Online brokerage firm Zerodha’s Chief Executive Officer (CEO), Nithin Kamath, in his recent social media post on platform X, explained the depository participant (DP) charges that companies impose on stock market investors when they sell their holdings.
Nithin Kamath said that every time an investor or trader sells their holdings, the Depository Participant (DP) is the one which clears the settlement of the trades, from debiting the shares from the demat account to delivering them to a clearing corporation.
“When you sell stocks, your shares are debited from your demat account and delivered to the clearing corporation for settlement. This debit is what attracts a DP (Depository Participant) charge,” said Kamath in his post.
What are depository participant (DP) charges?
Depository participants (DP) are SEBI-registered entities like banks, financial institutions, among others, which serve as intermediaries between the depository and the investors in India.
According to Bajaj Finance data, DPs offer services to facilitate seamless and efficient trading and settlement of securities, offering services like holding and transactions of securities in electronic form.
In his post on X, Nithin Kamath explained that most brokerage firms charge a flat depository participant (DP) fee to investors, but some companies charge a percentage of the selling value of the holdings.
Sharing an example, Kamath said that a 0.04% DP charge will be ₹400 on a ₹10 lakh sale of a stock through a brokerage firm. He highlighted how a low brokerage charge combined with a high DP charge does not make sense for an investor.
What should investors watch out for?
Zerodha chief also said that stock market investors should watch out for brokerage firms charging DP fees on every selling transaction. Giving an example, he said that if someone sells a company share four times in one day, they are charged the fee every time.
“Another thing to watch: some brokers charge DP fees on every sell transaction. If you sell Reliance 4 times in a day, you pay 4 times. At Zerodha, we charge DP fees once per stock per day, no matter how many times you sell it,” said Nithin Kamath.
Kamath highlighted that Zerodha charges ₹13.5 + GST charges per transaction (which includes a ₹3.5 depository fee) to the clients using the online broking platform.
“DP charges don’t show up like brokerage does, so most people miss it. It’s worth checking what you’re actually paying. These things add up,” said Kamath.
This fee, which is charged for the depository participants, is combined with a charge on top by the brokerage, which, as per Nithin Kamath, becomes an additional risk.
Read all stories by Anubhav Mukherjee
Disclaimer: This story is for educational purposes only. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
