Hi Nitin, I hope you and your loved ones are doing great. If I am not wrong, recently you became an advisor to SEBI. Can I ask you something? Why is SEBI not banning youtubers who are showing off their luxurious life, live Youtube Trading Sessions, profits, their Next move during market hours (Kind of Manipulation) all these kinds of stuff? I think this thing is generating greed to earn more & put more money at risk. I feel teaching is a great thing but somewhere above points are also wrong…
I completely agree, as Nithin already shared stats about how much traders (less than 1%) make money in stock market. These people on youtube show that if you follow their strategy/rules/process you will also be able to make same amount of money and lure others to sell their courses/classes/membership/merchandise. These people just lure people on the name of education and learning videos where as they just try to show off their profits and increase their youtube views again to earn money. I know many of my friends came to stock market and lost all of their money after following these people on youtube.
I have been sitting on a few SEBI committees for a while now. I have brought up this topic many times in the past three years. This isn’t an easy problem to solve as this revolves around freedom of speech. You can’t have a regulation that bans people from talking publicly.
Whatever I say might seem conflicted as we, along with many other brokers, have been what may seem to be a beneficiary in the short term with the customers these influencers influence. But I think it is an enormous problem even for the business because people who start trading with wrong expectations will get disappointed soon and probably never trade again. They’d probably also influence others around them not to trade in the markets. So while this might give a short-term bump, it is bad for the long term.
We can’t paint everyone with the same brush, as there are influencers who are also doing a good job at educating people on money, finance, and investing. I think the larger problem is that on social media, the louder you are, the more popular you get. So there is a perverse incentive always to keep saying something loud or say random things frequently to build an audience. So I have seen even good folks slowly morphing into something else trying to build an audience on social media. This is especially more on a platform like Twitter.
You can’t stop people from showing off their lifestyles; that is a freedom of speech issue. But if anyone is making claims around profits from trading, maybe we should have a regulation that allows them to do it only if it is validated. If not, it is a case of cheating, especially if those claims are used to sell a course or make money in some other form. Launching took us a while, but that is also why we put out Verified PNL. We had to wait to see if there was no backfire for launching a feature like this. In a way, Sensibull first launched this feature with Verified MTM helped.
While nothing is illegal in selling courses, many of these influencers have extended their services to advisory and portfolio management, which isn’t allowed per regulations. SEBI should find a way to quickly act upon all these violations and have severe punishments. This is not just true related to this issue, but maybe with any financial crimes in the country. This is the only way to improve corporate governance in listed businesses and even the startup ecosystem.
While verified PnL is a massive improvement over verified MTM (which honestly was just a gimmick, as MTM hides more than it reveals), it still won’t serve the purpose. I have raised this on the original thread as well. Unless there’s a way to capture any profitability metric, finfluencers will exploit verified PnL by trading with say 10cr capital and telling people the profits are generated from a ‘small’ 5L account.
I know you mentioned that the team is working on some NAV project, but like I said on that other thread, It’s just seems too complicated to achieve given the current state of console. For reference [Ticket #20230615649399], for an incorrect reporting highlighted on console, the team after a week of figuring out, advised me to refer to pnl on kite for the time being. And when there’s some issue on kite, I’m sure they would be suggesting referring to console. Anyway, if you are at it, please have a look at the entire ticket as it has some other issues that need addressing as well.
Yeah, we can’t. Your points are also valid…
There are two bits to this ticket
Our RMS team squaring off positions not once but in chunks. I think I have answered this in detail before on Tradingqna. @Meher_Smaran can you dig it out?
But if I had to give you the gist, we hate getting our RMS team involved in squaring off positions. This is the riskiest part of our operations. The incremental revenue we generate from call & trade charges is insignificant given the risk and effort. So, no, our RMS team doesn’t do this for generating more revenue and as an FYI not a single person at Zerodha has any revenue target or incentivized on revenues. This is to avoid any such situations where there can be a conflict of interest.
Ideally, we want customers to manage everything on their own. And while the support response could have been better, what the person is saying is correct. The total margins for an account are on an overall portfolio which can change significantly every time any individual position is exited. So it is hard for the RMS team to figure out how much exactly needs to be squared off.
@Tharun_Iyer_M let us create a support article on this topic. Share the draft with me before publishing. Also, refer to the earlier detailed response once Meher digs it out.
