Jan 24, 2000|
Net trading set to revolutionise broking business
The Securities and Exchange Board of India (SEBI) is all set to approve the introduction of the order routing mechanism through the Internet.
Internet trading or E-broking as it is more popularly known refers to the system by which investors can place orders for shares over the Internet. The movement of money and shares takes place electronically and in most cases is real time. The implementation of secure transaction systems and the flexibility offered by Internet trading have made it a rage in more developed markets like the US and Europe where it is estimated that orders over the Internet account for about 40-45% of trading volumes. South Asian countries like Japan and Korea have also jumped on the e-trading bandwagon.
The first implication of the allowance of routing orders through the net will lead to a spurt in volumes. So far the volumes on the BSE and NSE put together aggregate Rs 77.85 bn with 182.1 million shares traded. These are expected to spurt almost 5 times within a year of the Internet trading in place (as and when payment gateways are put in place).
This would in turn imply the beefing up of the back office operations of brokerage houses especially in terms of the service they offer to their clients.
The second implication will be the possible cannibalisation of the existing broking house business through either their own net site operations if they have one in place or by those portals who could tie up with other brokerage houses. However, if the volumes were to shoot up as expected existing brokerages will get sufficient time to get their act together.
The third implication, depending on what sort of regulations SEBI puts in place, is that if the orders are routed directly through their exchange then the identity of the buyer and the seller would not be known to the market at least till a day or two.
Finally, as and when payment gateways are put in place, brokerage houses could tie up with banks or banks could get into the brokerage business itself. www.equitymaster.com is currently in the process of setting up an Internet trading module, which it will offer to its visitors shortly. Other prominent players who have announced their e-broking intentions are Motilal Oswal Securities, SSKI and ICICI.
Thus, first it was the introduction of online transactions (putting an end to the outcry system) which changed the face of the broking in country. The start of Internet broking is likely to herald the second revolution.
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