Sunday, November 25, 2007

online broking India - I

September 2000

Emergence of e-broking

Online trading (also called e-broking) is slowly attracting investor fancy in India.

Advertisements are appearing in the print and electronic media.

A small beginning

The current trading turnover at around Rs. 10 crores per day from online trading compared to a combined gross turnover of around Rs. 9000-10,000 crores handled by the BSE and NSE together. online trading has a long way to go. With some ten dotcom players, such as, investsmart,, indiabulls, and a host of brokers, such as kotakstreet, sharekhan, motilaloswal, Geojit Securities and duttstock, entering the online ring promises exciting times ahead.

brokerage : For instance,, as the first entrant into e-broking, charges the highest brokerage (for delivery transactions) at 0.85 per cent per trade. It is followed by InvestSmart which charges 0.75 per cent. However, late entrants such as, sharekhan and all charge 0.25 per cent of the transaction value for delivery-based trades.

Clearly, the pattern of entry into e-broking shows that ``brokerage and associated costs'' can be the differentiators only for a while. as the first entrant, has touted itself as the first integrated e-broking service provider in the market. Though its brokerage charges are higher than its peers, it has positioned itself as the only player to have online broking, banking and depository interface in one module, to offer a fully integrated online trading experience.

Players such as SSKI's sharekhan, which launched their scheme in July, have tried to steal a march over by introducing a flat fee product of Rs. 1,000 per month. This trade-as-much-as-you-want scheme was an innovation targeted mainly at frenzied day-traders.

But even this innovation of sharekhan was challenged., which launched its e-broking services in August, not only halved the flat fee from Rs. 1,000 to Rs. 500, but also allowed short sales and offered clients the option of trading against securities up to three times sales marked for delivery.

Reacting to the cut-rate discounts, ICICI Direct has reduced its minimum brokerage per trade from Rs 100 to Rs 25 and the minimum trade size from Rs 6,000 to Rs 1,000.

Clearly, innovation offers limited scope for it is a matter of time before almost all the schemes offer more or less identical features.

As online trading is still at a nascent stage, practically all the major players which have set up e-broking outfits, aim at achieving two objectives. One, to broadbase the overall trading of investors, while holding their existing clientele intact. Two, most established e-broking outfits, such as, investsmart (an IL&FS initiative) and, are using their brick-and-mortar presence to encourage investors to go online. Given the poor connectivity and Internet infrastructure, most e-broking majors are trying to raise the comfort level of the investors by assuring them that even if the Internet order-routing system breaks down, or investor access is broken for any reason, online registered investors can always exercise the option of putting through their orders offline.

Except for Probity's 5paisa ( and India Bulls, most other online brokerages are an extension of brick-and-mortar broking.

As this combination is still a new concept, most investors will be better off clarifying how the offline environment will operate, if the online environment fails for any reason. For the investor, the important thing is to ensure that this switch from online to offline is seamless and that there are no associated hidden costs.

Unless the online trading volumes increase dramatically to 10-15 per cent of the total trading volumes (or at least 20 per cent of the gross turnover of the BSE and the NSE), the brick-and-mortar outfits will continue to dominate.

Success factors:

The pedigree of the e-broker: The pedigree of the e-broker is important as that is likely to identify the serious players. Going forward, consolidation is inevitable even in this industry and when that happens, online trading sites such as, investsmart and with a good pedigree have a much better chance of survival than the stand-alone sites such as and Indiabulls.

Technology and infrastructure: In these early months, online trading is likely to attract a host of entrants as India has already seen so far. But the key differentiator will be the investment in technology and back-office infrastructure. Even if small-time e-broking outfits make the initial investments in technology, the recurring expenses, which would also be high, may prove to a burden in the long run.

Quality of service and security: As the industry quickly consolidates and technology gets standardised, the quality of service will be the key differentiator. Basically, the investors do evaluate the quality of service and ``security-related issues'' (say, in terms of 128-bit encryption or privacy/confidentiality in access), between two outfits. In the long run, depending on the service levels, investors switch to the better player.

