Why is Zerodha taking so long to offer US investing?

@nithin, It’s been quite a while since Zerodha started talking about allowing investing in the US. Why is this taking so long?

1 Like

The actual tech integration to allow buying/selling US stocks is really straight forward. Unlike in India, orders don’t necessarily have to go to the exchanges for matching in the US, it typically goes to liquidity providers like Citadel, Two Sigma, CODA, etc. These are simple integrations if you decide the route of being a broker in the US. An even easier way is to just integrate with international brokers like Drivewealth, Interactive brokers, Saxo, etc - which is what the current bunch of platforms in India who offer this facility are following.

The real problem to solve isn’t really the tech integration, but actually the very painful and expensive international fund transfer process.

Remittance & withdrawal issues

  • Banks charge between Rs 500 to Rs 1500 for every single international fund transfer.
  • There is another 1% in currency spread on the transaction that gets eaten up for every transfer.
  • There is an A2 form that physically needs to be submitted and presented to the bank for international transfers for the purpose of investing. Some banks might pick up this document from your place, but it can take up to 2 weeks for the funds to show up in your international trading account. Two weeks of opportunity and interest cost.
  • The same costs and time when withdrawing the funds back to India.

Most of our customers are those who will most likely transfer between $500 to $2000 at a time. In the current remittance regime, the customer will be down by up to 5% on the capital because of all the above costs immediately. So if someone did take all the effort to send money out, it isn’t really a good deal for them.
Of course, this starts making sense as the remittance amounts become larger (very small % of our client base), but for us to create an offering for our client base, it makes sense to do it only if we can scale it to all our customers. Also, this coordinating where the money being remitted is, when it will be updated, etc is bound to be a support burden if offering to a lot of customers.

So yeah, we are working on fixing the remittance problem first. That has to be solved for this business to make sense, both for customer and us. We will start showing market data feed for US stocks on Kite, but trading we will enable only once we have clarity on how remittance will work.

27 Likes

Hey, Thanks for the detailed explanation. I know this is way too early but here are some questions.

So you’re implying that Zerodha is trying to implement a way which will cost us zero to deposit and withdraw funds?

Will we be able to trade the global markets or US only?

Some stocks like amazon cost a lot, will you be providing fractional buying?

Not exact zero but yes closer to that, much cheaper to current costs.

US listed stocks should cover most known/popular ones also it is better to stick to US for retailers I think, if not one has to take that particular country currency risk also along with market risk, considering the stability and historical trend of USD with rupee. Anyhow there are ETFs listed on US markets which give exposure to any country/region so that should do, I believe.

We will for popular ones.

4 Likes

Can you give any link?
To get all information of ETF listed on US markets?

Can check here.

3 Likes

hi, nitin . i am ravikiran. i desperately want to trade s&p 500 future and options and eur/usd currency pair. you are also working on f&o segment of USA markets?

Indians aren’t allowed to trade derivatives when you remit money out of the country. Check this

1 Like

@nithin do you intend to bring support for buying US ETFs as well when you enable investing in US stocks?

What about the separate 5% TDS on remittance after 7 lacs? How are you guys planning to work with that? Do you think there are still customers willing after this tax?

Yes…in US any broker should allow it as rule says fraction buying is possible

Of course, yes. You should be able to buy all US ETF’s.

Ah yeah, I forgot to mention this in the above post. :slight_smile: Let me add it.

It is TDS that can be adjusted against other taxes you have to pay. So it isn’t that bad.

Will SLB will be possible for us stocks since their market is quite mature for this purposes.

ICICI bank charges ₹1000+GST for 100% remittance to US. The process is immediate and the funds credit within 24 hours. I transferred funds to my Interactive Brokers account recently.

What’s their charge for remittances outside India and brokerage commission.

So any tentative go live date? @nithin

Interactive Brokers does not charge for any cash deposit. All charges are levied by our Indian banks.

You can view their commission structure via this link- https://www.interactivebrokers.com/en/index.php?f=1590&p=stocks1

Hi @nithin have a look at this https://ripple.com/customer-case-study/sbi-remit/

Maybe you can do something with crypto? since it’s now unbanned

I use XRP to send payments internationally it literally takes a few seconds to complete and also is easy to use.

1 Like

Sir. We can ask ICICI Bank US & India (any nationalized bank) to make smooth process of A2 form -Online submit, which clears all times of 2 weeks.

For remittance issue, zerodha can itself start remit process, which will scale timely transfer for funds for Zerodha family.

Ex.The skrill.com also taking same 1 - 2 % charges for every transfer, which too cost for customers.

For all the process in order to get smooth, zerodha needs take a step to become US Exchange authorized broker.