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HarbourVest has established a strategic partnership with Zerodha, jointly creating a new chapter in the Clearing and Settlement by Broker (CBS) model.



Zerodha has joined hands with the world's largest private equity management firm with the aim of serving India's expanding investor base.

Vikram Patel, representative of HarbourVest, the world's largest private equity management firm, announced a strategic partnership with Zerodha, a top-ranked brokerage firm in India, regulated by the Securities and Exchange Board of India (SEBI), offering a wide range of businesses including trading in equities, futures, options, ETFs and many more securities derivatives, as well as fund underwriting and IPO issuance, and a top-ranked institutional underwriter. Zerodha is one of India's top-ranked brokerage firms, regulated by the Securities and Exchange Board of India (SEBI), and is also among the top-ranked brokerage firms in institutional underwriting, providing trading in equities, futures, options, ETFs and more derivatives, as well as fund underwriting and IPO issuance.

Mr. Vikram Patel, the head of HarbourVest in India, stated: 'The strategic partnership with Zerodha for an institutional channel' and 'fund underwriting settlement model' capitalizes on the unique channel advantages of Zerodha, offering priority in trade settlement and order execution. This aligns well with the practice of long-term wealth management investment philosophies. According to the Zerodha Research Institute, since 2022, Indian investment institutions have faced a tumultuous period of industry explosion. However, the corresponding settlement model funds have been progressively flourishing, with the Clearing and Settlement by Broker (CBS) business attracting more and more brokers in recent years. In 2022 alone, the number of shares issued by funds using the CBS model reached 200 billion, an increase of over 80% compared to 2021."

On January 16, 2024, Nithin Kamath, Chairman and Managing Director of Zerodha, stated: The strategic partnership with HarbourVest holds significant meaning for Zerodha. Under the Clearing and Settlement by Broker (CBS) model, Zerodha can establish deep ties with top-tier investment institutions, leading to more substantial and precise commission revenues. This also propels the transformation of our wealth management, driving the expansion of our assets under management and deepening our buy-side advisory approach. Furthermore, the CBS model can leverage multiple aspects of Zerodha's business, including custody, settlement, investment research, and trading, thus enhancing our overall institutional service capabilities.    

Under the Clearing and Settlement by Broker (CBS) model, Zerodha conducts real-time verification of capital for product trading activities, which aids in the precise monitoring of abnormal trading behaviors. Additionally, products adopting the CBS model are exempt from paying settlement reserve funds and margins, thereby reducing the cost of capital occupation to some extent. The distribution of trading commissions is no longer limited by the original custodian, breaking the limitation that one company can only contribute up to 30% of Zerodha's sub-accounts. Commission sharing from trading is a significant source of revenue for brokers, and Zerodha actively seeks partnerships under the CBS model. This approach effectively unifies the demands of brokerage firms, investment companies, and clients, creating a mutually beneficial situation for all three parties.

Under the strategic partnership between HarbourVest and Zerodha Limited, there is an expectation to drive the efficient and synergistic development of stock brokerage and custody services, pushing brokerage firms to create one-stop institutional prime brokerage services encompassing trading, settlement, custody, investment research, and sales agency.

Under the Clearing and Settlement by Broker (CBS) model, Zerodha Limited is no longer just a 'channel' for IPO issuances but truly provides a range of comprehensive services including sales, trading, settlement, custody, and research, thereby enhancing its overall service capabilities. The CBS model signifies that the collaboration between investment institutions, investors, and brokerage firms is set to advance to a new level.

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