ICICI Web Trade, the Internet broking arm of ICICI has fixed 0.85% as its trading commission for delivery based equity trades. The web trading facility is for ICICI bank’s saving account holders who also have a depository account in place.
Internet trading or e-broking as it is more popularly known refers to the system by which investors can trade in shares over the Internet. The movement of money and shares takes place electronically. 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 company also plans to offer direct Internet trading facilities to investors following clearances from the National Stock Exchange (NSE). The most important facility however is that unlike traditional exchange transactions where deals are executed through the broking firm, this facility will allow investors to execute deals through NSE’s trading system.
The one implication, if this becomes the norm for internet trading, is that the identity of the buyer and the seller would not be known to the market at least till a day or two unlike at present where the identity becomes known through the brokers’ back offices.
The more important fall out would be on the brokerage rates itself. At present, brokerage rates themselves vary between 0.25% to 1%. Only if one were to invest through a sub–broker who in turn has an account with the broker does the rate go up to 2.25%. Hence ideally the introduction of trading via the internet should have been at comparable if not lower rates since this would anyway lead to a lot of back office efficiencies. The ICICI rates seem to be on the higher end.
Second, one is also not sure as to whether the current rates will sustain at these levels. Even internationally, online brokers such as Charles Schwab and E–trade charge flat rates for Internet trading. It is quite possible that in the future once a few more players venture into e–broking, ICICI would drop its rates.
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