A OVERVIEW OF INDIAN BROKERAGE INDUSTRY| Equity brokerage industry in India is experiencing rapid growth and diversity. Following the wide range of stock market reforms in the early 2000’s, brokerage industry underwent major transformations from being engaged in only brokerage business to offering a wide range of financial services. A modern broking house in India may well be a corporate entity that offers a wide range of products, relies on research for advice, uses modern technology, has large distribution network connecting the country, provides investor education and awareness and is compliance focused.
These developments have resulted in a huge spurt in business as also growing market share of the large sized brokerage houses that led to surge in enterprise value, thus becoming objects of interest for global investing. With the stock market momentum likely to continue, broking firms could look forward to scaling up their resource mobilization to fund growing operations and expansion. Brokerages mopping up huge resources from the market are not unusual even in the emerging markets. | | | | | | Indian broking houses could look forward to a period of growth and consolidation.
India’s economic growth and deepening of the financial system will present the broking firms with numerous opportunities for growth and expansion. Integration of the financial markets will enhance the scope of their business and scalability. Access to public equity markets will enable them to raise resources to fund expansion and growths as also pursue useful business acquisitions. Growing international investor interest in India will add newer opportunities to scale up the business as also harmonsing with global standard and practices.
Introduction of new products such as mini contracts in the derivatives and other futures and options products will add new opportunities for creating new business segments. | | While opportunities abound, there is a great need for reform and restructuring of the equity broking industry. There are about 9,000 brokers registered with SEBI but 80 percent of the turnover in NSE and BSE is accounted for by about 100 brokers. Consolidation thus becomes relevant to forge a stronger industry. Similarly, capital levels too need to be strengthened. The 45 odd listed broking firms in India together have a meager Rs 3. bn of capital, which is far less than what one top broking firm in China could raise from the capital markets. Better performance and practices will enable broking firms to increase capital levels that will be essential for funding expansion. | | Skill sets and compliance norms are the key to the sustainable growth of the industry. The Securities and Exchange Board of India promoted National Institute of Securities Management, which is mandated to launch extensive certifications and examinations to the broking industry professionals to equip them with required skill sets and expertise.
It becomes important for the broking industry to actively support such national endeavors that would enhance the quality of the markets. | | Investor education and awareness is another aspect broking industry should promote in the long term interest of the market. As the product mix and risk matrix in financial markets is continuously changing, it becomes imperative for the intermediaries to educate and create awareness in the clients that would be mutually beneficial. Better understanding of the financial products and associated risks by the investors will be in the interest of the growth and stability of the markets. | The Indian broking industry is coming of age. It has enormous opportunities for growth and diversity. As markets expand and get globalised, these firms will have increased opportunity to cater to a large and diverse range of clientele with a wide mix of products and services. Expanding markets offer enhanced opportunities. Those who are well prepared will be in a better position to garner the benefits. | | BOMBAY STOCK EXCHANGE A Share market/stock markets is an open market for fiscal operations such as trading of a firm’s share and derivatives at a fixed cost.
These securities are further listed on a stock exchange. A Share market does not offer any corporeal service and is not a separately owned business entity. | It was in 1875 that the Indian Share Market first started functioning. The first share trading association in India was known as the Native Share and Stock Broker’s Association, only to become the Bombay Stock Exchange (BSE) later on. This trading association started off its operations with around 318 members. Main components of Indian Share Market Bombay Stock Exchange (BSE) Bombay Stock Exchange is known to be the oldest stock exchange in the entire Asian region.
If someone wants to know about the history of the India share market, it becomes synonymous with the history of the Bombay Stock Exchange. It started functioning in 1875 with the name ‘The Native Share and Stock Broker’s Association’. Under the Securities Contracts (Regulation) Act, 1956, the association got its recognition as a stock exchange in 1956. When it started, it was just an association of persons but with the recognition it got transferred to a corporate and demutualised entity. * Trading items in Bombay Stock Exchange – * Equity or Shares Derivatives (Futures and Options) * Debt Instruments | The main index of BSE is known as the BSE SENSEX or simply SENSEX (Sensitivity Index). It is an index which comprises of 30 financially sound company scrips, with an option to be reviewed and modified from time-to-time. The index calculation is based on the ‘Free-float Market Capitalization’ methodology. Leading bourses like the Dow-Jones also follow this methodology. Currently the Sensex is hovering around the 17,000 mark, all expected to touch 20K by 2010. But then volatility has its important role to spoil the entire game.
NATIONAL STOCK EXCHANGE (NSE) National Stock Exchange (NSE) is considered to be the leader in the stock exchange scenario in terms of the total volume traded. The market capitalization the National Stock Exchange touched about $921. 31 billion at the end of May 2009. The National Stock Exchange received the recognition of a stock exchange in July 1993 under Securities Contracts (Regulation) Act, 1956. The products that are traded in the National Stock Exchange are:- * Equity or Share * Futures (both index and stock) * Options (Call and Put) * Wholesale Debt Market Retail Debt Market NSE has a fully automated screen based trading system which is known as the NEAT system. The transactions are carried on with speed, efficiency, and are all transparent. The risk management system of the National Stock Exchange is world class and can be considered as the benchmark for other bourses. The leading index of NSE is known as Nifty 50 or just Nifty. It comprises of 50 diversified benchmark Indian company scrip and is constructed on the basis of weighted average market capitalization method .Regulatory Authority of Indian Share Market
SEBI or Securities and Exchange Board of India is the market watchdog and has the responsibility of protecting the investors’ interests, develops regulatory norms and helps in the development of the securities market in India. SEBI is the regulator for the securities market in India. It was formed officially by the Government of India in 1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired by C B Bhave, SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmadabad.
EMERGING TRENDS OF EQUITY MARKET ONLINE TRADING The advent of online securities trading has raised doubts about the survival of market making and brokerage industry. However despite the decrease in spreads, the trading values have been improved with global boom in securities trading. There is yet another view that touts that technology would actually save the business . the firms, gain considerable profits. Technology is revolutionizing all the aspects of trading from back-office clearing and settlement to front order trading and also gives a better understanding of their customer base.
The economies of scale present in the industry require very large volumes to break even. With cross border trading gaining popularity, only a few players who can reap the economies of scale will be winners in the global trading industry. Online trading has transformed the way trading takes place in India. With a number of websites offering loads of information and financial data on score of companies, the stock trading has become very easy. The commission per transaction is lesser than the traditional form of trading.
Spotting the likely change in investors’ preferences and the potential in the business, many stock broking companies have started their own trading sites and established links with banks. BSE: THE STRUGGLE FOR SURVIVAL some serious scams have brought serious reforms, like rolling settlement, ban of badla, etc, in the indian capital market. the biggest impact of recent developments is more on the 125-year old bombay stock exchange. with the lack of interest among retail investors in trading. * growth with badla * speedy recovery * dawn of new era * head on with nse * advantage at nse