Zerodha CEO Nithin Kamath Considers This As The 'Heart Of Broking Operations'

Zerodha Founder Nithin Kamath revealed that he considered the core order management system (OMS), and  risk management system (RMS) as the heart of every broking operation in India.

Delving into this further, he shed light on how most brokers don't actually own their entire tech stack. There's usually a third-party vendor providing the OMS, and RMS.

"If this breaks, trading stops. Vendors in our business include Omennest, Kambala, 63 Moons, Rupeeseed, etc. OmneNest, which we use has about a 70 market share," Kamath said.

He likened the how OMS/RMS to core banking systems that Infosys or Oracle provides for banks, whilst revealing how centralisation leads to tackling higher risk as a broking platform.

However, he also mentioned that it was a tricky business to create your tech-in-house.

"Many brokers are trying to build this tech in-house. We've been working on it for almost four years now. It's extremely hard and complex. More importantly, it involves taking serious risks with your business during the transition. You're migrating live client positions while ensuring nothing breaks. One mistake and you could have trades going wrong, margin calculations failing, or clients unable to exit positions," he said.

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“Constant regulatory changes make this even harder because they need to be incorporated into the system, and each change is a potential breaking point,” he noted. 

Making the core of every debate for business using vendors, “Why bother with the time, effort, and risk to business continuity when no one really cares if you're running the complete tech stack or not? Clients don't ask. And vendor costs haven't caught up with the phenomenal growth in brokers over the last five years either, so the immediate financial case isn't obvious," according to Kamath.