‘High leverage, higher risks,’ says Nithin Kamath, founder of Zerodha
- ByStartupStory | January 17, 2022
Market regulator SEBI’s plan to introduce margin reporting and short margin penalty, according to Zerodha CEO Nithin Kamath, was one of the reasons for the company’s founding in 2010.
After the market collapsed in 2008, he said, this was introduced as a result of not collecting enough margins for overnight future and option (F&O) positions.
NSE introduced F&O in 2000, and it is now the world’s largest derivatives exchange by volume, according to the Zerodha CEO, who regularly shares his insights on market and related trends. “Until 2008, the majority of trading activity was in futures.” Options became popular only after contract sizes and margins increased, he explained.
He also stated that Zerodha was founded on the premise of disrupting the market by providing high leverage and taking higher risks. “This is why, for the first time in India, we introduced a flat fee pricing model (of $20 per executed order in 2010),” he added.
Nithin Kamath and his brother Nikhil Kamath began their business in 2010. It was the first online brokerage to implement innovative pricing models and proprietary technology. Today, over 8 million clients use Zerodha’s investment platforms to place orders every day, accounting for over 15% of all retail trading volumes in India.
On Friday, Nithin Kamath said he noticed a “weird” trend in the stock market. “While publicly traded high-growth, yet-to-be-profitable startups are seeing sharp drops in valuations, private market valuations are holding up,” Kamath said.
We live in strange times. Btw, if it’s possible to short private companies, I believe there are a few pair trades—shorting private and buying listed,” he added. Kamath also shared a graph illustrating the performance of fintech IPOs.
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