Integrated package: Currently, only offers a seamless 3-in-1 package of broking, banking and demat accounts. This effectively means that through the click of a mouse, an investor can buy and sell shares, and forget about the paperwork involved in settlements and transfer of shares or money. The rest of the players are also putting such an integrated package in place, but has a headstart as the others may be able to offer an seamless online trading experience only after an independent payment gateway (which provides connectivity between different banks for online banking) is firmly in place.

However, the existing online trading system suffers from a major lacunae. currently offers online trading services only to investors who have a bank or a demat account with ICICI. Or, investors can open an online trading account with only if they open a demat account with Kotak Securities and have a bank account either with Citibank, HDFC Bank or Global Trust Bank. If investors do not have these accounts, they have to go through the entire rigmarole of opening up the bank and demat account again for easy operation. Apart from the hassles involved, there may also be certain extra charges involved in this exercise that may have to be built into the overall cost of online trading.

e-broking transaction charges 2000

ICICI Direct

Account opening charges: Rs 750 only. For accounts opened before March 31, 2000, the account opening charge of Rs 750 will be set off against the brokerage paid for all trades done till September 30, 2000.

Fee Structure:

Delivery trades:
Less than Rs 1 million per quarter: 0.85 per cent
Rs 1 million to Rs 5 million per quarter: 0.60 per cent
Rs 5 million to Rs 10 million per quarter: 0.50 per cent
Rs 10 million and above per quarter: 0.40 per cent

Intra-settlement trading: The same fee schedule applies for squaring off transactions, but the above brokerage is to be paid only for the first leg of the transaction.
Minimum size order: The minimum value of the trade is Rs 1,000 and the minimum commission is Rs 25 per trade inclusive of demat market transaction charges, service taxes and postage of contract note.
Banking: ICICI Bank only
Margin: 100 per cent
Offline broking: Option unavailable
Shortselling: In the offing
Demat: ICICI Bank, no extra charges

Account opening charges: No fee charged for plan A and B. For plan C and D, a fee of Rs 500 is charged which will be adjusted against future trades.
Banking facility: HDFC or Global Trust Bank
Offline broking: option available
Minimum size order: none
Shortselling: option unavailable
Demat: SSKI, extra charges
Stamp duty, turnover tax and contingent charges extra as applicable: approximately Rs 25 per Rs 100,000

Fee Structure:

Plan A: Power-Asset Account
Rs 1,000 per month for intra-settlement. The value of trade is limited only by the cash in the account for purchases and by shares in the account for sale.

Plan B: Power-Leverage Account
The fee charged is Rs 1,000 per month with no limit on trading. Twenty-five per cent margin is required. The value of any individual trade can be as much as four times the margin in your account.

Plan C: Classic-Asset Account
The fee charged is 0.25 per cent of trade value. This is targeted at those who are not yet ready for flat fee-based investing. The value of trade is limited by the cash in the account for purchases and shares in the account for sale.

Plan D: Classic-Leverage Account
The fee charged is 0.10 per cent of trade value for intra-settlement trades. The value of any individual trade can be as much as four times the margin available in your account.

Account opening charges: Rs 500 only
Intra-day: 0.05 per cent for each trade
Intra-settlement: 0.05 per cent for each trade
Delivery: 0.25 per cent
Banking facility: HDFC Bank
Margin: 25 per cent
Offline broking: Option unavailable
Shortselling: Available
Minimum size order: None
Demat: IIT Corporate Services, extra charges


Account opening charges: Rs 500 only, which will be adjusted against future trades.
Margin: 33.33 per cent, minimum Rs 5,000.
Offline broking: Option unavailable
Banking: HDFC Bank, HSBC, Global Trust Bank, CitiBank, Standard Chartered, ABN Amro or Centurion.
Shortselling: Information unavailable
Minimum size order: Rs 1,000
Demat: Kotak Securities, no extra charges.

