Could Zerodha team please clarify Zerodha’s internal controls around client confidentiality and employee trading?
Consider a scenario where a client holds a large intraday short that must be covered by 15:20 IST. Closing such a position can move the price (e.g., 0.2–1%), so anyone aware of it could try to trade ahead of the client.
What safeguards are in place to prevent employees from viewing or acting on this information? Specifically:
Role-based, need-to-know access to client positions.
Detailed audit logs showing who accessed which positions, when, and for what purpose, reviewed regularly.
Policies restricting or requiring pre-clearance of employee personal trades, plus monitoring for front-running or shadow trading.
Surveillance/exception reports that flag patterns around forced square-offs.
Defined consequences for breaches and a clear process for client recourse.
Really curious to know on how Zerodha manages this risk.
For our employees trading is not allowed but can do investments.
Any one can see positions/funds etc only based on request, means on need to know basis, one need to input ID to see anything, so would be impossible to know who has which position.
We have logs of everyone for every request they make on client data, any divergences are monitored/tracked and audited.
Also importantly no one knows when the client will close their intraday position, not necessarily they will close only at 3.20, so unless one knows it upfront there is zero chance of making any money by front running. Also our clients are retail, very rare they take position so big for intraday to move prices by 1% or above, atleast among large to mid cap counters.
I know. I’m just saying it is a good trading opportunity, if you figure out the direction and magnitude of the move in the last few minutes. It usually moves predictably in the last minute or two in one direction - due to big traders closing out.
Pretty sure IEX scammers used options for frontrunning. Perhaps the most profitable for frontrunning would be options.
Btw, you say no trading for employees. But how do you enforce this? Can’t they just trade with another broker?
You are missing the whole point here, options work better if one knows inside information, in the case we are discussing there is no inside info, only just copying some trader assuming he /she is 100% right, that’s a lot of risk to take for small reward.
But you do have aggregate data right? Say, if you know NIFTY 26000 CE has more than 200% MIS long positions than the last 3 days and that in all probability they will be closed by EOD. Then you’d take the opposite position, short NIFTY 26000 CE at 3.20 pm NRML and close short at 3:29:50pm for a 5-10% profit. Isn’t that frontrunning? OI data is publicly accessible. But we don’t have the type of OI: MIS or NRML. But you do. Isn’t it possible to use that information to gain an edge?
MIS positions close at 3:20 according to Zerodha support article. As to clients using NRML, Sure they can. MIS would be used even if there is no extra margin for these reasons
If a client is a regular day trader, Intraday would be selected as default in Kite app(based on previous orders)
Chance of getting overnight positions is less as positions are squred off automatically, if the client misses, thereby reducing overnight risk.
Using NRML as MIS does complicate things, But we are only interested in the ratio of MIS to NRML in select options. The ratio tells the intention of the majorities, comparing it previous 3 days gives a clearer picture and therefore potential movement at EOD. I think it would be a profitable strategy(if it isn’t against any rules).
All your developers have log viewing access?