How to respond when Zerodha emails asking for clarity on your trades

When Zerodha emails you asking for clarity on specific trades, an exchange surveillance system or Zerodha’s own monitoring has flagged those trades as unusual, and SEBI rules require the broker to ask you to explain them and to report your answer, or your silence, to the exchange. You have 3 working days to respond, and if you do not, your trading account may be blocked until you do. The email is a regulatory request, not by itself an accusation of wrongdoing.

This guide covers why surveillance flags trades, what the email actually asks, how to respond truthfully and inside the deadline, what happens if you stay silent, and how to confirm the email is genuine before you act on it. The mechanics matter because the exchange, not Zerodha, makes the final call on whether a trade is non-genuine, and that verdict binds you. Getting your explanation right, and on time, is the difference between a closed query and a frozen account.

Conflict-of-interest disclosure. This guide is published by the WebNotes Editorial Team for informational purposes and is written independently. WebNotes operates a Zerodha account-opening referral programme, disclosed on the pages that carry the referral link; this guide does not carry it and earns no referral commission from the procedure described here.

Why surveillance flags trades in the first place

The alert does not start at Zerodha. The exchanges, NSE , BSE and MCX, run their own surveillance systems that generate alerts on internal criteria such as the number of trades, the traded volume and the price movement in a scrip. The exchange shortlists the client codes behind a flagged pattern and sends that list to the broker. Zerodha then has to seek clarification from each flagged client and communicate the response back to the exchange. So the email you receive is the broker end of an exchange-driven process, not a decision Zerodha took on its own.

Several patterns commonly trip a surveillance alert. Unusually high volume or a concentration of trades in a single illiquid scrip stands out against that scrip’s normal turnover. Reversal trades, where a buy and a matching sell cancel each other out in market position over a short interval, draw attention because they can create artificial activity without genuine economic purpose. Self-trades, where the same beneficial owner is on both the buy and sell side, and circular trading, where a closed group of connected clients trade among themselves, both manufacture volume that misleads other participants. Trades clustered around a price-band or circuit limit, where orders push a stock to its upper or lower circuit , get flagged because band moves are a classic manipulation vector. Trades that follow an unsolicited stock tip circulating on social media or messaging groups can flag too, because pump-and-dump operators rely on tipped retail buying to exit.

The statutory backbone is the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, notified on 17 July 2003 under Section 30 of the SEBI Act, 1992. Regulation 3 prohibits dealing in securities in a fraudulent manner, and Regulation 4 prohibits manipulative, fraudulent and unfair trade practices, including creating a false or misleading appearance of trading through devices such as circular and synchronised trades. The PFUTP framework is what surveillance exists to enforce, and it is why the exchange wants your explanation on record.

What the email asks, and why

The email names the scrip or contract, the dates, and the trade pattern the exchange has questioned, and it asks whether you were fully aware of your dealings in that security. In plain terms, it wants your rationale: why you bought, why you sold, and what view drove the trades the system flagged. It establishes genuineness. If your trading had a real economic basis, an honest account of that basis is usually all the exchange needs to close the alert.

Some clarification emails also ask for supporting documents, a bank statement most commonly, where the exchange wants to confirm the source of funds behind the trades or rule out a financing arrangement between connected parties. Provide a document only when the email asks for it, and provide exactly what is asked, no more. Zerodha’s support documentation describes the email’s purpose but does not publish a fixed template, because the questions are tailored to the specific alert; your actual email carries the precise questions you must answer.

Step-by-step procedure

The numbered box at the top of this guide gives the sequence. The detail below expands the steps that decide the outcome: confirming the email is real, reconstructing the flagged trades, and writing an explanation the exchange will accept.

1. Confirm the email is genuine first

Before you answer anything, confirm the email is actually from Zerodha. Surveillance-themed phishing exploits the urgency of a regulatory deadline. Check the sender domain, do not click links inside the email, and instead open Console or Kite by typing the address yourself to see whether a matching query exists. The decisive test is what the email asks for: a genuine trade-clarity email asks you to explain your trades. It never asks for your password, your login OTP, your CDSL TPIN, or a transfer of funds to “release” or “secure” your account. If the message demands any credential or a payment, it is a scam; treat it the way the dedicated guide on verifying a Zerodha email sets out, and report it rather than reply.

