'There Is No Risk Model': Zerodha’s Nithin Kamath Flags A Silent Threat In Indian Stock Market

Key Highlights

• As a result, leveraged trading activity appears to have migrated from futures and options into the cash market via MTF. Under the MTF framework, investors typically pay only 20–25 per cent of a stock’s value upfront, with brokers financing the rest.
• Regulations permit leverage of up to five times on approved securities.
• Unlike derivatives positions, which are marked to market daily and often closed quickly, MTF positions can remain open for extended periods, sometimes for months, allowing risk to accumulate quietly over time. Kamath clarified that his concern is not with the existence of MTF itself, but with the lack of a comprehensive, system-wide risk framework governing its use.
• He argued that intense competition among brokerage firms has resulted in what he called a “race to the bottom”, where nearly all brokers offer the maximum leverage permitted.
• Those who adopt stricter risk controls risk losing clients, leaving little scope for meaningful differentiation in risk practices. He also noted that MTF involves several compounding risks.