On Online Trading in India.
Bala:
Here is an article I found in Indian Express regarding online trading in India.It gives a feel of the status of internet trading and its future in the country,hope it is of some help to you.
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Saturday, March 20, 1999
Brokers spread their net through online trading
Nandita Datta
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NEW DELHI, March 19: Technology-savvy brokers are preparing for the big bang. Their target: Retail investors. Their route: Internet. Although internet-based online trading (or E-Trade as is it is referred to in the US) is still some distance away here, shopping for investors on the net has begun and, in many cases, yielded results.
While the netiquettes are still being put in place by the market regulator and concerned stock exchanges, brokers have begun a proxy in order to attract high networt NRI clients.
The receipe is simple: Create a website and offer the staple diet of stock quotations, research reports and daily technical analysis. Sprinkle in a few garnishings like market gossip, 'pick of the week', multibaggers, etc. Once the connection has been established after opening an account, the websurfer can send his buy/sell order together with the limit price through E-mail and the broker then physically punches the same on his V-SAT terminal. The contract notes are mailed to the client at the end ofthe settlement period, while daily statements are sent through E-mail.
Says Vivek Kumar, assistant vice-president at Motilal Oswal Securities Ltd, ''Internet-based trading has actually not started in India because of rules and regulations. However, as we have a presence on the Net through our site (http://www.motilaloswal.com) we receive a lot of mail regarding E-Trade mainly from NRIs. So, as a prelude to net-based trading we offer live BSE quotes and research. The idea is that a client will log onto the website where he can see the quotes and send his buy/sell request.'' Kumar, however, admits that such trades as a percentage of the total business volume is minuscule.
Adds Ravi Narian, deputy managing director, National Stock Exchange, ''Even though internet-based online trading is technically possible through the NSE V-SATs, what is prevalent now is an indirect method where the internet has replaced the telephone. Instead of placing orders over the phone, a client can do so over the net. However, thebroker still has to physically punch in the order. We are aware that a number of our exchange members are tapping overseas clients through this indirect internet trading. It's a step in the right direction and the methodology is completely within the rules of our exchange.''
Aneesha Madan, vice-president at Dutt Stock Broking, says she receives around 1000 requests through their website (http://duttstock.com) mainly from NRIs. ''About 100 open accounts with us out of which 10 actually fund their brokerage account. Our average trading turnover through such trades in a week is around Rs 2 crore.''
Gogia Capital Services, an NSE member claims to be among the the first companies to introduce the concept of web-site trading for NRIs. Says Satish Gogia, managing director, ''We recive 10-15 requests per week and approximately 2-5 materialis. Our average business volume through such trades is around Rs 20-3- crore per week. After the account opening form is filled and negotiations over the terms and conditionscompleted, the client is allotted a password and a user ID which is feed into our server and there is complete security.''
Others in the fray include KBS Capital Management (http://kbscapital.com) and Kotak Securities (http://kotaksec.com). In the pipeline are big players like the Stock Holding Corporation of India, JM Stock Broking and DSP Merrill Lynch. Most of them are building a foundation for the eventual opening up of online internet trading which will help expand business volumes at low cost. Until then it is important to have a presence on the net for a headstart once online trading commences. Client selection is most crucial to web trading. Says Kumar, ''We have to take care while registering clients as here we are dealing with a faceless customer for the first time.'' Security is very important or else ghost orders can wipe a broker out of business. Says Gogia, ''Our screening process is spread over several stages.'' The client has to open an NSE trading account and provide bank account details.Then the client's signature and financial statement are attested from the banker. ''A copy of his passport and other documents are also required.''
Adds Madan, ''Trading through our website is open to all investors provided they have enough funds. For example, if a client wishes to purchase 100 shares of ITC at Rs 600, he must have Rs 60,000 in his brokerage account. We do not execute any order if funds are insufficient. We also require clients to submit documentation proof of residence and ID.'' The other problem is of bad deliveries. Dutt Stock Broking eliminates the problem by not allowing its clients to sell shares (in physical form) not bought from it. Gogia says a client's signature is attested from his bankers and tallied with his passport. Or else, trading is in the demat form.
Brokerage rates are around 0.1-0.2 per cent for non-delivery trades, 0.75 per cent for depository trades and 0.75-1 per cent for delivery trades -- more or less at par with normal trades carried out through thephone.
Regulators log in
With India inching towards online internet trading, regulators are trying to get their acts to gether. Sebi chairman D R Mehta is looking into the issue. ''It's a new concept and we are examining it, though we don't have a definite programme.'' In the absence of a direct connectivity, internet is used only as a means of communication with the broker, says an executive director of Sebi.
The National Stock Exchange is already looking at the nuances of such a process. Says deputy managing director Ravi Narian, ''Through our CTCL, it is technically possible to offer online internet trading even in the current scenario. CTCL allows an interface at a member's front-end where he can write almost any software. However, there are a couple of issues which have to be addressed before the exchange can go whole hog into the information superhighway.''
First, under the DoT regulations, connectivity of the NEAT network to the internet is not allowed except through the I-Net Loop,which is a very expensive proposition. ''Our technical team is looking into it,'' says Narian, adding that the cost to the members would be quite high. Second, and more important, is the problem of risk management. NSE has, in the past too, faced a problem of ghost orders and is very wary of this problem. Says Narian,''A couple of years ago, we had a surfeit of cases wherein a fraudulent client who would place a buy order and then disappear. The motive was obviously to help 'a friend' offload his position at a desired price. Consequently, our members were left holding securities for which they had to pay up. This problem will be even more compounded after online internet trading begins. Our technical team is considering the issue to come up with a fault-free system.''
Narian also disagrees with the view that once E-Bankingis in place, the problem of security will be mitigated to quite an extent. ''E-Banking will also face similar problems of risk management and is unlikely to offer a solution.International credit cards are also not a solution as the amount involved in trading would be quite large and not covered by the credit card limit.''
(Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.)
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