2. Read what the exchange has flagged

Identify the exact scrip or contract, the precise dates, and the trade pattern named in the email. A clarification on a reversal-trade alert reads differently from one on a volume or price-band alert, and your answer has to address the specific concern. The dedicated note on the Zerodha reversal-trades email covers that pattern in depth; match your reading of the email to the right category before you draft a word.

3. Pull your own trade records from Console

Open your tradebook and the contract notes in Console for the flagged scrip and dates. Reconcile every buy and sell so your written explanation matches your real order history exactly. An explanation that contradicts your own tradebook does more harm than no explanation, so build the answer from the records, not from memory.

4. Write a truthful, specific explanation

State, trade by trade, why you acted: the view you held, the trigger you saw, the reason you exited. Keep it factual and specific. Do not copy a generic template, do not embellish a rationale you did not have, and do not omit a trade because it looks awkward. The exchange is testing whether your trading was genuine, and a precise, honest account of genuine trading is exactly what closes the alert. If the pattern flagged was an accident, an inadvertent self-trade between two of your own accounts, for instance, say so plainly and explain how it happened.

5. Respond through the channel the email specifies

Reply to the email directly, or raise a Zerodha support ticket answering each listed question, according to what the email instructs. If you need to attach a bank statement or other proof, attach only what was requested. See how to create a Zerodha support ticket if the email routes you through a ticket. Send your full answer in one response rather than in fragments.

6. Submit within 3 working days

Send your response within 3 working days of receiving the email, per Zerodha’s support documentation as of June 2026. Zerodha then forwards your clarification, or the fact that you did not respond, to the exchange. The deadline is firm because Zerodha itself has a reporting window back to the exchange; a late reply can land after Zerodha has already had to report a non-response.

7. Keep a copy and track the acknowledgement

Save your reply and note the ticket number. Zerodha sends an acknowledgement once your response is received. Retain both in case the exchange comes back for more detail, which it can, since the broker is only the conduit and the exchange holds the final say.

What happens if you do not respond

Silence has defined consequences. Zerodha’s support documentation states that your trading account may be blocked if you do not provide the required clarification within 3 working days. The block stays until you respond, so non-response does not make the query go away; it stops you trading while the query remains open.

For trades the exchange treats as abnormal, the financial exposure is sharper. Zerodha reserves the right to withhold an amount equal to the value of the flagged trades or the resulting profit or loss, and it must inform the exchange of that decision, with its rationale, within 1 day of the withholding. This is most associated with reversal-trade alerts, where the reversal-trades framework describes trades that cancel each other in position, often between connected clients in illiquid contracts, with a consistent gain for one side and loss for the other. The withheld funds are not a penalty Zerodha imposes; they are held pending the exchange’s determination.

The decisive point on authority: the final determination of whether a trade is abnormal or non-genuine rests with the exchange, and that verdict is conclusive and binding on all parties. Zerodha collects and forwards your explanation, but it does not adjudicate. That is why a complete, on-time, truthful response matters more than a defensive one; the audience for your explanation is the exchange, and the exchange is the body whose decision you are bound by.

The broker’s surveillance obligation, and why it is mandatory

Zerodha does not send these emails by choice. SEBI circular SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2024/96, dated 4 July 2024, titled “Measures to instil confidence in securities market: Brokers’ institutional mechanism for prevention and detection of fraud or market abuse,” requires every stock broker to put in place, under Chapter IVA of the Stock Brokers Regulations, systems for surveillance of trading activities and internal controls, defined obligations on the broker and its employees, escalation and reporting mechanisms, and a whistle-blower policy. The circular draws authority from Section 11(1) of the SEBI Act 1992, Regulation 30 of the SEBI (Stock Brokers) Regulations 1992, and Regulation 51 of the SECC Regulations 2018.

