Did client overload lead to tech glitch on Zerodha platform? CEO explains
What is the explanation for the system failure in the last 10 minutes of yesterday’s trade?
Typically, we have a
small group of customers who do intra-day trading and in intra-day products, people have to square off the positions on their own. Typically, we allow people to square it off until 3:15-3:20 pm. Over the last few days, one of the issues that we have had with increased volatility is that we have seen that people are not squaring off their own positions. What we require of customers is that they square off.
When they do not square off on their own, we as a part of the risk management team, have to square off on behalf of customers. At that point of time,
there are tens and thousands of positions open. The current volatility has caused an issue over the last few days where we have degraded performance and yesterday it was a little more severe. What we are doing from today is that we are adding a charge to our customers if they do not square off on their own. This way, we are pushing them to do it on their own. We will charge a small fee for that.
We are doing that change from today and hopefully that should sort it out.
What is happening with the retail accounts? Are they looking at selling lock stock and barrel? I am not getting into specifics with you, I understand your compliance here but could you give an example of the long trade versus short trade? An example of the demat holding? What did retail and HNI investors sell out in the last two-three weeks?
As a business, our customers are more retail and not really HNI types. What is heartening in all of this is that the last two weeks has been crazy in terms of new account openings. We typically ask our customers why they are opening accounts and their views as the
market has fallen and it is a good time to start investing for the long term.
These are first time investors. So, 60% of our customers have never done any
mutual fund or equity investment ever. That is heartening. Otherwise, generally on the futures and options side, they have been quite light. There is no serious leverage in the system. It has not been that a lot of longs have lost out money, it is not that a lot of shorts have made a lot of money. We do not see that happening across our client base at least.
Today, from 3 pm onwards, we will send a push notification to people who have not squared off their positions.
-Nithin Kamath, Zerodha
On the holding side, people have not sold as such. People are holding on to it. Typically the behaviour is that because you are not leveraged trade, there is no pressure for you to sell and book out. We do not offer any margin funding as of now. There is no leverage in the system and customers are quite okay to hold on for a long run.
Is the retail behaviour an indication of market top and market bottom? What would you say is the retail investors behaviour at Zerodha?
Right now, there is no action at all. Everyone is in shock. This is not 2008. I do not think any of us has ever seen anything like this. One month earlier, we were all bullish about the market and suddenly a month later, you cannot turn bearish as a professional. These are unprecedented times. I do not know if that whole analogy about retail behaviour and market bottom really works this time because everyone is in shock right now.
I just wanted to get back to the point that you were making that beginning today your customers will be charged for not squaring off intra-day positions. Why would you implement something like that? Isn’t it a technical glitch from your side? Why should your customers pay for it?
It is not a glitch. When you come to our platform and take an intraday position, we do additional leverage for you to trade. You are entering the trade saying that you want to square off before the end of the day. That is how our products are and that is how all our terms and conditions are, that you will on your own, sell it before the end of the day. If you do not, we will do it. It is not a technical glitch. Today, we have to work on top of a certain infra. I can connect to the exchanges only a certain messages per second. The big challenge is that we are still on a leased line. In infra, we are still 15 years behind what is happening in the world at least in the commercial side. The retail side is already fast. Here the issue is say we have 2,000-3,000 messages per second connectivity and there are 50,000 intraday positions to be squared off!
But the point is in this kind of a market, your system failed during the last 10 minutes of yesterday’s trading action which was very critical. I am sure everyone in the right mind would have wanted to square off their positions any which way and this is not the first time. On expiry day, high volatility days, your system conks off. Can’t your system handle high volatility days?
No, I do not think you have done any research on this. The last 15 days have been the highest volume, highest volatility ever and every broker in town has been down for multiple hours for 10-15 days. Yesterday, we had a 10-15 minutes glitch and I have explained why it happened. It is not a glitch, it is an overload because of the way the whole product is structured.
We can very easily tell our customers we would not offer an intraday leverage product, but then our customers ask for it. When they ask for it, they are supposed to follow the rules of the product which requires them to square off on their own. We are facing some issues with that. Hopefully, we will sort it out today.
The way we have planned it is today, from 3 pm onwards, we will send a push notification to people who have not squared off their positions. It is not like we are trying to charge them for it. We are trying to push them to do it on their own, which is what they are supposed to do in the first place.
https://economictimes.indiatimes.co...erload-nithin-kamath/articleshow/74708779.cms
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