Business News: Zerodha, one of the largest brokerages in India, believes that the upcoming regulatory framework for index derivatives may come into effect “sometime in the next quarter,” potentially causing a 30-50% drop in the company’s revenues. In a blog post marking the brokerage’s 14th anniversary, Nithin Kamath, Zerodha’s founder and CEO, stated they are preparing for a major revenue decline this year due to several regulatory changes, including the new framework for index derivatives and the Securities and Exchange Board of India’s (SEBI) true-to-label circular. Overall, the company anticipates a revenue impact of more than 40-60%.

The true-to-label circular, effective October 1, mandates that stock exchanges charge uniform fees to all trading members, eliminating discounts based on volume or activity. Kamath estimates this change alone could reduce Zerodha’s revenue by 10%. Meanwhile, the regulatory framework for index derivatives is still under consultation but is expected to be implemented soon.

SEBI’s July 30 consultation paper proposes measures to enhance market stability and protect small investors, such as increasing contract sizes, collecting upfront options premiums, and reducing the number of weekly contracts.

Additional challenges highlighted by Kamath include stricter rules around referral programs, which will now only allow payouts to Authorised Persons (APs), reducing the pool of people eligible to refer customers. This could slow growth. Furthermore, changes to demat account limits for basic accounts (BSDAs) could result in reduced account maintenance fees for a larger number of investors.

The increase in Securities Transaction Tax (STT) from October 1 will also have a notable effect on futures trading, although the impact on options trading is expected to be minimal.