I just had a word with BSE, apparently they found huge violations during inspection. There were also a lot of civil cases against the firm locally. Essentially cases of company cheating the clients.
The issue with many of the discount brokers is that they are trying to do everything to attract clients. Extremely low brokerage charges (most of them have ended up having our pricing model) and also extremely aggressive when it comes to taking on risk by offering huge leverages.
Brokerage business can’t work this way. If a business is taking risk by offering clients huge leverage, they have to ensure they are also earning enough by charging higher brokerage. There are going to be incidents which can cause some clients to go in debit, it is important at that time that you have earned enough to cover for this.
Do check this
No, not possible to run a discount brokerage firm with such razor thin margins at 3000 active clients. This business is viable only if active clients are atleast around 20000 after being in the business for 2 to 3 years. If not, the business would be losing money for sure.
I had updated here the list of brokerage firms by active clients as on Dec 2017
So yeah, it is not just about costs when choosing a discount broker. Make sure that you are trading with a brokerage firm who is growing, has decent sized business, conservative in terms of taking risks, apart from platforms and etc. Also keep a watch if the firm displays any unethical attitude in terms of exchange compliance, and delay beyond a few days in fund withdrawal requests.
@nithin its really sad brokerages have to suffer losses due to some traders’ account going into debit balance. But what happens when the traders account goes into debit and traders instead of paying back, just disappear (they may not be able to flee to foreign country but definitely to some other town) . Is it just like write off of bank NPA?
What will happen to legitimate client ? What if I had pledged certain liquidbees with broker and they default since some clients under them default ? What will happen to my cash holding and pledge stocks !