India Internet Trading Is On The Horizon
By Rosemary Arackaparambil
India is likely to kick-off Internet-based stocks trading by the end of 1999, a senior Securities and Exchange Board of India (SEBI) official said.
``We should be ready to start in a couple of months,' O.P. Gahrotra, senior executive director told Reuters in an interview late Tuesday.
Presently some brokers are using the Internet to provide clients live stock quotes on their Web sites and are also taking orders from clients via the web.
SEBI is setting up guidelines which will allow investors to strike deals directly on the Internet, through an access code provided by a broker who will take responsibility for the trades.
SPREADING EQUITY CULT
``Business will go up enormously once Internet trading starts. It is mind-boggling,' Gahrotra said.
He said Internet-based trading would expand equity culture to the far corners of this vast country. It would also raise the volume of business as day-trading became more popular.
SEBI Chairman D.R.Mehta said he was told that volumes on the New York Stock Exchange went up 40 percent because of day-trading, where investors square positions by the evening.
``In India we have not reached 5-10 percent of the population. Smaller towns are still outside, they don't even know what equity is all about,' said Gahrotra.
Brokers have a physical presence in around 350 cities in India, largely through the spread of trading terminals of the Bombay and National exchanges, but are unable to reach other far-flung investors.
FOREIGNERS HAVE TO WAIT
Internet trading on Indian markets will be available only to local investors, overseas Indians and foreign institutional investors registered in India who have local rupee accounts.
Other foreigners will be unable to trade unless the rupee becomes fully convertible, he said.
Gahrotra said a SEBI panel was working on the modalities of the system, which would not take time since other major hurdles had been overcome.
``So far there was a problem because two networks could not talk to each other. But now that the Department of Telecommunications (DOT) has allowed the interconnectivity of networks...the technology problem is over,' he said.
He said the panel was tackling two key areas -- the safety of messages transmitted and standardization of the features of software used by brokers for Internet trading.
``Nobody should be able to hack, nobody should interfere with the line, which means there should be a certain encryption procedure laid down,' he said.
Gahrotra said about 8-10 Indian brokerages had already prepared their own software and were raring to go, while SEBI had advised other brokers to go slow till the committee submitted its recommendations for basic software features.
``Apart from standardization, there is very little left to do. Internet trading is basically a communication mechanism.'
A section of the market is however concerned that the annual license fee of 1.5 million rupees that DOT is charging for the connectivity of networks might be a deterrent to brokers.
``Just now it appears as if it is a fee on the higher side. But it is a matter of time, it will get sorted out. At least the way has been opened,' Gahrotra said.
Courtesy:Silicon India |
