Retail traders and investors watch out - Are brokers like Zerodha counter trading?


#23

@Pk308 ; when no shares are tendered even in auction the buyer of shares do not get shares but cash credit which can be up to 20% higher than closing price of auction day debiting the account of selling broker. this applies to all normal group shares .
in case the share is not delivered on T2 day belong to BE /T2T group there is no auction but only cash credit as per above example.


#24

Almost right but it is not 20% above closing price of auction day rather 20% above than highest point touched during T to T2 day.


#25


#26

And any guess why that happened


#27

??? not clear ?


#28

Most convincing guess is that someone in franchise office or head office, having access to your trade, individually or in consent with the boss, places a counter trade. Now this cannot be general policy because scam will be exposed very soon, but filters down to those trades only where crooked has strong counter view and specific trader, in their view, is new and not aware of rules. What happens next. If trader looses, crook profits and vice versa. when crook looses it denies trader the delivery stating short delivery and intimate exchange Nil delivery trade.

My experience in this episode was a learning one. I kept insisting settlement as per rule for next six month. Lost temper many times during these conversations. Threatened them to sue with SEBI and exchanges, infact contacted SEBI online. Then they started yielding and returned around Rs 19000 in three installment.

Moral of the story - I haven’t seen any religious person who is not morally corrupt atleast once and I haven’t seen any businessman who has not done any irregularities or not cheated to clients atleast once. No body is perfect by nature, it is the surrounding pressure which can keep him awake.


#29

People promote conspiracy theories to generally find a reason to blame for own losses.

I have explained this before, can’t find the link. Firstly unlike other exchanges, all orders are first placed on the exchange. There aren’t dark pools etc in India unlike the US. Once order is on the exchange, anyone can fill it. There are high frequency trading companies who fill orders within micro seconds from when orders are placed on the exchange. We do no high frequency trades.
If a broker is counter to any client trade, it creates an alert on the exchange. We have to explain why this has happened. We have an inspection every few months where everything is audited. Every aspect of the business.

Just to clarify, counter trading isnt’ really possible technically on our exchanges even if someone wanted to. Every order has to be placed on the exchange first like I said. You get an exchange order number as soon as it is placed.


#30

hmmm… Short delivery happens on the exchange for various reasons, and there is a standard procedure in terms of how this is handled by the exchange. Have explained here

I wouldn’t be able to comment on your case. But how is it possible to place an order on the exchange and someone placing a counter order to that. If this is possible at all, it has to be in an extremely illiquid scrip. Maybe if you are trading a stock where there are no bids and asks or very little volume, something like this could be attempted.


#31

I have put forth my guess and till date did not find any more convincing theory. For the proof I have kept some email records.


#32

Btw those two scrips Nagarjuna construction and Ansal propertis were darlings of traders in those days.


#33

So you’d realize how tough it will be for someone to place a counter order to your trade on the exchange right? Why don’t you try doing it yourself today. Pick up a liquid scrip, place a buy order and try to fill your own sell order to that.


#34

Exactly. Very well said :+1:


#35

Sorry @nithin , but it looks that you did not comprehend my story. May be due to you being a busy person did not read line by line or may be you had lost temper due to connotation of this thread.

My story is different than the connotation in this thread but fits in the larger domain of business ethics. I have no reason whatsoever till date to believe that Zerodha is doing any malpractices with clients. Ofcourse I have doubt about efficiency (or inefficiency?) of your system and workforce but thats another matter. Even then you are far superior than most others, I acknowledge.

In my story, I m not suggesting that buy order of mine was filled by someone intentionally. Rather It was like (probably) buying in one account and selling in other. Net result is approx zero in a liquid scrip excluding transaction charges. Consider this with the rule of settlement at that time (I m not sure if that exists even today) that a broker reporting requirement was not mandatory in case of net buying and selling of an scrip by various clients of that broker is zero.

Now safeguard was available even then for short delivery but if someone in the brokerage house feels that he can fool clients by telling him lie then he will be tempted to do this. Also this can’t be a general practice of a brokerage house because reward is too low and risk are too high. It must be a work of an individual or 2-3 people at max.

Whenever these aspects come into light, wise thing to do is to crosscheck the system and processes and declare that system is free of this type of bugs.

Hope and Wish Zerodha community will remain an example of ethics and standard practices.
Regard.


#36

Ah, my bad. Saw only one of your comments. And no temper lost. :slight_smile:


#37

Thanks @nithin sir for jumping in.
As an individual we may not access to info like stop loss, available funds to convert mis etc to delivery and so many other info that a broker has. So, it will not be possible for an individual. Isn’t it?


#38

Quite possible. I am not part of any other broker organisation. In fact I have shifted to zerodha and been using zerodha since then. But, we all want to be sure & ask questions. Many posts on this forum get unlisted without valid reasons. That feeds onto these kinds of doubts !


#39

Can a broker not have proxy investment organisation that uses the info from broker and set up counter trades?


#40

[quotehttps://tradingqna.com/u/Neostar=“Neostar, post:39, topic:48456”]
Can a broker not have proxy investment organisation that uses the info from broker and set up counter trades?
[/quote]

Dear @Neostar Suggest you to concentrate on the market skills rather than searching outside for failures, if any. Yes of course, anything concrete comes to your knowledge, sharing of that would benefit others.
Regards,


#41

Like I said earlier, If orders could be executed before it hits the exchange, then yeah possible. But in India you can’t, your order has to hit the exchange first.
Btw like I said, it is very common in most developed markets, most retail brokerages sell the retail order flow to high frequency trading firms. All retail clients know this happens. But they all know that their P&L is based on how the underlying moves, not if the order hit the exchange or if the brokerage sold the order flow to a HFT firm.
Check this on how the order flow thing works in the US
https://www.bloomberg.com/quicktake/payment-for-order-flow


#42

Yeah… Just to add further… We need to understand that Zerodha backed by strong involvement of @nithin sir and Karthik sir have always educated the naive traders and investors with fine aspects of trading. We need to consider the noble intentions of them to help retail traders like us to sustain against big fishes… Why would zerodha spoil it’s name and brand which it has earned with so much hard and sincere efforts.
I have trust in zerodha and Nithin sir till now and will continue in future… Thanx :smile: