In 1999 we were members of the National Stock Exchange – a membership got by writing a simple exam in Raja Shivaji School aka King George at Dadar/Matunga.

WE went for a meeting to Citibank and they showed us a machine which allowed you to buy a refrigerator or aircon without going to the shop! (hello kids, 1999 few people had a cell phone, and internet had not even made its way).

Then we went to Merrill Lynch. I asked them “How many offices will you have in India” and the gora said “about 8000”.

We came back to the office and decided that ‘brokerage’ will become a commodity, and we the Rolls Royce of the brokerage industry (we were charging 2.5% brokerage) will have to shut down or learn a new trade. 37 was too old to learn a new ‘way’ of brokerage business. We were forced to retire.

My study of the situation was right – brokerage rates fell from 2.5% to now ZERO. With our kind of “investment delivery” business, we would not have survived. We knew that Kotak, Icici, Hdfc…and the millions of others who came and perished..may or may not make money but we would be dead. Killed I mean. We believed that you needed to invest for real long periods so brokerage costs did not matter – I have Gillette bought at Rs. 70 sometime in the 1990s I think. Does it matter whether I paid 2% or 2.5% brokerage. However, if you are a trader brokerage is of paramount importance. I have a sensible portfolio but I do not think I pay more than Rs. 3L as brokerage in a year. However my ‘brokerage’ is high and includes the trading skills of my broker. Investing skills are mine, and in that the brokerage, does not matter. However, I am vintage. Kids today with 1/100th my portfolio trade 1000 times what I do. Trading and FnO is MORE THAN 95% OF The market volume now. For us it was about 10%. We had to die.

Enter Zerodha. When they came in I chuckled. I knew his model could not make money if he hired the best of people – salaries alone would kill other than technology costs. I did not realize that such a huge gullible “trading” community existed. They do.

They have banished Icici securities to the number two position. Knowing Nirmal Jain of Indiainfoline Icici will soon go to the third spot. Kotak is no longer in the top 5.

Technology has made trading easy and investment very difficult. How does one handle that?

Companies not willing to spend money on technology or people will perish. Icici securities will look profitable because of the USURIOUS ‘demat charges’ – I pay that too – for having an account with them. No. I am not cribbing about the cost – the convenience, tech is awesome. Far, far superior to Hdfc bank. I deal with both, and feel reasonably secure. No, I don’t have the guts to shift my demat account to zerodha. My trading volumes do not justify a shift.

So the pecking order has changed and will change even further. The new entrants will be from tech fields who will not consider 30% Roce their birth right. If you charge a %age of trade done, you will chase more business – and trading is a funny game. If you are a bad trader, you will lose more if you trade more – friction costs as they call it.

The inhibitors in India for trading are of course trading costs and STT. STT is a killer for the big trader. In 1999 a big trader meant a guy who did Rs. 1 crore of trade. Today every kid does more than that per day. Things have changed, and the leaders have changed too.

Watch this space. Amazing amount of traction will happen. Welcome to the action.