Enthusiastic brokerages are laying the groundwork for internet trading or e-broking, although cyberlaws (which govern such trades) are yet to be enacted. BSE vice-president Dina Mehta estimates at least 10 members will be ready for e-broking when guidelines are in place and issues like connectivity are resolved. Websites of brokers like Motilal Oswal and KBS Capital, already feature online stock quotes (with a small time lag), market information and stock analyses.

Market regulator Securities and Exchange Board of India has also risento the occasion and appointed a committee to formulate guidelines. "The internet will be another channel for communication with the broker -- like the phone or fax. It will lead to greater transparency," says Jignesh Shah whose firm, Financial Technologies, has developed a solution for internet trading. Introduction of screen-based trading saw daily volumes on NSE and BSE rise from Rs 500 crore to Rs 5000 crore. The internet is expected to drive similar growth rates.

Rough estimates peg the number of brokers with websites -- the first step to e-broking -- close to 50. Although this is a small number, growth potential is huge. In US, for example, online brokerages started only a year and half ago. Today, one in four trades is over the internet. Traditional brokerages like Merrill Lynch have been forced to go online, while e-brokers like Charles Schwab have doubled customer accounts to 1.2 million in a year.

Currently, Department of Telecommunications regulations do not permit exchange trading networks tobe connected to the internet. This means although the broker can receive orders through the internet, he would still have to manually key them into his trading terminal. Deal execution can be completely automated once this connection is established. Payment and settlement will be through traditional methods until scrips are dematerialized, and banks automate to make electronic funds transfer possible.

Motilal Oswal is investing close to Rs 5 lakh in implementing an order collection system on the site probably the first in India. Investors who log on to the site will be able to place orders, view order status online and get daily statements. The site itself will be password-protected at two levels: when the investor logs on to the site and when he places a buy or sell order. Large orders will, however, be verified on phone.

The most obvious risk in internet trading is that the broker can be tricked into accepting orders by someone impersonating the client. Once the password is cracked, a hacker can alsotamper with data on the site: the Infosys scrip, quoting at Rs 5,000, can be substituted with Rs 4,500. False information and rumours on the site can cause the scrip to crash. "The hacker can gain access wherever the link is weakest," warns Viraj Savant, director, DBS Internet. Last year, the prestigious India Internet awards site was hacked, forcing the organisers to take the site down.

Another potential hazard is data eavesdropping where an outsider gets access to confidential information like orders being placed or the identity of the person placing them. The third major security risk -- called Trojan Horse -- is when all traffic to the original site is redirected to a duplicate site. An investor who believes it to be the broker's site is duped into revealing confidential information. DBS estimates the average cost of an e-broking solution with adequate security measures to be Rs 75 lakh upwards. "There are different levels of security, depending on what extent you want to go to," says Savant. Forexample, authentication could be done with a simple user-id and password or involve third party digital certification, smart cards.

"Although there are roadblocks like lack of legislation it would be naive to assume Indian brokers have not foreseen the potential of internet trading," says Nirmal Jain of Probity Research, who estimates the individual investor base in the country to be 5-10 million. A statement reiterated by the fact that BSE expects daily turnover to increase three times, and NSE's R H Patil predicts a 50 per cent rise when internet trading finally takes off.