In a post on X, Kamath said that while investors often assume brokers control their entire technology stack, the reality is very different. Most brokers rely on specialised third-party vendors for their core order management system and risk management system, commonly referred to as OMS and RMS.
These systems act as the backbone of a broking operation, similar to how core banking software from firms such as Infosys or Oracle underpins banks.
Kamath said the OMS and RMS together form the “heart” of a broker’s business. If these systems fail, trading comes to a complete halt. Vendors such as OmneNest, Kambala, 63 Moons and Rupeeseed dominate this space, with OmneNest alone estimated to have around 70% market share. Zerodha itself currently uses OmneNest for its core systems.
The Zerodha founder explained that while many brokers talk about building these systems in-house, the process is far more complex than it appears. Zerodha has been working on developing its own OMS and RMS for nearly four years, and Kamath described the effort as extremely difficult and risky.
The biggest challenge lies in migrating live client positions without disrupting trading. A single error during the transition could lead to incorrect trades, faulty margin calculations or situations where clients are unable to exit positions.
Adding to the complexity are frequent regulatory changes. Each new rule or compliance update has to be seamlessly built into the system, and every change increases the risk of something breaking. Kamath said this makes in-house development particularly challenging for large, established brokers that already handle massive daily trading volumes.According to him, it is actually easier for a broker starting from scratch to build its own OMS and RMS than for a scaled-up player. For large brokers with lakhs of active clients, the process is like “rebuilding the plane while flying it”, where business continuity cannot be compromised even for a moment.
Kamath also highlighted a deeper incentive problem. For most brokers, there is little immediate pressure to take on such a high-risk project because clients rarely ask whether a broker owns its full technology stack. At the same time, vendor costs have not risen in line with the explosive growth seen in the broking industry over the past five years, weakening the financial case for investing heavily in in-house systems.
As a result, many brokers continue to depend on third-party vendors despite the strategic importance of the technology.
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