Now, would you call this an app glitch or the broker’s agenda to increase brokerage charges and reduce the overall profit percentage of the client?
In either case, it was a retail trader who suffered. However there is a provision to file a complaint against stock broker, but incidents like these leave a question: whom to trust and rely upon? If the top and renowned stockbrokers are only thinking about their revenue and profits, where should the retail trader go?
And what steps is SEBI taking? Is SEBI even auditing brokers’ activities? Does SEBI penalized brokers for such cases?
If the market regulator does not consider these parameters, soon there will be a time when hardly any trader trusts or trades in the share market because Even if they make a profit, they will either end up paying high brokerage fees or taxes to market regulators and the government.
