What about those geniuses who offered 20-30X higher intraday leverage…
Luckily for them, the markets were closed by 5 pm. Since there is a short margin penalty, the leverage has to be brought to zero by market close. If the exchanges were open when this happened, that broking crowd along with all the clients would have disappeared.
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MCX should immediately change its underlying for oil contracts from WTI to Brent.
The brokers could pressure MCX to do it…
- First of all India crude basket is based on Brent and
- second Brent is cash settled like MCX oil contracts. Therefore Brent is more appropriate underlying for trades in India.
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Hi
Im a regular Varisty student and I have gained immense knowledge through the same during this lockdown. I have been reading about black swan events throughout all the modules and I never Imagined that I would witness one early in my learning path. I wish Zerodha all the good luck to sustain this crisis. I finally want to thank you for this Q&A platform.
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May be.
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Bracket order is a lot more complex product to offer as there are two legs to the same order and there are many issues offering this when the volatility is extreme. Cover order is easier as there is only one leg.
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@nithin I guess there is a market for a niche broker who doesn’t offer derivatives, commodities or, heck, even MIS trades and just offer plain simple equity broking (CNC orders only) that makes money by charging brokerage.
If I place a buy order, it asks for full contract value from me and buys the equities for me, and when I place a sell order it sells. No complicated MIS leverage or derivatives stuff. And all this with a good tech setup and good support. I will be willing to pay brokerage for delivery trades knowing that my broker is safe from all this wild stuff going on and is making money by providing a simple service.
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Damn, life would have been so peaceful as a brokerage firm. 
How much will you pay as brokerage? I will tell you why it won’t be possible to run that business.
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I don’t know. Whatever your costs are + some profit margin, maybe? Is half a percent enough?
Something like a lot of SAAS product companies do. Provide a service and charge slightly more than what it costs. Eventually, bring costs down with scale.
@nithin brokers were planning to move high court today 11am i guess. Did it happen.
Also as a company are you part of them since personally you are well aware of what the rule says and the probable outcome.
@nithin ,
Would this have been a problem if mcx was running normal timings i.e till 11.30.
Would you have been able to settle?
Bottom line - Would this disaster for commodity brokers have been avoided if timings were normal?
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Commodity market are international market , how sebi reduced the timing , i dont know , how trader will react when american market open and indian market closed , the bull shut done by sebi , now emergency they revise the timing to normal
SEBI is a bullshut
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We have all been spoiled by businesses funded by VCs/PEs doing everything for free. A correction will happen and things will get back to normal - businesses charging a fee to offer a service.
We believe that people use us because our product is superior and not just the fees. But 0.5% with us and 0 at someone else won’t work. Hardly any will be ready to pay 0.5%
If the concern is safety, I don’t think you should be bothered with us, like I have explained in the original post above (have updated it now).
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Yea, how will people get to office now during lockdown?
What was the point in reducing the timings if you just going to open it anytime you wish?
Clueless SEBI/Govt.
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Now that the payout is made, I doubt if anything can happen. Also, all other exchanges have settled it at -$37 as well (DGCX, SGX, etc).
If it was open till 11.30, brokers like us who run a low leverage business with strict controls could have avoided the issue by squaring off customer positions before the losses shot up. But there are many brokers who give lots of intraday leverage, who potentially could have been in a much bigger mess if MCX was open.
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Most brokers had already shifted to Work from home. A small group of offline brokers pressured the exchanges to reduce the timings saying they can’t. Otherwise there was no need to in the first place to reduce the timings.
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Can you sue SEBI for the losses? since they reduced the timings without considering the risk to brokerage companies?
But didn’t other brokers also increase margins for past 1 month. They are aware of the risks so how could they give such low margins in such high volatile times?
How come they have such weight in decision making process considering other brokers are at risk?.
Its unbelievable.