Whether you are a trader or investor and heard about Zerodha online or from a friend, most of you would have felt that the brokerage are too good to be true. In case you were trading with some full service broker like ICICI direct or Sharekhan, you could reduce your brokerage by more than 90% with them. But then the next question would have come to you,
Is Zerodha Safe ?
Would my money be safe with them ?
What if Zerodha closes ? What will happen to my shares/money ?
In this article I will try to answer some specific question which you may have about Zerodha safety. First thing you should look while selecting any broker is are they SEBI registered. If not, then you should not open account with them. Zerodha is SEBI registered and there registration number is INZ000031633. With the registration, you could be sure that they are regulated by SEBI and any issue with them can be escalated to SEBI.
The next question some of you may have is how to they make money if they take ZERO brokerage. This I think is not entirely true. They do charge Zero brokerage for delivery based trade but they charge brokerage on Intraday and F&O trade and more than 80% market turnover comes from these trades. So, yes they do provide Zero brokerage for delivery based trades but they do make money off intraday and F&O trades. In fact, in 2016 they made a profit of 65 Crore on a revenue of 115 Crore.( http://economictimes.indiatimes.com/small-biz/startups/when-we-lowered-prices-i-got-threatening-calls-from-brokers-says-nithin-kamath-zerodha/articleshow/52711067.cms). So you could be sure that the business is viable with the brokerage they are charging.
Next question is in case they close what happens to your shares and money. Zerodha has a Depository account with CDSL and once you buy shares, they are kept in your DEMAT account. So in case Zerodha have some issue, your shares are still safe in your CDSL account. Next coming to your money, technically the money does not belong to your broker and in case of issue, there is an investor protection fund which help in make your loss full if you have any. But this is a hypothetical question and there is a very small chance of this happening.
In this article I have tried to answer question from the point of Zerodha but most of the well know broker should be safe to trade with. Just make sure that you check if they are SEBI registered and not fly by the night kind of operator. Do read a take on the same question by Zerodha
For your complete list of best broker operating in India, to read our article on Top 10 stock broker in India.
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