The introduction of stock trading through the Internet could result in 20 to 25 per cent rise in turnover, feels Anand Rathi, president, Bombay Stock Exchange (BSE).
"I expect non-resident Indians to push turnover up by 10-15 per cent, and investors from inside the country by at least another 10 per cent," Rathi said.
D R Mehta, chairman, Securities and Exchange Board of India (Sebi), however, refused to quantify the expected rise. He said, "The rise should be substantial, but it's difficult to predict how much."
To put it in perspective, Net trading started in the United States four years ago, and has been growing by about 50 per cent every year. Currently there are some 5 million investors in the US operating through the Internet, accounting for roughly 30 to 40 per cent of retail trade in the stock markets.
Experts feel, net trading in India should grow fast, predominantly for two reasons: one, that there are some 2 crore retail investors and twice that with Unit Trust of India; and two, that the Internet reaches some 1.5 million people already and this should grow by 100 per cent in the next few years.
However, the downside to this is poor infra-structure, and high connection charges, which would turn out to be major deterrents unless sorted out. In the beginning, net trading would require investors to pay upfront margin or produce bank guarantee, but within six months to a year, the system will have to have an interface with banks for automatic verification of fund availability and transfer of sale proceeds, said Rathi. "In the long run, with net trading you cannot have only upfront margin payment system," Rathi told Business Standard.
"All transactions will be routed through brokers, who would be responsible for all exposures, but despite the broker and bank interfaces, the platform for trading
will have to ensure near real time transactions, so that investors do not have to wait for orders to be executed," Rathi added.
According to a study by Stock Holding Corporation of India Ltd (SHCIL), net trading will offer excellent opportunities for the broking business, which while being lucrative for the brokers would not be expensive for the retail investors.
"You wouldn't need much of the back office work required now, which will reduce the transferred cost," said B V Goud, chief executive officer, SHCIL.