Every platform built on technology will have edge cases where something may not work as expected. You can pick up anything from Google to Amazon to Facebook to whatever. But that doesn’t mean you judge the entire platform based on that edge case. Millions of customers use the console, and we have had no complaints about the quality of reports over the years. Yes, there were issues when we first launched, but nothing in the recent past.
I think many on the platform have already said that Zerodha’s reporting platform is the best in the industry. I have not traded anywhere else, so I can’t vouch for it personally, but this reply is intended to help improve a product that is so critical in my life. Please don’t take it otherwise.
This is not a one-off edge case. I had highlighted a similar issue in Nov last year, and look at the response I got. Does the team think I won’t be able to check prices on BSE and NSE to validate the response? Indicative Yield on Coin for Gsec - #19 by Nakul
There were other issues with discrepant qty and debt/equity tagging that I had shared with the team as per your suggestion, which then were corrected. Introducing Verified P&L on Console - #12 by nithin
The account value curve shows me values in a range of ± 2lacs every time I check without any payins/payouts (Not due to changes in values of holdings). Refer to the spikes in the chart for the last part with no payins/payouts:
I’m sure there must be some technical reasons for all of these, but blaming technical issues doesn’t work for very long in B2C products.
Oh I’ve already included the link to that discussion in one of my replies to the ticket (I’m a very engaged TQnA user btw)
Also, Arun, can you check why the account spikes if this isn’t payin or payout?
Just consider these two square-off scenarios as well:
Margin shortfall of 10 lacs. A smart RMS team member (basis his experience working with the trial and error method) decides to square off 10 lots of a position - and voila, the margins are back in positive. User pays 1x double brokerage & 1x call and trade charges
Margin shortfall of 5 lacs. A not-so-experienced RMS team member (who is also working with the trial and error method) decides to square off 1 lot of a position - only to realize the margins are still in negative - decides to square-off one more lot. By the time he completes the execution, he has punched in 15 orders. User pays 15x double brokerage and 15x call and trade charges.
Don’t you find an in-principle issue here. Here’s a line from one of Morgan Housel’s articles on incentives (from Zerodha’s perspective and not the RMS employee, who I know doesn’t have a profit target).
"A good question: ‘Which of my current views would change if my incentives were different?’ "
I think you are missing the point here. The RMS team mainly tries to square off lesser positions to help the customer. Most of the complaints we get from customers are Why did you square off more than required. And, like I said, most customers usually have multiple F&O positions, and it is hard for folks to easily figure out how much should be squared off to get to the appropriate margin levels. This problem never happens in equity intraday trades as the margin is fixed per scrip unlike SPAN for F&O.
@MohammedFaisal had a good suggestion, though. Maybe we will not charge incremental call & trade charges during the day if RMS squares off positions in chunks.
Exactly my point.
Edit: on re-reading, maybe not exactly but halfway there. The same thing applies for incremental brokerage as well.
Not charging additional call and trade charges is an easy thing to do for us in the backend. It won’t be easy to exempt brokerage on additional orders.
I see many influencers show their profits by themselves which is great but they only show big profits and they say
if i can do it you can also do it which I feel won’t be true in case of trading, as its a zero sum game (minus brokerages/taxes/fees etc)
I don’t know if zerodha can pull a stat to falsify such claims as well. For eg - how many people joined using
a referral link from some influencers and how many are having profits, how many stopped trading after trying for x months, total money they lost, average money they lost etc I assume these stats will be more horrified than overall stat that you shared a while ago.
It is possible to give stats on the number of traders who made profits in derivatives segment during FY 23?
If not the number may be a percent of the traders who had at least 100 trades in Fno or so.
Sometimes, Console is picking indicative NAV (iNAV) prices for ETFs which is a problem we’re trying to fix. However, when calculating collateral value, we use the actual closing prices as clarified here.
@abcd5662 those spikes you see are for Sundays/trading holidays when the contract values for Long-Short options are missing. Seems like this issue came up recently, we’re fixing it.
Hoping to see something from SEBI soon. Checkout below link
This implies that the referral scheme run by brokers I guess will stop. They can give commissions to registered APs only once the regulations kick in.
Will this even make the situation actually better than it is?
I guess the real problem is unregulated entities giving advice to unregulated entities.