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Hidden Trading Costs: Nithin Kamath's DP Charge Warning
23 Feb
Summary
- DP charges can significantly increase trading costs.
- Some brokers charge fees as a percentage of sell value.
- DP fees are often less visible than brokerage fees.
Nithin Kamath, co-founder of Zerodha, has cautioned investors to scrutinize Depository Participant (DP) charges, as these hidden fees can substantially inflate trading expenses.
Kamath explained that DP charges arise each time shares are sold and debited from a demat account for settlement. While Zerodha charges a flat Rs 13.5 plus GST per transaction, some brokers apply a percentage of the sell value. For instance, selling shares worth Rs 10 lakh at a 0.04% rate incurs Rs 400 in DP charges for a single trade.
This practice can negate the appeal of low brokerage fees. Furthermore, some firms charge DP fees on every sell transaction, even for the same stock multiple times a day. Kamath highlighted that such charges, often less visible than brokerage, can significantly impact investor returns over time, especially for active traders.
