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  • OCTOBER 27, 1999

E-brokers firm up plans to tap Indian investors

According to newspaper reports, TD Waterhouse Group, the world's third largest online brokerage firm, has picked up a 49% stake in Tata Finance Securities Ltd., a brokerage subsidiary of Tata Finance. The consideration for the stake has not been disclosed.

Internet broking refers to a system by which retail and institutional investors can directly place orders using the Internet as a medium as opposed to the more traditional telephone. Worldwide e-broking (as Internet broking is more popularly known) has radically transformed the way people trade on the bourses. Currently, in a developed market like the United States, online trades account for more than 40% of all trades done. The popularity of the service is enhanced by the fact that it is far cheaper to trade through the Internet.

The Securities and Exchange Board of India (Sebi) does not permit Internet broking as yet. It has however set up a committee to look into the modalities for permitting firms to offer this service at some future point of time. TD Waterhouse's investment in Tata Finance Securities is aimed at setting up its infrastructure in order to gain a first mover advantage as and when broking via the internet is permitted in India.

The euphoria surrounding internet broking in the US seems to have trickled down to the Indian sub continent. And not without reason. The convenience of operating from just about anywhere, having a higher level of privacy and low transaction costs are the main benefits of internet broking.

With the Indian capital markets making a relatively smooth transition to depositories mode as against the physical form of delivery, a large hurdle for the introduction of internet broking has been done away with. Also, with banks increasingly focussing on technology, the clearing process too has become much simpler.

Currently a number of Indian broking houses are firming up plans to offer e-broking services. Some of them have even begun to offer intranet based services. This site, www.equitymaster.com, too, has firmed up plans to launch an e-broking service as and when regulations permit. In this regard, the site is close to tying up with a leading private sector bank for providing clearing services.

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