E-trading: A perfect union between data and brokerage companies

Islam Zween, Argaam CEO

In 2000, the young entrepreneurial friends Indian Rajiv and Brazilian Marcelo dreamt about being like the founders of Fidelity Investments, the largest asset manager in the world with 5.4 trillion in assets under management, and $14 trillion in assets under administration.

After their graduation ceremony from one of the Indian universities in 2005, the pair parted ways with Rajiv settling in Mumbai to sow the seeds of his investment plans. He launched what it materialised later as a new era and a revolution in India’s E-trading. Marcelo opted for the Brazilian market to practice his favourite brokerage strategy by using his mathematical mind to determine if a stock price is low enough or high enough. The road for both isn’t easy. It was long and hard.

Five years on, both entrepreneurs knew exactly the key challenges they faced. For Rajiv, innovating an online trading platform that can consolidate several features, services and investment portfolios in a seamless integration and based on in-depth analytics. It was a critical task that would lead him to an invention that would later help change India’s online brokerage landscape.

As for his friend Marcelo, the challenge was more intellectual than analytical. He wanted to lay the foundation of a big data company that would serve as a platform of evergreen learning materials, research content and quality data, mainly timely and accurate, to become the bedrock of all informed decisions by investors and trading firms.

Their appetite for India’s market, in particular, has been whetted by massive economic and social changes in recent years, which helped the country to be among the world’s leaders in financial-technology investments.

The real turning point for Rajiv took place in 2010, when he founded Kite Connect, the E-trading firm that uses algorithmic trading  to execute today 10 million orders per day, manage portfolio, and stream live market data. He joined forces with other partners later to found Zerodha, as an extension to Kite Connect.

“From working in a call centre to laying the foundation for Zerodha in 2010. CEO Nithin Kamath, built a $2 billion dollar valued company in just 13 years,” Rajiv wrote on his LinkedIn in 2023.

Though unlisted in India, Zerodha has indeed proved resilient in India’s turbulent tech firms’ scene. Economists say it’s thanks to the company’s ‘camel’ approach, as it has never been in a rush to make large profits. Today, it clocked more than $900 million in revenue and more than $400 million in net profit, according to the latest available data.

Nithin’s initiatives in the Indian market ticked a key box in the customer’s satisfaction criteria in E-trading: reassurance. Members value reliability in terms of accurate and up-to-date, educational, and informative data, efficient trade execution, and last but not least very low cost.

Zerodha charges only $200 per member in the US and only 200 rupees (around $3) in India, which has surpassed China as the most populous country in the world. The company today boasts about 10 million members.

Marcelo was doing very well as well in Sao Paulo. He made his entrepreneurial dream come true in 2005 by establishing XP Inc, which offers fixed income, equities, investment funds, and private pension products, as well as offers wealth management and other financial services. Today, the company has more than 3 million active customers and more than $130 billion in custody. The company’s charge is not low though; $5000 per member as it covers a wide array of financial services in just one screen for its customers. It operates in several countries, mainly in Brazil and the United States.

Jump to 2016, the good old friends had a video call in which they recalled their dreams and ambitions. The thing is their business models complement one another and realised that the integration between data and e-trading was a strategic shift for both of them and how technology can make a big difference in the sector, which has greatly eclipsed the traditional floor trading.

They must be recalling now in 2024 how they decided to play the trading game with the winner-takes-all approach, striking the right balance between all strategic players: the exchanges, trading firms and informed traders.

Note : "The writer used fictional names for illustration."

Islam Zween, Argaam CEO.