Most traders believe the biggest risk in the market is price volatility. But there’s another, less talked about risk—when your broker acts without warning, makes a miscalculation, and leaves you to bear the loss.
We see these stories more often than we should. Traders, especially those dealing in derivatives, assume that their broker’s risk management systems (RMS) will function transparently and fairly.
But what happens when that system turns against you? What happens when your positions are squared off at night without any alert, without even giving you a chance to respond?
This is one such story. Not of a fluke win or a trading success, but of fighting back when things went unfairly wrong.
It’s about Saurabh, a commodity trader who trusted the system and was let down. It’s also about how we stood by him and made sure he didn’t walk away with just a loss.
And yes, this case involves Zerodha, one of the most popular names in the Indian broking industry.
The platform that prides itself on being tech-forward, transparent, and trader-friendly. But what happened with Saurabh tells a very different story.
“They took my positions out—just like that. No message. Nothing.”
Those were Saurabh’s first words when he came to us. His voice had frustration in it, but also confusion. He wasn’t just angry, he genuinely didn’t understand how something like this could even happen.
It was April 2nd, 2024. Saurabh was holding 6 lots of Silver May Futures, and everything seemed in order.
His trades were hedged, margins looked decent, and he’d been careful throughout the day.
Earlier that morning, he’d tried exiting a position, but cancelled the order when it triggered a margin call. That was around 10 AM.
He knew the drill, managed the risk, and moved on
Then, later that evening, he placed another exit order at 7:49 PM. This time, it went through.
By 10:33 PM, without a single margin alert or message, Zerodha’s RMS system squared off all six lots, booking a loss of ₹10.39 lakhs.
He found out the next morning. And for a moment, he genuinely thought it was a technical glitch.
The Gaps in the System
When we dug into the details, what stood out was the complete lack of communication at the most crucial moment.
Zerodha’s RMS team argued that once the hedge was broken at 7:49 PM, the margin requirement jumped to over ₹51 lakhs, while Saurabh only had about ₹38 lakhs in the account.
That shortfall, they claimed, triggered the square-off at 10:33 PM.
Fair enough. But where was the alert?
Earlier in the day, they had alerted him within seconds of a margin shortfall. Why not this time?
Their explanation: “Our system alerts after every 5% increase in margin shortfall. Since the alert was already triggered at 123%, the next one would only come at 130%. The square-off happened at 127%.”
So, in short, we didn’t tell him, because the system didn’t feel like it.
And that was exactly the problem.
The Real Blow: Squared Off More Than Needed
It didn’t stop there.
In what looked like a hasty or poorly executed RMS action, Zerodha squared off all six lots, when in reality, only four lots needed to be closed to cover the shortfall.
Even Zerodha’s team admitted later that two lots were reinstated within a minute, which only added to the confusion.
“If they knew they made a mistake, why wasn’t the rest reversed too?” Saurabh asked.
There was no answer. No justification. No refund.
Just damage.
Taking It to Arbitration
After his internal ticket went unresolved, Saurabh approached us.
We reviewed everything—from trade logs and alert records to RMS policies and SEBI guidelines. It was clear: Zerodha had acted without giving the trader a fair opportunity, and more importantly, without following a consistent system of communication.
We filed for arbitration under the Multi Commodities Exchange (MCX) framework, which is SEBI-recognised.
Zerodha, represented by their legal team, tried to defend the square-off based on RMS policies, terms of use, and internal thresholds.
They argued that they had the right to liquidate positions without prior notice.
But the arbitrator didn’t just look at the letter of the law, he looked at the spirit.
The Turning Point
One question changed everything:
“Why didn’t you notify the trader about the margin shortfall when it mattered?”
They couldn’t answer it convincingly. The arbitrator noted that:
- The RMS system failed to communicate promptly.
- The square-off was excessive—more lots were sold than necessary.
- The broker could’ve given the trader time till the next trading session.
- No policy document clarified exactly how much time a trader is given before square-off.
Zerodha had leaned too heavily on automation and forgotten there was a human at the other end of that system.
The Final Award
The arbitrator ruled in favour of Saurabh.
Zerodha was directed to pay ₹10.39 lakhs to compensate for the full loss incurred due to the unjust square-off.
For Saurabh, it wasn’t just about the money. It was about accountability.
He wasn’t fighting the market. He was fighting for fairness—and he won.
Why This Case Matters
This case isn’t just one man’s story. It’s a reminder for every trader who believes that once you place your funds with a broker, everything is being handled in your best interest.
That’s not always true.
Risk systems are built by people. Mistakes happen. But when communication breaks down, and traders are left in the dark, those mistakes become violations.
Whether it’s Zerodha or any other broker, the rules are clear: transparency, timely alerts, and fair handling of client accounts are non-negotiable.
If they fail at that, you have every right to hold them accountable.
A Final Word
If you’ve experienced something similar—unexpected square-offs, poor margin communication, or unexplained losses, don’t assume it’s your fault.
Sometimes, it’s not a trading loss. It’s a system failure.
And just like Saurabh, you have the right to fight back. And win.
