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Vivek Law
Mumbai, Nov 1: SEBI'S move to push the National Securities Depository Ltd (NSDL) to bring down costs for brokers to become depository participants has come under sharp attack from some prominent members of the working group on depositories. At last Friday's meeting of the working group, Sebi officials suggested that NSDL bring down the charge of Rs 25 lakh which is incurred by a depository participant for setting up the necessary infrastructure and systems, as this would enable more brokers to become participants.
Sources in the working group told The Financial Express that the move was resisted on the grounds that this would put the system at a risk. "It was felt that if a broker cannot spend Rs 25 lakh to set up proper systems then is it safe to entrust Rs 50 crore worth of investor funds in his hands," said a custodial committee member. It was also pointed out that most of the high net worth brokers had already become DPs with the depository and several of the others (over 2,000) had openedclearing member accounts with the depository.
Sebi chairman DR Mehta was not available for comment, while NSDL chief CB Bhave declined to comment on the deliberations of the working group.Sources said that even in the case of the National Stock Exchange (NSE) there are very few brokers who are keen to become DPs even though they have a much lower charge to pay since they are on the same V-Sat network as the NSDL. "The returns are not high on low volumes which small brokers will end up garnering. It just makes no sense for all and sundry to become DPs. The system will be at grave risk if this happens," said a top source.
In fact, it is an accepted fact that the world over it is the banks and highly capitalised brokers who are entrusted with the investments of investors. "An investor will give his shares to only that entity which he trusts. Brokers have in fact themselves come out and said that broker should not be encouraged too much to become DPs, but Sebi seems to be keen on doing just what the marketdoes not want," said another source.
Highly capitalised brokers have so far performed exceedingly well and have spread their reach to cover a large number of investors. But experts say that these are highly capitalised brokers. If small-time brokers are allowed to become DPs there could be a grave threat to the market integrity, it is felt. Currently, there are over 70 DPs with the NSDL and it is felt that what is more critical is for these DPs to expand their network wide. These DPs include almost all the top banks, brokerages and custodians. "The key lies in these DPs expanding to other centres to service small investors and not in encouraging every broker down the street to enter this business," said a source closely associated with the depository.
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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