Zerodha co-founder Nithin Kamath has explained how his company’s zero-brokerage fee policy is counterproductive to its clients, arguing that conducting lesser trades would mean they have lower chances of losing profit.
In a post on X, Nithin Kamath said Zerodha’s clients trade a lot less as compared to other platforms.
“As a [percentage] of client funds, our brokerage revenue is 20-25% of our listed peers. That means our clients trade a lot less (75% lesser) as a proportion of their capital,” he said.
Why lesser trade means more profit
Nithin Kamath went on to explain that more trading activity does not usually mean better returns and can often lead to a blow in your account.
“Here’s something counterintuitive but true: With few exceptions, the more frequently people trade, the lower their odds of being profitable. More activity doesn’t mean better returns; it usually means a higher chance of blowing out your account,” he said.
Kamath noted that it should be in the platform’s interest to get its clients to trade less and not more.
“While pushing clients to trade more may boost short-term revenues, it ultimately harms them in the long run,” he said.
The Zerodha CEO outlined how his company has avoided the standard playbook for finance apps from its day one — “o push notifications pushing you to trade, no landing screens showing “trending stocks” or “most traded F&O contracts,” no dark patterns to manufacture activity. In many cases, we’ve actually built features that reduce activity.”
Kamath said that Zerodha wanted its customers to stay with them for longer, both for their own benefits as well as the platforms.
“Also, this is why no one at @zerodhaonline is incentivised on brokerage revenue and has been the case since day 1,” he said.
“But I’d be lying if I said it’s easy to resist the FOMO of taking shortcuts that can potentially cause a bump in revenues,” Kamath added.
Netizens impressed with Nithin Kamath
Users on X were delighted with Nithin Kamath’s fresh take on Zerodha’s reason behind not charging a brokerage fee.
“Rare to see a founder admit that ‘less trading = more survival’. Most platforms chase activity, not longevity. When incentives aren’t tied to churn, traders finally get space to think, not just click. A reminder that sometimes the best feature is the one that stops you from yourself,” one person commented.
“I think it’s refreshing to see a brokerage prioritizing customers’ well-being over short-term gains as a relatively active trader it’s interesting to see how reducing activity can actually lead to better outcomes. Keep up the integrity,” added another.
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