Can online broker go bankrupt?

[amanfree]

Online brokers are less likely to go bankrupt if they have a sound business model and less debt.

Zerodhas been growing 100% per annum and is a company with decent financials. Read it many places including times of India.

Been using it since 2014 with no issues.

chances of broker going bankrupt increases when it starts trading itself. There have been instances when broker/ banks open big positions with client money which grew much bigger than their own means.

https://en.wikipedia.org/wiki/Barings_Bank

Barings Bank was a British merchant bank based in London, and the world's second oldest merchant bank (after Berenberg Bank). It was founded in 1762 and was owned by the German-originated Baring family of merchants and bankers.[1]

The bank collapsed in 1995 after suffering losses of £827 million ($1.3 billion) resulting from poor speculative investments, primarily in futures contracts, conducted by an employee named Nick Leeson working at its office in Singapore.

BTW i heard from someone that zerodha has started a prop trading desk, not sure about it. You may ask in zerodha thread.

 

[lemondew]

Zerodha might have opened a prop desk but that doesnt necessarily mean client money may be used for prop desk trading. Zerodha is profit making company. There is a good chance a part of their profits is moved into their new businesses. They have many new things coming up.... including their prop desk

chances of broker going bankrupt increases when it starts trading itself. There have been instances when broker/ banks open big positions with client money which grew much bigger than their own means.

https://en.wikipedia.org/wiki/Barings_Bank



BTW i heard from someone that zerodha has started a prop trading desk, not sure about it. You may ask in zerodha thread.

 

[whoisalice]

I understand that and I know anything can happen but I need to know that how much money is safe and is their any regulations which assure clients money like in Forex many brokers have insurance on clients money....

Sent from my MI 4W using Tapatalk

Interesting question. Just read on another tradeji thread that if the broker is running contests like Zerodha 60 day challenge then your money is not protected by the exchanges

Here is the SEBI circular.

http://www.sebi.gov.in/cms/sebi_data/pdffiles/34568_t.pdf

So essentially Zerodha and Samco are not really secure then ! Because no matter how big a broker claims himself to be none of the Indian broker is bigger in size than MF Global or Lehman Brothers. And both MF and Lehman went bankrupt.

 

[niceman]

Hi,
I was wondering if my discount broker goes bankrupt, what will happen to my stocks in the DEMAT account associated with the broker. Will they be safe? Will I be able to sell or transfer these stocks to my other full-service broker?

 

[OneThatGotAway]

both MF and Lehman went bankrupt. coz they traded on clients money .
maintain less then 15 lac in account and sleep peacefully.Stt and fees u pay are insurance .
Broker is alive since 5 yrs now so you should be ok .

And shares in demate remain in demate only unless you sell it even if broker closes.
you can always link your DP to another broker

 

[startrade]

I will not comment on Zerodha because I am not trading with them...

but I must mention the behavior of some of the biggest brokers like ICICIdirect here. In January, 2008 when Nifty hit down circuits for 2-3 continuous days, ICICIdirect.com website was down for 3 days. While ICICIdirect saved itself from market volatility, their customers were screwed because they were not allowed to place order even in delivery segment. This is an example on how the brokers may not go bankrupt but they can definitely inflict damage on customers by locking them out of their trading accounts when markets are volatile.