This is what made Zerodha number one brokerage firm in India and making Nithin Kamath one of the best business man in India.
Back then in 2008 when I started trading in options segment, I remember I end up paying brokerage of around Rs.100 for every lot I traded with Share Khan. It was so huge.
Then by 2010, I came across a post in a trading forum called Traderji, where people were discussing about a new broker who is providing brokerage for flat Rs.20 or just 0.01% on turnover whichever is lower, irrespective of the capital or volume you trade.
Being a beginner back then, I use to trade every single day multiple times, trying to get in and get out quickly to make some profits. So for me, this was a boon as i can now reduce my transaction cost to greater extent and my break even point is reduced drastically.
Open Free Demat Account Mow @ Zerodha _Click_Here_
I immediately opened my trading account with them in 2010. So are the other 1000s of traders. All they had was a NOW/NEST terminal with IL&FS Demat account, no fancy terminal or charting platform like ShareKhan’s Trade Tiger.
Here’s my contract note with zerodha in 2010, look at the contract note number, its 300, now check the contract note of yours which is generated yesterday. Such a phenomenal growth.
Also Read Easiest Zerodha Review 2021
By introducing the flat brokerage plan, Nithin Kamath completely disrupted the brokerage industry. But many retail brokers like Geojit, Share Khan commented that discount brokers cannot sustain, will soon go bust, cannot provide the robust platform, cannot provide any additional service that can help retail traders, etc etc.
But Zerodha accomplished everything today which these brokers said that cannot be done. Sooner, there were dozen new brokers came in few years down the line, with similar pricing structure as Zerodha, a flat brokerage.
So their pricing power, the one which Zerodha relied upon is no more a edge, since many other new players came in with low fee. But because of first mover advantage, they already captured sizable market share by then.
But Zerodha started focusing on other things which many other broker missed.
Zerodha 60 Days Challenge:
This was the first move which caught many competitors by surprise. Until then, brokers are least bothered about whether you make profit or not. But when Zerodha introduced, it got huge attention from traders community. Every trading forums were talking about it, mainly for two reasons.
- You get back the brokerage money, if you end up in profits after 60 days
- You get a winner certificate, which states you are one among top traders in India
Remember trading is a lonely world, so all of a sudden when you get recognized for the work you do, it feels great. That’s what Zerodha did, it made all profitable trader to feel great and encouraged rest of the struggling traders to make profits.
Of course, this resulted in huge turnover for Zerodha, since many traders made more trades.
In 120 Crore Indian population, very fraction of people are aware about stock market and very marginal percentage of people trader regularly. As a broker, you cannot rely on existing user base, because we know 95% of the retail traders lose money and goes bust within first 3 years, only people who survive more than 3 years gets a chance to become successful.
When every other brokers were focusing on their customer base to provide Trading advisory , stock recommendations etc.
But Zerodha focused on educating other people who do not know anything about trading. They created a platform called Zerodha Varsity that explains everything about trading in laymen terms.
This way, they increased market share, new set of first time investors/traders started coming in, since they learned with Zerodha varsity platform, their obvious choice was Zerodha when it comes to account opening.
Zerodha did not rely on their existing user base alone, instead focused on educating people about trading and converted them as customers.
When every broker was providing exe desktop application, Zerodha started focusing on neat web based platform called Kite. It was simple and elegant, anybody can access it anywhere with a browser. It was a instant hit, when compared to their PI platform.
Though during volatile times, Zerodha does face issues, they try to come up with root cause and solution sooner. And no matter how many times users complain about it, they hardly move out of Zerodha.
Likewise he introduced many other initiates like Zero Brokerage for delivery. Investing in Mutual funds through Zerodha platform.
They created a big Eco system through rain matter. Platforms like Small case, Senibull, Streak, Learn App all gained huge traction, these are some of the mediums that helps Zerodha with more business.
There are more than 220 registered brokers in India, out of these how many broker’s CEO name you could recall? Its because he thinks about Zerodha 24×7,
Even today when someone posts some questions in their TradingQnA forum, you can see Nithin answering most of the queries. When their platform crashes at times, he stands tall and takes all the blame on behalf of their engineering team.
