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Vivek Law & Parul Monga
Mumbai, Oct 15: Broking outfits active at the Bombay Stock Exchange and the National Stock Exchange are keen to jump into the OTCEI system to reap the benefits of arbitrage. OTCEI managing director Joseph Bosco confirmed that several top brokers have informed the exchange of their decision to trade on the bourse.
By getting an OTCEI terminal, NSE and BSE members can take advantage of the exchange's Friday-Thursday trading cycle. "Friday is the last day of settlement on BSE and, hence, BSE brokers can easily shift their position to OTCEI. This would also be a good counter to enter into a badla transaction as it will allow them to retain their position without having to pay the steep badla charges," adds Bosco.
Besides, trading on OTCEI is cheaper than that on NSE by almost 25 per cent and considering that most of the top securities will be listed on OTCEI as well, the exchange is banking on big business coming its way from top arbitrageurs.
However, the move is bound to affect the existing OTCEI brokers,who are already finding it difficult to meet the base minimum capital requirements. Sources say 6 OTCEI dealer cards have already been flogged off at a discount of 10 per cent to the price at which they were procured. Others are waiting for the right time to sell off their cards. Meanwhile, no fresh dealership is being allowed.
The reasons for selling out are clear. Sebi has set a base minimum capital requirement of Rs 4 lakh. Most of the OTCEI brokers were adhering to a limit of Rs 25,000! In a market as depressed as this and given the fact that the exchange has been in a comatose condition for the past three years, it is highly unlikely that the smaller brokers will come forward with further funds to trade. At present, only about 10 brokers of the exchange are actively trading. However, Bosco is not too unhappy about the situation as he feels that OTCEI needs well-capitalised brokers who can trade on a large scale.
Meanwhile, two south-based brokerages, Coimbatore Capital Market Services and GeojitSecurities, have already decided to slash brokerage for clients who opt for trading on the OTCEI system. "While Coimbatore Capital Market will not charge any brokerage at all, Geojit has decided to charge half the brokerage which it recovers from clients at other exchanges," said an OTCEI official.
The rationale is clear. The exchange has to be first resurrected and brokers have to find it fruitful. This can only be done through enhanced trading turnover in the short-term before the concept of high trading interest in small and mid-cap companies can catch up in India.
OTCEI also plans to kick off its operations without having a new index or restructuring its old index. "There are already a number of benchmark indices present in the country. We would restructure our existing index later," said Bosco. "As an incentive to participating brokers who had initially paid the technology fees, we are going to give a complete waiver on transaction costs to the extent of the technology fees paid to the OTCEI," saidBosco. "We would of course look at the small and mid-cap scrips once the exchange starts throbbing with life again, as that is the mandate for OTCEI," said Bosco.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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