BSE cash market trades on mobiles up 11x on wider access, cheap data

The proportion of the cash market turnover attributable to mobile phones is up almost 11x in the past five years. The rise has come on the back of higher smartphone penetration, lower data charges, and booming equity markets.

The share of cash market trades carried out on mobile phones was 1.5 per cent in January 2016 on the BSE. It rose to 16.6 per cent in December last year. 

On the National Stock Exchange (NSE), it rose from 2.7 per cent to 23.09 per cent, an 8.5 times rise during the same period.

Market participants said the biggest factor that contributed to the rise in mobile trading was easy on-boarding. “The biggest change was the regulator (Securities and Exchange Board of India) supporting digital account opening by allowing the Aadhaar to be used for opening accounts online. Once clients began on-boarding on their own without any relationship manager’s support, brokers started thinking about allowing clients to trade on their own,” said Prasanth Prabhakaran, managing director and chief executive officer (CEO), YES Securities.

Prabhakaran said once brokers started investing more in technology, they realised investors were adapting to the digital medium much faster. With the national lockdown, the availability of dealing room staff was limited, and volumes that came through dealers shifted to mobiles.

“Eighty per cent of your business happens through mobiles,” said Nitin Kamath, founder and CEO, Zerodha.

Clients earlier used to place orders through CTCL systems of brokers, with the help of dealers.

CTCL is a computer-to-computer link network operated by brokerages. Institutional investors and high-frequency traders use the co-location facility to place large-sized trades on the exchanges. The entry of retail investors in large numbers in the equity markets in 2020, after the sharp recovery from the March lows, has contributed to this trend.

The Sensex so far has gained 85 per cent since March. Market experts said mobile-based trading was favoured by millennials entering the market for the first time.

There has been a sharp jump in new demat accounts, and overall trading activity within the existing client base.

“Retail investors’ participation has increased slowly from 40 per cent to 65 per cent during Covid-19. The advent of mobile-based discount brokerages has led to higher participation from newer geographies and millennial and zillenial investors,” Prakarsh Gagdani, CEO, 5Paisa.com.

Market players said the rise in mobile trading had helped them save cost and significantly reduce erroneous trades.

"One has to spend at least Rs 60,000 per month on one relationship manager, and one person cannot handle more than 20 active clients a day. A third of the cost incurred per client can be saved by making the platform user-friendly and making sure research is available on the same mobile platform,” said Prabhakaran.

Trading through mobiles as a percentage of the cash market turnover is expected to taper off at this level.

“Half the trading that happens in exchanges are from prop shops and algo desks. But if you take the retail trading portion, it’s 60-70 per cent of the business. It could go incrementally a bit,” said Kamath.

Moreover, trading through mobile phones is still confined to big cities despite the fact that many new demat accounts are being opened in small towns.

“The address could be in a tier 2 city. However, if you look at an IP address it is largely confined to the top 20 cities,” said Kamath.