Broking rates tested new bottoms in the past fiscal, as declining cash market volumes and increased competition among brokers added to the bargaining power of rich and high-volume investors.

?It was a tough year for brokerages as volatile markets kept retail investors away. Broking rates are expected to stay low or dip even further if participation from investors remains low,? said Anshuman Jaswal, senior analyst ? capital market, Celent Securities and Investments. ?The volumes have been dwindling; so it is understandable that in order to prop up volumes and survive in the market, brokerages have had to compromise on rates,? added an analyst who covers the broking sector and didn?t want to be named.

In the last one year, rates for delivery trades for high net worth individuals (HNIs) or those who do high volume trades have on an average fallen from about 15-18 paise (for every R100 traded) to 12-15 paise, said market participants. Delivery rates for retail customers have slipped from an average of about 35 paise to 25-30 paise during the same period. For intra-day trades, high volume customers currently shell out 1.5 to 2 paise as opposed to about 3 paise a year ago, while rates for retail investors have remain unchanged at about 3 paise.

?Broking rates have become more a lot more flexible over the past year; the rates are tweaked depending on the bargaining power of the client,? said a senior broker on condition of anonymity. For instance, although average market rates for delivery trades for HNIs range from 12 to 15 paise, clients often bargain hard during high volume trades, demanding rates as low as 8 paise.

Broking yields have remained under pressure in the past two years as investors shifted to trading in the low-yield options segment, which now contributes over 60% of total volumes on the exchanges. Rates in this segment have remained relatively stable in the past fiscal, varying anywhere between R20 and R100 per lot depending on the quantum of trading and the relationship between customers and their brokers. However, concessions of 30-40% are now given on the day of F&O expiry when volumes see a substantial spike.

Cutthroat competition among brokers in the last 2-3 years has also put pressure on rates. ?There has been increasing competition among brokers in the past 2-3 years, which has led them to slash rates,? said Jaswal. He added that brokers have upgraded their technology platforms, offering features such as mobile trading and ?this in itself had led to reduced brokerages?.

Cash volumes hovered near R10,000 crore for much of the year, except in February and March this year, when volumes rose because of sustained buying from FIIs. Average daily turnover for calendar year 2011 stood at R11,221 crore compared with R14,513 crore and R15,687 crore for 2010 and 2009, respectively.