Zerodha’s late MTF entry still nets 5% market share but Nithin Kamath flags cost blind spot – News Air Insight

Zerodha’s founder and CEO Nithin Kamath has revealed that the company’s Margin Trading Facility (MTF) has quietly gained traction despite limited promotion and a late entry into the segment by the discount broker. He also highlighted the pricing blind spot among retail investors.

In a recent post, Zerodha said it launched its MTF product about a year ago and has already captured around 5% of the market, even though it was among the last brokers to roll out the offering and has not actively promoted it on its order screens or platforms. However, growth in the segment has since plateaued, mirroring the broader industry trend.

“We @zerodhaonline launched our MTF product a year ago. Despite being one of the last brokers to offer this and without actively promoting it on the order screen or elsewhere, we captured 5% of the market. But growth has plateaued along with the broader industry,” Kamath tweeted.

What stood out, according to the brokerage, is that most customers appear largely indifferent to MTF brokerage costs or are unaware of what they are being charged. Zerodha currently levies a brokerage of 0.03% or Rs 20 per trade on MTF, in line with its regular equity trades. The broker noted that if it were to charge a flat 0.1%, its brokerage revenue from MTF could be as much as 10 times higher, given that many competitors already operate at significantly higher rates.

Also read: Despite repeated nudges, 62% of Zerodha users with holdings still don’t have a nominee: Nithin Kamath

“One surprising thing I have noticed is that customers do not seem to care about MTF brokerage or know what they are being charged. Our current brokerage is 0.03% or Rs 20. At a flat 0.1%, our brokerage revenue could be 10 times higher. These rates are much higher elsewhere,” Kamath said.

Despite this, Zerodha said it has chosen to keep pricing simple and uniform, avoiding complications such as position size caps or differentiated pricing for margin trades. All customers are offered the same brokerage rate, a move the firm says helps maintain transparency and operational efficiency. Zerodha offers its brokerage services through the Kite platform.

“We have kept the brokerage rate consistent with our other trades and avoided complications like position size limits on MTF trades. All customers get the same rate, making operations simple,” the founder added.

The commentary sheds light on a broader issue in retail trading, which is that while leverage-driven products like MTF are gaining popularity, cost awareness among investors remains limited, even as brokerage charges can materially impact long-term returns.

Zerodha vs competitors

What is MTF?Margin Trading Facility (MTF) allows investors to buy shares by paying only a part of the total value, with the broker funding the balance. The shares are held as collateral, and investors pay interest on the borrowed amount until the position is squared off or converted into delivery. MTF is typically used to amplify exposure, but it also increases risk and cost, making pricing and discipline crucial for traders.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)