The circular applies in a staggered manner by the broker’s active client base. Qualified Stock Brokers had to comply by 1 August 2024. Brokers with more than 50,000 active unique client codes had to comply by 1 January 2025; those with 2,001 to 50,000 by 1 April 2025; and those up to 2,000 by 1 April 2026. As a Qualified Stock Broker with a client base running into the millions, Zerodha sits at the strictest end of this regime, which is why its trade-surveillance and clarification process is systematic rather than occasional. The framework sits alongside the older exchange surveillance measures, the additional and graded surveillance measures on volatile scrips and the broader surveillance and trading-risk framework , that already govern which securities draw extra scrutiny.

If you disagree with the outcome

The exchange’s verdict on a flagged trade is binding, but a separate grievance path exists for disputes with the broker about how the matter was handled, for example a fund withholding you believe was applied in error. Raise it first through Zerodha’s grievance-redressal channel. If unresolved, the SEBI SCORES portal handles investor complaints against the broker, and the Smart ODR platform offers online dispute resolution. None of these overturns the exchange’s surveillance determination itself; they address the conduct of the intermediary, not the regulatory finding.

See also

• Zerodha
• Zerodha reversal-trades email
• How to verify a Zerodha email is genuine
• How to verify a Zerodha call is genuine
• How to stop unsolicited stock-tip SMS on Zerodha
• Zerodha grievance redressal
• Zerodha SCORES
• Zerodha Smart ODR
• How to create a Zerodha support ticket
• SEBI PFUTP Regulations 2003
• Securities and Exchange Board of India
• National Stock Exchange
• Bombay Stock Exchange
• ASM and GSM frameworks explained
• Surveillance measures and trading risks
• Circuit limits and price bands
• Illiquid stocks: SEBI rules
• Finfluencer SEBI ban and its impact on Zerodha referrals
• Contract note on Zerodha
• Zerodha Console
• Kite by Zerodha
• Trading account
• Is Zerodha safe?
• Zerodha investor charter
• Zerodha policies and procedures
• Freak-trade square-off on Zerodha

External references

• Zerodha support: Why did Zerodha send an email requesting clarity on trades?
• Zerodha support: Why did Zerodha send an email seeking clarification for the reversal trades?
• Zerodha support: I received an email seeking explanation on specific trades. What do I do?
• SEBI: Brokers’ institutional mechanism for prevention and detection of fraud or market abuse (4 July 2024)
• SEBI: PFUTP Regulations 2003 (last amended 28 June 2024)

References

1. Zerodha support, Why did Zerodha send an email requesting clarity on trades? (as of June 2026): exchange-driven alerts, broker seeks clarification, 3 working-day response window, account may be blocked on non-response.
2. Zerodha support, Why did Zerodha send an email seeking clarification for the reversal trades? (as of June 2026): definition of reversal trades, withholding of amount equal to trade value or profit or loss, reporting to exchange within 1 day, exchange verdict final and binding.
3. SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, notified 17 July 2003 under Section 30 of the SEBI Act 1992; Regulation 3 (fraudulent dealing) and Regulation 4 (manipulative and unfair practices, including false or misleading appearance of trading).
4. SEBI circular SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2024/96, dated 4 July 2024, “Measures to instil confidence in securities market: Brokers’ institutional mechanism for prevention and detection of fraud or market abuse,” issued under Section 11(1) of the SEBI Act 1992, Regulation 30 of the SEBI (Stock Brokers) Regulations 1992, and Regulation 51 of the SECC Regulations 2018; staggered implementation by active UCC count, QSBs by 1 August 2024.

WebNotes Editorial Team prepares factual how-to guides based on publicly available regulatory documents and broker disclosures. WebNotes is not affiliated with Zerodha Broking Limited. Surveillance procedures, deadlines and reporting obligations are subject to change; verify current requirements at support.zerodha.com and the relevant exchange circulars before acting.