Number of brokers in cash segment falls below 10k in May

The total number of stock brokers operating in the cash segment of the country's stock exchanges has dipped below 10,000 for the first time in at least four years, amid continuing lacklustre trends in the market.

According to the latest data compiled by the Securities and Exchange Board of India (Sebi), the total number of registered brokers in the cash segment stood at 9,643 as on May 31. In comparison, their numbers stood at 10,128 at the end of the last financial year. Prior to that, the numbers of cash segment brokers were 10,203 and 10,268 at the end of financial years 2010-11 and 2011-12, respectively.

Besides, the number of sub-brokers available for trading in the cash segment has also declined marginally to 69,335 at May-end, down from 70,242 at the end of March. According to market experts, a majority of the retail investors are not participating in securities trading, causing a number of brokers to shut shops.

"The retail investor is not coming to the markets and if retail investor does not come, then how will small brokers run their business," Religare Securities' EVP and head retail research, Rajesh Jain, said.

Sebi data showed number of brokers in the equity derivative segment has been consistently climbing since 2010-11. At the end of May, the brokers in this category have grown to 3,023 from 2,957 in 2012-13.

In currency derivatives, brokers have grown from 2,330 to 2,349 at the end of May.

"The volumes have shifted from cash to derivatives. The retail investor has shifted to big brokers who offer research and other services, as small brokers are not able to set up research desks," Jain said. "When 80 per cent plus volume is there in derivative segment, obviously all brokers will have to offer derivatives," he added.

CNI Research CMD Kishor Ostwal noted with nearly 90 per cent of the retail investors out of the markets, it is largely the foreign institutional investors (FIIs) which are trading in the cash segment.

These FIIs are not seeking the services of brokers but are directly trading through algorithm operations on the stock exchanges, he added.

Ostwal also noted that many listed companies on exchanges like the BSE are either suspended are under derivative segment.

According to Jain "the global mood is a big reason to set the sentiment, but overall it is a changing face in the industry where big brokers are becoming bigger as they can give better services to their clients".