What Sebi’s ‘hard ceiling’ of 15% on open interest means for growth of brokers, clients: Zerodha’s Nithin Kamath explains

Zerodha founder and CEO Nithin Kamath said the 15% open interest (OI) limit at the brokerage level puts a hard ceiling on the extent to which a brokerage firm can grow and the pace of that growth. While the restriction limits scale, it ultimately benefits consumers by reducing concentration risk and preventing any single broker from becoming too dominant.Kamath also referred to setting up a unique company as a unique company and at the same time provided insight into what is involved.

“Broking is a unique business because there is a hard ceiling on how much we can grow and the speed at which we can grow. What most people don’t realize is that SEBI has set an open interest (OI) limit of 15% at the broker level,” Kamath wrote on his official X-handle on Tuesday.”No single broker can have more than 15% of the total market OI. This restriction is in place to limit the risk of concentration if a single broker becomes too large. Concentration is good for business, but ultimately harmful to consumers,” the tweet said.

Drawing a parallel with UPI applications, Kamath says the National Payments Corporation of India (NPCI) has imposed a similar restriction on third-party UPI applications, although the measure was never implemented.

“This is similar to the 33% market share cap imposed by NPCI on third-party UPI apps. That measure was never implemented as it would have meant that UPI apps would have halted transactions, but in our case the cap applies,” Kamath said.

Also read: Zerodha’s late MTF entry still gives 5% market share, but Nithin Kamath flags cost blind spot

How has Zerodha benefited from this?

Kamath said the only way individual brokers can grow is if other brokers grow too. Fortunately for Zerodha, the overall market has grown, helping the company maintain its 15% OI market share over the past five years.

“If we want to grow, the overall market has to grow, and that means other brokers have to do well too. While we’ve reached almost 15% of OI in the last five years, fortunately the overall market has grown and we’ve benefited from it,” Kamath said.

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