Brokerage firms having a prop desk is a norm across the world. In developed markets like the US, order flows are sold to high frequency trading firms who in turn fill them. In India it is not possible. What you get to see as a broker, especially with our kind of size, it is almost like you seeing the market itself.
Being able to see the entire market depth, isn’t really any great advantage when trading (especially for the non HFT kinds). Today you can subscribe to exchange tick by tick data feed and see the entire market/order book (not just of your own brokerage firms). And there are many many entities who subscribe to this. So your real concern shouldn’t really be about just Zerodha seeing order book of all their clients, but all the prop/HFT trading firms who subscribe to market tick by tick data and get to see the entire market.
HFT is the reason there is so much liquidity in our markets (50% of our trading turnover) and the trades that they are taking isn’t really the kinds you or any retail trader would be taking . So if anything the liquidity being provided by them should be helping most retail traders. Otherwise the bid ask spread itself can cause high volume retail traders to lose a lot of money.
ps: we are trying to figure a way for retail to be able to access TBT info. We will for sure have some good news in the next 6 months.