Zerodha ends commission sharing for popular referral program: Here's why
What's the story
Zerodha, a leading stockbroker in India, has announced its decision to discontinue the practice of sharing brokerage revenue for demat account referrals.
This move comes as a response to a recent directive from the National Stock Exchange (NSE).
The new policy will be effective from August 25, 2024.
The NSE's directive is aimed at preventing potential trade inducement that could adversely affect customer interests.
Compliance
Zerodha's response to NSE's directive
In a press release, Zerodha confirmed its compliance with the new NSE regulations by stating, "To comply with the new NSE regulations, we are ceasing brokerage revenue sharing for referrals."
The company also assured that it would continue to award 300 reward points for each successful referral.
These points can be redeemed for various services offered by the brokerage firm.
Regulatory measures
NSE's stance on referral schemes
The NSE, in a circular dated August 14, expressed concerns over unauthorized referral schemes.
It emphasized that only registered and approved individuals should handle client referrals.
"Any person referring a client to a trading member must be officially appointed as an authorized person and must comply with all regulations and codes of conduct," the NSE stated.
This move aims to safeguard investor interests and uphold the integrity of trading practices.
Program modification
Zerodha's referral program to continue in modified form
Zerodha has cleared all existing referral wallet balances exceeding ₹10, due to this regulatory change.
Despite discontinuing the brokerage-sharing aspect, the company will continue its referral program in a modified form that emphasizes reward points.
In a blog post, Zerodha stated it would persist in advocating for the continuation of the referral program and provide updates based on further discussions with exchanges.