In yet another step towards institutionalising the stock broking business, the Securities & Exchange Board of India (Sebi) on Thursday allowed the direct market access (DMA) facility to investors in India. To begin with, DMA will be available to institutional investors.
In a circular to BSE and NSE, the capital market regulator said DMA permits brokers to offer clients direct access to the exchange trading system through the broker?s infrastructure without manual intervention by the broker. DMA, Sebi said, gives clients direct control over orders, helps in faster execution of orders, reduces the risk of errors from manual order entry and lends greater transparency and liquidity.
DMA also leads to lower impact costs for large orders, better audit trails and better use of hedging and arbitrage opportunities through the use of decision support tools/algorithms for trading.
Market participants say DMA, along with collection of margins from institutional investors, will help broking industry?s consolidation.
Sandeep Singal, co-head, institutonal derivatives business, Emkay Stockbrokers, said, ?DMA is a welcome step. This allows execution of various products based on quantitative and algorithmic models that were not possible otherwise. Hedge funds and proprietary traders are the most and best users of these quantitative products. It would improve liquidity in the market. It would lead to further consolidation in the institutional segment of the broking business. Institutional players might prefer to pass substantial business through their captive broking outfits. However, the brokers would be paid for their value addition in terms of research, advisory and other money-making ideas.?
Sebi said SEs will specify from time to time the categories of investors to whom DMA can be extended. Initially, the permission is restricted to institutional clients.