Fee structure

The Green Channel (Cash)
In this plan, one can trade up to three times the value of the margin with
Delivery brokerage: 0.25 per cent.
Intra-settlement brokerage: 0.10 per cent payable for both legs of the transactions.
Intra-day brokerage: 0.10 per cent for the first leg only
Service charge and other levies: Nil

The Green Channel (Securities)
In this plan, traders can pay margin in the form of securities instead of cash.
Delivery brokerage: 0.25 per cent.
Intra-settlement brokerage: 0.10 per cent payable for both legs of the transactions.
Intra-day brokerage: 0.10 per cent for the first leg only
There is an additional transaction charge of 0.15 per cent per month on the value of the applicable limit.
Service charge and other levies: Nil

The Freeway
This scheme allows investors to trade at a flat fee of Rs 500 per month up to a maximum exposure limit of Rs 250,000.
The brokerage works out to 0.20 per cent.
Service charge and other levies: Extra

The Cash Expressway
This facility allows retail investors to sell their shares and collect the payment within 48 hours.
Delivery brokerage: 0.25 per cent and a transaction fee of 0.5 per cent on the sale value.
Service charge and other levies: Nil

April 2005

Customer based at the end of 2004

The online broking arm of ICICI Web Trade, an ICICI Bank subsidiary, commands 68 per cent of the total online trading market. Its customer base has grown from 300,000 last year to 550,000 today. It has 450 branches across India, and also covers Singapore and the Gulf.

The long-term plan is to graduate from being just an e-brokerage to a one-stop shop for personal finance products and services. The platform already sells health, home, overseas travel and life insurance products online. While you can pay online for general insurance products from ICICI Lombard, a physical follow-up from ICICI Pru representatives is necessary when buying life insurance products. The portal also enables online investing in postal savings instruments such as NSC and KVP. It has made CallNTrade available across 300 towns, allowing customers to use the phone to trade if they are unable to get online.

All bank transactions have to be through ICICI Bank– the direct connectivity between trading, demat and bank accounts makes transactions quicker and safer. ICICI direct is also the first broker in India to introduce Digitally Signed Contract Notes. The process has been automated and they are instantly and securely available online.

The customer base of the next popular trading platform has increased about 40,000 in December 2003 to 63,000 today. The portal allows trading in equities, derivatives and mutual funds, besides offering insurance and loans online. It has 78 branches in 64 cities, and it hopes to double this number over the next year.

The site gives customers real-time data and prices, and analysis backed by powerful technology. Service is real-time with 24x7 access to all information on the portal. The company has a tie-up with HDFC Bank and ABN Amro Bank for banking, and clients are not bound to use a specific DP account. Indiabulls’ charges are competitive: 0.5 per cent of the order value for the cash segment and 0.1 per cent for derivatives.

------------ICICIDirect-------- India Bulls
No. of clients1---510,000-------------63,000
(As on 1 Dec 2004)
Brokerage (% of order value)
Cash segment---0.25 to 0.75% ------------- 0.50%
Intra-day------ 0.03-0.10%---------------- 0.10%
Derivatives----- 0.03-0.10%--------------- 0.10%
Sign-up fee (Rs-----) 750------------------ 700

October 2006

Innovations in online broking — flat fee structure spreading

The flat fee model charges the clients a fixed brokerage for a specified period, irrespective of the frequency or value of transactions.

So, if you are a very active trader, then flat fee broking products may suit you better.

ICICI's Offer

Monthly fixed rate Rs. 299
max quarterly free turnover: Rs.1,50,000
Brokerage above that amount: 0.6%

Monthly fixed rate Rs. 599
max quarterly free turnover: Rs.3,00,000
Brokerage above that amount: 0.6%

Monthly fixed rate Rs. 999
max quarterly free turnover: Rs.9,00,000
Brokerage above that amount: 0.5%

Kotak SEcurities offer
Monthly fixed rate Rs. 499
per transaction fee: Rs. 9;

Otherwise per transaction fee: Rs. 20; (delivery transaction size: Rs.5000)

In the Western markets, where almost 50 per cent of the cash market trades are done online, the success of the flat fee model can be attributed to the popularity of Internet trading.

In India, where an estimated 12-15 per cent of the total cash market volumes are done online, the flat fee regime has a long way to go. The products offered are still at a nascent stage and cater to the needs of a specific group of investors only.

Why the transition?

At a time when Internet broking is emerging as a popular trading tool, scalability and accessibility have become realistic goals for the broking houses. The broking industry is thus attracting a lot of new players. With such entrants as ABN AMRO Asia Equities, Religare and, the much talked about, R-Trade, competition is set to become tougher for the established players.

1 comment:

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