Chapter 13

What the house says

Published 30 September 2026

Every casino file eventually needs the house's own testimony. In Indian broking, that testimony exists - written by the founder of the largest broker, published on his own blog, in plain sentences that no critic could improve on. This chapter simply reads it to you.

On September 30, 2025, Nithin Kamath published "15 years of Zerodha - The risk crystallises", his annual founder's letter. Buried in the anniversary nostalgia is the single most honest sentence the Indian broking industry has ever produced about itself: "almost every brokerage business model relies on earnings from active traders who trade options." Not some brokerages. Not the bad ones. Almost every one. The industry's economics, stated by its most respected founder, rest on the one activity the regulator has measured at a 91% loss rate for the humans doing it.

The admission that was already public

Kamath has never hidden the odds. The same letter repeats what he has said for years: "As I have said in the past, 90% of traders lose money... What is unique about trading is that it's very easy to get started, unlike starting a business." He is right, and he is describing his own revenue base. The man who built the easiest on-ramp to the easiest-to-start version of a 90%-loss activity is also the man most on record about the odds. Both facts are true. The tension between them is not hypocrisy - it is the industry's load-bearing structure, visible in one person's career.

Then the letter does something even rarer: it prices the regulator's intervention from the house's side. "we are seeing a substantial hit of about 40% in brokerage revenues in the latest quarter (June 2025) compared to the same quarter last year." Forty percent. When SEBI raised the tax on options and cut the weekly expiries to two per exchange, the largest dealer's brokerage revenue fell by two-fifths in a year. No clearer measurement exists of how much of the dealer's income was the machine's velocity - the daily expiries, the cheap contracts, the churn.

How the list gets gamed

The letter's most casually damning passage is about an industry metric nobody outside it thinks about: the exchanges' active-client rankings. "brokers are constantly gaming this by pestering customers to trade via notifications and dark patterns. By triggering people to trade, you not only generate turnover but also move up the list." Read what the founder of the biggest broker is telling you about his competitors: the push notifications buzzing on a crore of phones are not service. They are a lever - pull it, turnover rises, rankings rise, and the newly triggered trader joins the 91% for a few more weeks. The house knows exactly what the notification does to the human holding the phone. The letter says so.

"Whether they help in capital formation"

The letter also contains the question the industry least wants asked out loud, asked by its own most credible voice. "With retail option volumes skyrocketing, there was always a risk of regulators questioning the utility of options turnover, whether they help in capital formation, and doing something to curb options trading." There it is, in the founder's own conditional: the suspicion that the world's busiest derivatives market contributes nothing to funding actual businesses - that the volume is not finance but pure transfer, a wealth-shuffling machine wearing a stock exchange's clothes. Stock markets justify themselves by channeling savings into companies. An options expiry funds no factory, hires no worker, builds no road. When the house's own founder concedes the question is legitimate, the question is settled.

And he saw the end coming - he says he predicted it annually. "Another year where I was pessimistic about the business has passed, and it's been another year where I've been pleasantly surprised... The time has finally come for business to pivot." The house knew the casino years could not last, kept collecting while they did, and wrote it all down. You cannot accuse this dealer of deception. The disclosure was excellent. The revenue was collected anyway. That is the whole industry in one letter.

The moat made of candor

The letter frames the company's philosophy as a competitive moat: "you don't need to mine, harvest, or profile personal data, nor rely on dark patterns and constantly trigger customers to trade to be a profitable business. This philosophy of ours has today become a strong moat thanks to customer trust." Believe it - the trust is real, and earned. Then notice what the moat protects: the same 48% net margin on the same order flow from the same 91%-loss segment. Candor about the odds does not reduce the take; it deepens the trust that keeps the order flow loyal. The most trusted dealer in the country is still the dealer. The letter says all of this, openly, and trusts you to hold both thoughts. This file simply holds them.

The pivot, priced

What does the house do when the regulator cuts into the casino? It adapts - and the letter lists the new floors being built. Zerodha's margin trading facility, launched nine months before the letter, already held ~₹5,000 crore of book, about 5% of the market - the lending-to-trade business, growing at machine speed as the options business gets taxed. The dealer does not leave the table. It finds the next game on the floor.

To be fair to the letter, it also contains the industry's best argument for itself: Zerodha "don't do unto others what you don't want done unto you" - no data mining, no dark patterns of its own, no investor-pumping ad spend. If every dealer operated that way, this file would be shorter. But the letter's own numbers close the argument the other way: even the best dealer, run by the industry's most candid founder, earned a 48% net margin in FY25 from an order flow generated mostly by customers the regulator says almost all lose. The house always wins. The honest house will tell you so itself - on its blog, once a year, between the anniversary photographs.