If you’ve seen Scam 1992, you probably have a faint idea of what Stock markets are. Comeon, Pratik Gandhi’s sassy portrayal of Harshad Mehta had all of us going gaga over the stock markets. He played the role of one of India’s richest stock brokers, whose involvement in Indian securities scam was the reason for his downfall, and eventual demise. Keeping depressing stories for another time, let us talk about the underlying topic that manages to come up in conversations every time when your chachas and mamas come home- the stock markets!
Is money the first thing that comes to your mind when you think about stock markets? If yes, how do you think people go about trading their stocks for money in a market? Through Brokers- the most important entities in a stock market. They are the ones who help you buy and sell shares.
What exactly does a stockbroker do?
Simply put, they trade on behalf of others, acting as middlemen, or as your chachas might say, the dalals. A typical broker in the stock market:-
- Provides trading services and in return, are compensated via commissions or fees by the investors.
- Besides executing client orders, might as well furnish investors with research, investment plans, and market analysis.
Several brokerage firms also include customized solutions to their high net worth clients. Since Securities exchanges only accept orders from firms or individuals who are a part of the exchange, individual traders and investors need the services of such brokers.
How did the conventional stock markets work?
In India, the conventional stock markets revolved around traditional brokers who dominated the markets till the beginning of the 21st century. These were the giants who claimed an extensive monopoly in the Bombay Stock Exchange with their immaculate market presence and corporate repertoire. As the Dalal Street giants, you would expect these firms to demand an extremely high commission for every order, with different remuneration charges for people with varying pocket sizes.
If you happened to be a beginner in the stock market, with a few stocks to trade in, you would be charged differently than a high-end biggie in the market with some stocks worth crores. In addition, the dominance of traditional brokers in the market prevented the opening up of the markets for everyone. Since being technology-friendly was never a priority for the traditional brokers, it was difficult for a person sitting in a small village in another part of the country, with a very small amount of residual income to indulge in the share markets. The existing stock-broker services usually used outdated technology to provide assistance, disallowing any development into the sluggish market at that time.
Change of guard in the secondary market; A small dive into Zerodha’s story
Like any volatile system evolving into a better, more stable one eventually, the stock market in India witnessed an impressive change of guard over the decade. With the world opening up to technology and the internet, it was only time that the Bombay Stock Exchange unlocked its doors to the general public.
The first company in India to provide a hassle-free, low brokerage trading platform was founded in 2010. Zerodha, a Bangalore-based company started by Nithin Kamath proved to be a pioneer firm in online discount trading. With a moderate investment in 2008, while the stock market was still low, the young entrepreneur decided to involve a technology-friendly interface that would open up the realm of stock markets for everybody in India. Not to sound parochial, but our conventional, crazy on numbers Gujarati brokers were about to witness a massive shift of paradigm that trashed every age-old concept of stock broking, enabling a new kind of freedom for investors. The first modern solution by Zerodha was dismantling the regressive rule of charging differently for varying pocket sizes by awarding a fixed price of twenty rupees for every order.
Imagine being an amateur investor in 2010, suffering the high commission rates of the conventional brokers who enjoyed absolute authority in the market. Suddenly, you discover this reliable user interface on the internet with a drastically low commission rate, doing the same job as any other traditional broker! The company was destined to hit a jackpot with its customer-first policy, and in a matter of a few years became the broking firm giant it is today.
The rise of another online discount broking firm:
A similar case involving another D-street newbie turned giant reflects the importance of innovation in otherwise primitive practices. Upstox, another online discount broking platform established in 2016, abolished the practice of charging a fee to open an account on its interface. With absolutely zero investment into opening a trading account, the company provided everybody an incentive to indulge in the stock market with no potential excuse! If that is not a breakthrough, what is?
What is the one thing that changed the game for these newbies in the market?
To be able to redefine the market in a span of 10 years, from being nobodies in the game to acing the system better than anyone in history, this is a story that topples any and every conventional notion that might prevent a beginner from thinking big. What is that one thing that changes every dynamic of the past, rebrands the whole market, and encompasses a larger audience than was ever imagined? It is the idea! It is that one unabashed thought, and your passion to go after it that has the potential to revolutionize the course of your action.
Our world is changing rapidly, taking giant leaps in directions we never knew existed. Where traditional methods have been proven outdated, new systems are facing immense scrutiny and competition. We are on the cusp of it, the transition being a pivotal part of the race for survival. It was critical for stockbrokers in the 90s and early 20s to accommodate advancements into the system. But when they failed to do so, owing to reasons like corporate arrogance, more advanced companies entered the market and changed the game.
Was it difficult for these traditional giants to invest in a stocks trading platform for the public? Did they suffer from diminished funds that prevented them from doing things differently? Definitely not! All it took was one idea, a simple, inclusive, and modern idea to topple the charts and win over people’s trust. If you are an aspiring entrepreneur and have a stellar idea that you can work passionately for, it is important to take the plunge. You might not be the first one to start a particular type of business and there might be several corporate giants dominating the market extensively, but if there’s a vision that does not fear failure, there’s your dream company ready to create a revolution of its own.