Diversification key as broking revenues feel policy pinch, says Crisil

Proprietary players’ revenue plunged about 25 per cent in H2FY25 versus H1, recovering only modestly in H1FY26 as volumes stabilised

Diversified broking firms are better placed to withstand the impact of regulatory curbs and the Budget’s proposed hike in securities transaction tax (STT) on derivatives than traditional brokers and proprietary traders, Crisil said in a report. 

Analysing 25 broking firms across FY25 and the first half of FY26, the rating agency found that players with a higher share of non-broking income, such as distribution fees, wealth management, investment banking and interest from margin trading, have been relatively insulated from the drop in market activity. In contrast, firms dependent largely on transaction-based revenues have seen a sharper impact as volumes cooled. 

The average daily turnover (ADTO) across capital market segments declined about 25 per cent in the second half of FY25, reflecting the impact of regulatory measures and weaker trading activity. Consequently, industry revenue fell around 6 per cent year on year in the first half of FY26.

“The analysis of 25 players … shows that entities with diversified revenue streams have typically navigated market fluctuations adeptly, while entities where transaction broking fees or proprietary trading business constitutes the predominant share of revenues, have faced decline in revenue during such periods,” Crisil Director Malvika Bhotika said. 

The pressure has been particularly severe for proprietary trading firms. Crisil’s report shows proprietary players’ revenue plunged about 25 per cent in H2FY25 versus H1, recovering only modestly in H1FY26 as volumes stabilised. “With the regulatory measure of reducing weekly expiry products resulting in fewer arbitrage opportunities, proprietary players saw revenue drop 25 per cent … Going ahead, the proposed hike in STT could have a higher impact on proprietary traders, including high-frequency traders and arbitrageurs, who account for 60 per cent of the market volume,” said Prashant Mane, Associate Director, Crisil. 

The government’s 2026-27 Budget proposed raising STT on futures to 0.05 per cent from 0.02 per cent and lifting STT on options, premium and exercise, to 0.15 per cent (0.1 per cent/0.125 per cent), a move market participants warned would make derivatives trading costlier and could reduce liquidity and turnover.

Past interventions

Those tax changes follow several SEBI interventions over the past 18 months aimed at curbing speculative activity and strengthening market stability, including removal of cross-margin benefits on expiry days, limits on weekly derivative products and upfront collection of option premiums. SEBI’s October 2024 circular and subsequent implementation timelines have already altered the trading landscape and reduced arbitrage windows.

Crisil said many brokers have started reworking business models, by boosting fee and interest income, and expanding distribution and wealth businesses, but warned that the ability to fully reshape revenue mixes will determine which players emerge stronger.

Published on February 10, 2026