"Spurred by good response to our margin trading system unveiled on October 23, we are planning to launch our mutual funds business on the website in the early part of next month," ICICI Web Trade Ltd chief operating officer Anup Bagchi told The Financial Express here on Saturday. According to sources in the company, the margin trading turnover on the site has been in the range of Rs 15 to 18 crore per day, of late. However, Mr Bagchi refused to disclose the figure stating that such a thing would be violative of the US' Securities Exchange Commission norms. ICICI, its parent company, is listed on New York Stock Exchange. The mutual fund division would deal in as many schemes as possible to offer a broad choice to its customer base of over 39,000 registered users, Mr Bagchi said and added, however, that the selection of MF schemes would be more market-driven.

The process of entering into partnerships with MFs was likely to begin next month, he said.

Citing the reasons for the success of margin trading on the website, Mr Bagchi said automated risk management system at the company-end has helped ease of scalability in terms of quantity of trades, while automatic squaring off of stocks at the customers-end has helped curtailing the possible downside facing the client.

Margin trading is a process under which a client could trade worth Rs 100 by keeping a cash margin of Rs 33.33 (one-third of the exposure limit) with the broker/institution (website in this case). Risk management mechanism has been fully automated keeping the large user base in mind. It is impossible to handle large volume of deals manually as various triggers required to be set in terms of margin limits, alerts in case of the margin falling below 12 per cent of the total exposure limit and clients alerts for conversion of margins or adding of margin money have to be monitored on a realtime basis, he said.

"The typical broking firm will have 150 retail customers, 20 high networth customers and five to six institutional customers. For them it may be possible to handle the whole gamut of things, though it may be time consuming and tedious. But in such cases scalability will be a problem," Mr Bagchi added.

The major advantage of having automated squaring off mechanism was that it relieves the client of the burden of getting glued to the stock ticker. In the absence of client's response to the price alerts provided online, the system would automatically square off their positions when the prices were coming down. Besides saving the customer from any possible loss, this also avoids defaults by them, he said.

Contrary to global scenario, where the customer provides a cash margin of one-third of the exposure limit and a bank or other institution provides guarantees for the remaining sum, the Indian customer was facing 100 per cent exposure with 33.33 per cent of margin money, he explained. The other advantage with the site was that a client could punch in his orders even during the non-trading hours for them to get materialise immediately after the trading starts, he said.