'High leverage, higher risks': Nithin Kamath on idea behind starting Zerodha
The Zerodha CEO says the company was started with an idea that it could disrupt the market by offering high leverage and taking higher risks
PremiumZerodha Chief Executive Nithin Kamath today said one of the reasons behind starting online brokerage company back in 2010 was market regulator SEBI's plan to introduce margin reporting and short margin penalty.
This, he said, was being introduced for not collecting sufficient margins for overnight future and option (F&O) positions after the market collapsed in 2008.
The Zerodha CEO, who regularly shares his insights on market and related trends, said NSE had introduced F&O in 2000 and today it is the largest derivatives exchange in the world by volume. “Trading activity was mostly in futures until 2008. Options only became popular once contract sizes and margins went up," he added.
He also said Zerodha was started with an idea that it could disrupt the market by offering high leverage and taking higher risks. “This is what led to us launching a flat fee pricing model (of ₹20 per executed order in 2010) for the first time in India," he added.
Nithin Kamath, along with his brother Nikhil Kamath, had started back in 2010. It was the first online brokerage to introduce disruptive pricing models and in-house technology. As of today, Zerodha sees over 8+ million clients place orders every day through its investment platforms, contributing over 15 per cent of all Indian retail trading volumes.
Nithin Kamath on Friday had said he observed a “weird" trend in the stock market. “While listed high growth, yet to be profitable startups are seeing sharp drops, private market valuations are somehow still holding up," said Kamath.
“Weird times we live in. Btw if there was a way to short private companies, I think there are a few pair trades—shorting private & buying listed," he added. Along with this, Kamath shared a chart that depicts the performance of fintech IPOs.
Also read: ‘Weird times’: Zerodha CEO Kamath on sharp drops in stock prices of startups
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