Zerodha Commodity Trading Review

Zerodha is a popular stockbroker in India known for its low-cost and user-friendly trading platforms. Apart from equity and mutual fund trading, Zerodha also offers commodity trading services. Here is a review of Zerodha commodity trading offerings and explore the charges, trading app, market timings, margins, settlement, fund transfers, and account closure.

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Zerodha Commodity Account Opening

Zerodha offers fee-free trading in Equity Delivery and Direct Mutual Funds, making it an attractive option for investors. For Intra-day and F&O trades, there is a flat fee of Rs 20 per trade. Opening an account with Zerodha incurs a charge of Rs 100. To trade in commodities, you must activate the Zerodha Commodity Trading segment by submitting a request.

However, commodity account opening is only available to existing Zerodha Equity account holders or those opening an Equity trading and Demat account alongside a Commodity trading account. Existing customers can enable the Commodity trading segment online by paying Rs 100. New customers must open an Equity trading and Demat account, with online account opening costing Rs 200 and a Demat account maintenance fee of Rs 300.

Check out Zerodha Charges – Account Opening Charges, Account Maintenance Charges etc.

Zerodha Commodity Account Opening Process

To begin the process of signing up with Zerodha, start by visiting its website.
Locate and click on the “Sign up now” button.
You will be prompted to enter your mobile number, after which you should click on “Continue.”
An SMS with a 6-digit OTP will be sent to your mobile number. Enter this OTP and click on “Confirm” to proceed.
Next, you need to verify your email address by entering another 6-digit OTP sent to your email.
After verifying your email, provide your PAN number and date of birth, and then click on “accept and Continue.”
Proceed to pay the account opening fees.
Enter your Aadhar number and grant Zerodha permission to access your Aadhar details.
Following this, input your bank account details. To complete the online In-Person verification (IPV), you will need to write down the displayed OTP, hold it in front of a camera, and proceed as instructed.
Upload all the necessary documents, including Aadhar card, PAN card, canceled cheque, signature photo proof, and Income proof (only mandatory for derivatives trading).
Once you have completed the document uploads, proceed with the E-sign using Aadhar. Take the time to review the account opening form before clicking on “Sign Now.”
If you are an existing customer, you may need to activate Zerodha MCX as well.

Zerodha Commodity Charges

Zerodha’s MCX charges for commodities trading encompass account opening charges, brokerage charges, regulatory transaction charges, and taxes. For commodity futures, the account opening charge is Rs 100, while the brokerage is either 0.03% or Rs 20 per executed order, whichever is lower.

Commodities Transaction Tax (CTT) applies at a rate of 0.01% for non-agri products on the sell side and 0.05% for commodity options. Exchange transaction charges vary for different groups and commodities. There is no brokerage for commodity options.

Additionally, a GST of 18% is applicable on the sum of brokerage and exchange transaction charges. SEBI charges stand at Re 1 per crore for agri products and Rs 5 per crore for non-agri products. Stamp duty charges amount to Rs 200 per crore on the buy side, and there is a call and trade facility charge of Rs 50 per order.

Zerodha Commodity Trading App

Zerodha provides MCX trading services through their user-friendly Zerodha Kite App and web platform, which are also used for Equity and Currency trading. The convenience of using single trading software for all these asset classes makes it easier for traders. Moreover, the login credentials for Zerodha Commodity account remain the same as those for the Equity trading account, enabling seamless access to the Zerodha Kite platform using the familiar Zerodha User ID and password.

It is worth noting that to engage in commodity trading with Zerodha, customers must also have or open an Equity trading and Demat account in addition to a Zerodha Commodity Trading account.

Check out our Zerodha Kite Review.

Zerodha Commodity Trade Classification

In accordance with the recent guidelines from the Securities and Exchange Board of India (SEBI), MCX (Multi Commodity Exchange) is required to submit the trader classification of each participant in the commodity market, categorizing them based on specific criteria specified by SEBI.

Consequently, Zerodha, as a brokerage firm, mandates that every client declares their trader category for each commodity within Zerodha Console. It is essential for each client to provide this declaration; otherwise, their Zerodha Commodity Trading activities will be suspended.