ICICI, HDFC and KOTAK, remember all three brokers in India are banks, they can easily open 3-in-1 demat account whenever some one opens a Bank account with them, they already have huge user base, so opening a demat account for the bank customers was not a big deal for them, but beating all big boys and becoming number one in India is not something any one can achieve, this is really an outstanding achievement from Nithin Kamath who was once a small sub broker with Reliance Securities.
As an Entrepreneur, I truly admire Nithin for the clear cut vision he has and the things that he achieved. No doubt, Zerodha is the Robinhood of India.
Why Zerodha is safer than other brokers?
- Debt Free Company : Zerodha is a zero-debt company. In the corporate world, most financial irregularities have debt as the main catalyst. Zerodha has always been zero-debt right from the beginning. There is no borrowing of any kind.
- No Margin Funding : Zerodha has never done margin funding, which is considered as a risky proposition for stockbrokers.
- No client securities in the pooled account : Zerodha doesn’t keep client securities in a pooled account.
- Simple Pricing Model : Zerodha has one single brokerage rates for all its customers. It doesn’t matter if you are an HNI or an investor. No one gets special treatment at Zerodha. Having a single rate for all customers reduces the operational risks significantly.
- No Advisory Services : Zerodha never advises or sell any product promising returns. The only thing they do as a business is to offer execution platforms for someone who has the intent to buy/sell. No conflict of interest.
- No Proprietary Trading : Many stockbrokers in the past have been alleged of doing proprietary trading from the funds kept in customers’ accounts. To allay concerns of customers of the company using their money for prop trading, as per a blog written by Zerodha founder Nithin Kamath, the company has stopped proprietary from September 2019.
- No Credit Risk : There is no credit risk as less than 5% of Zerodha’s own capital is lent to customers in any form. Zerodha’s own funds in the business is greater than 25% of all client funds put together. Zerodha is profitable as a business and have enough reserves to sustain, even if there was an extended downturn in the economy.
- Lowest Complaints to Active Clients Ratio : Zerodha’s ratio of complaints to active clients is among the least on the exchange.
- Million+ Happy Customers : As of April 2020, Zerodha has lakhs of active customers trading for over 10 years. Zerodha is the largest stock broker in India.
Zerodha is registered with SEBI and a member of leading stock exchanges like NSE, BSE, and MCX. All stockbrokers offering trading services in India must register with SEBI and follow various guidelines.
Similarly, stockbrokers must also get membership of the stock exchanges to be able to give their customers access to the exchange platforms. Both SEBI and stock exchanges keep an eye on their members and regularly audit their accounts to ensure diligence with the regulations.
To date, no major violation has been reported by Zerodha.
Zerodha is also a DP (Depository Participant) with CDSL, one of the two Central Depositories in India that manages demat accounts. This membership allows it to open demat accounts of its customers with CDSL.
Please note that demat accounts are not opened or managed by Zerodha but it only plays the role of intermediary between the customers and the CDSL.
As per SEBI regulations, all stock brokers need to acquire PoA (Power of Attorney). The PoA gives limited or full legal authority to the broker to operate your demat account i.e. debit/credit or pledge securities as per the agreed terms.
PoA is not mandatory but is useful in automatic debit/credit of securities from a demat account. Customers can refuse to give PoA to the brokers. However, then they have to approve every time there is a need to debit or credit security from their demat account.
To avoid this repeated approval process, PoA is used as a standard instruction to debit/credit or pledge securities whenever required.
Zerodha’s various membership details are as follows:
- Zerodha Broking Ltd.: Member of NSE & BSE – SEBI Registration no.: INZ000031633
- Depository services: SEBI Registration No.: IN-DP-431-2019; DP ID: 12081600 (Zerodha Securities Pvt. Ltd.)
- Commodity Trading through Zerodha Commodities Pvt. Ltd. MCX: 46025 – SEBI Registration no.: INZ000038238
Zerodha has all the right credentials to be a safe, reliable and trustworthy stockbroker In India. The company is a legitimate stockbroker with all required certifications and memberships. Many leading companies have partnered with Zerodha which adds to its credibility.
The company has won many awards in various platforms. Recently, it has also applied for mutual fund license which speaks for its expansion plans. In short, you’re as safe with Zerodha as with any leading stockbroker in India.