Does Zerodha refute this article?

[nithin]

@Chirag1

Prasad GVSV Bhavana, a punter based in Hyderabad, was supremely bullish about the prospects of Tata Motors, the blue-chip automobile behemoth.
Accordingly, he packed his portfolio with a massive consignment of Tata Motors’ futures.
As of 9th August 2017, on the eve of Tata Motors’ quarterly results, he held a treasure trove of 30,000 August 2017 futures, 30,000 September 2017 futures and 30,000 October 2017 futures.

@Chirag1

Have answered this here

Largest unauthorized trade

I’ve got this message on my whatsapp regards a huge unauthorized trade done by Zerodha. I hope this is not true…@nithin may want to clarify. Zerodha squares-off largest (78000 units of TATAMOTORS) unauthorized trade within 15 minutes of trade day while client got T+1 days. This caused the client a total loss of 84 Lakhs within a single transaction. The entire fault is due to Zerodha’s liquidation.

There is no way a broker can offer F&O trading to clients if he can’t square off client positions when he is making losses. Stock very easily could have done a PCJeweller and fallen a lot more and caused losses beyond what client holds as funds. If a broker doesn’t square off, a single/group of clients can cause systemic risk to the broker and the entire system. Anyone who has experience with how F&O works will know that.

NSE IGRP was in our favor. Client went for arbitration and this is headed by judges (1 in our favor and 2 against). If a person hasn’t traded F&O or tracked it closely, very tough to explain/convince how risk management works for F&O. We will appeal this again in court . This is how F&O trading works, not just in India - but across the world. If client doesn’t have sufficient margins to hold the positions, he has to square off positions or else brokers have to for risk management. If brokers can’t square off, a single client can cause risk to other clients as well.

This article talks about us encouraging rampant speculation. Anyone who is our client will know that we don’t. We have not once ever advised/pushed any client to trade derivatives, intraday, or as a matter of fact any kind of trade/investment with us. We are just an execution platform. We have through Varsity, tradingqna and every other initiative always tried to explain the risks involved in derivatives/leverage and how most people don’t win.

If clients should be allowed to trade derivatives based on their income, hmm… this is a debatable topic. There is no law that currently requires us to do that. I believe that we should treat all adults as adults and let them be responsible for their decisions. Such restrictions is not good for the economy in general. Tomorrow there could be restrictions on how much gold, bonds, equity/stocks, real estate, MF, I can buy based on my income, because technically all these asset classes can lose significantly as well. Maybe there could be restriction on the kind of clothes, car, TV etc I buy (all depreciating assets). This will be a wrong precedent.

Hopefully this makes sense.