The trader categories available for selection include:

Value chain participants of the particular commodity,
Farmers / Farmers Producers Organizations (FPOs),
Domestic financial institutional investors (DII),
Proprietary traders,
Foreign participants and others.

Additionally, the commodity trader classification has been incorporated into the Commodity account opening form to ensure compliance and accurate categorization.

Zerodha Commodity Market Timing

The commodity market timings are generally longer than equity markets. For cotton, CPO, and kapas (cotton), the market is open from 9 am to 9 pm. Other non-agri products have extended trading hours from 9 am to 11.30 pm, except during daylight savings when the market closes at 11.55 pm. Agri products have shorter trading hours, open from 9 am to 5 pm.

Zerodha Commodity Settlement

Zerodha Commodity Trading platform, does not offer physical delivery of commodities. Therefore, before the delivery period begins, users must close their open positions in Zerodha Commodity.

During this period, buyers and sellers express their intention to take or give delivery of their open positions. Commodity options contracts have two possible outcomes on the expiry day. A close-to-money contract is devolved into the respective futures contract if clear instructions are given; otherwise, it expires worthless.

An in-the-money contract is automatically converted to a futures contract unless no match is found, resulting in cash settlement. An out-of-the-money commodity options contract simply expires worthless. Adequate margins must be maintained to ensure conversion to futures contracts, or Zerodha will square off the positions.

Zerodha Commodity Fund Transfer

Zerodha follows SEBI regulations by maintaining separate bank accounts for Equity and Commodity trading. Funds cannot be transferred or adjusted between these accounts.

To trade or meet margin requirements in Commodities, users must transfer funds to ZERODHA COMMODITIES PRIVATE LIMITED MCX account from their linked bank accounts.

Transfers can be made via UPI, instant payment gateway (charges Rs 9 + taxes), or net banking (no charges from Zerodha, but bank charges may apply).

Zerodha offers online withdrawal through Zerodha Console and Zerodha Kite, with commodity withdrawals processed on weekdays at 8 AM, taking up to 24 hours for funds to be credited. Withdrawal requests made after the cut-off time are processed the following day.

Check out Zerodha Account Closure Process 2023.

Zerodha Commodity Account Closure Process

Prior to initiating the Zerodha Commodity Trading account closure process, it is essential to verify that there are no pending dues on your Zerodha Commodity Trading account.

To close your Zerodha Commodity Trading account, you have two options: online or offline.

Zerodha Commodity Account Online Closure Process

To close your Zerodha Commodity Trading account, follow these steps:

Download the account closure form for Zerodha. Open the form using any text editor.
Locate the section that mentions Zerodha Commodities Private Limited and select it.
Access Digio, the e-sign application provider used by Zerodha for secure e-signatures.
Log in to your Digio account.
Upload the downloaded account closure form by clicking on “Add document.”
Look for the sign icon within Digio and click on it.
Provide your VID (Virtual ID) and click on “Send OTP.”
Check your registered mobile number for the OTP (One-Time Password) and enter it into Digio.
This completes the e-sign process. Download the digitally signed form.
Raise a ticket with Zerodha to submit your account closure request, attaching the downloaded and digitally signed form.

Zerodha Commodity Account Offline Closure Process

To close your Zerodha Commodity Trading account, please follow these steps:

Visit the Zerodha website and navigate to the Downloads and Resources section.
Locate the Zerodha Commodity Trading Account deactivation/closure form and download it.
Look for the section related to Zerodha Commodities Private Limited and tick the box next to it.
Sign the account closure form.
Prepare a letter requesting the closure of only your Zerodha Commodity Trading account and include the duly signed account closure form.
Address the letter to Zerodha’s head office.
Send the letter and closure form to Zerodha’s head office via a suitable postal service.

Upon receipt of the Zerodha Commodity Trading account closure form, Zerodha typically takes 5-7 working days to process the closure request.

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Conclusion

It is important to be aware that Zerodha does not offer physical delivery of commodities. Zerodha provides its customers with a hassle-free commodity trading experience. This is made possible through its robust trading platform, Zerodha Kite, which offers powerful features and tools. Additionally, Zerodha offers an online fund transfer facility, making transactions quick and convenient. For intraday Zerodha Commodity Trading, customers can avail of margins that allow trades up to 2-2.5 times the available funds.