Zerodha Blocks New Purchases Of Illiquid Penny Stocks And Option Contracts To Limit Frauds

On Sunday, CEO and Founder Nithin Kamath tweeted that Zerodha Broking Limited has blocked new purchases in all illiquid penny stocks and illiquid option contracts as they can be used for "executing trades to intentionally create losses, both by phishers and fraud advisers."

"A new type of scam that everyone trading needs to know - fake sites that mimic the look of login page of large brokers sent via SMS/email. Login credentials are stolen and trades in scammy penny stocks executed to intentionally cause losses," Kamath tweeted.

"We have blocked new purchases in all illiquid penny stocks and illiquid option contracts that we believe can be used for executing trades to intentionally create losses, both by phishers and fraud advisers. Hoping other brokers do the same to stop this sudden increase in frauds," he added.

Mixed reactions were seen from customers on the discount broker's decision. While some welcomed the approach to protecting potential victims, others said that Zerodha should not take on the role of a market regulator and instead provide complete access to the markets.