IN INDIA, INTERNET trading in the capital market segment is still limited to the NET being used only as a medium of communication between Client & Broker where the latter still punches the orders (received through e-mail) in his terminal.
But times ahead, people will be able to log in their orders via net from any part of Country through a Broker located quite far. That means:
Press enter: make or lose millions
By this, the focus of Broking business will shift from building up sub- broker network or additional terminals to being a branded marketing & service oriented industry. New strategies will be needed to build up & retain a loyal client base, as “NETVESTORS” will be able access to number of brokers with a single click of their mouse.
By this, the result will be cheap & instant availability of information, thus qualitative improvement of markets. This might lead to excessive speculation, but stock invest is a zero sum game – the gains made on a given day are losses suffered by the counter party/ ies which cannot happen on a sustained basis.
Thus the “NETVESTOR” will be super – informed person with so much of market information & historical data available to him. Rather than increasing volatility, “NETVESTING” will reduce it.
The role of the Stock exchanges & the risk to the market has to be assessed. Gradually various functions of stock exchanges are being managed by independent agencies. Internet trading will take this trend further.
The central role of the Stock exchange will be to provide a place for “price discovery” to which will be connected to thousands of broker terminals, in turn, to millions of “NETVESTORS” PCs.
The risk management functions of stock exchanges will assume greater importance. A major concern relates to risks, more so in a country where even the basic citizen identification documents are not available for all. The nature of risk will be fake orders, backtracking of e- contracts, bad delivery payment problems from large positions etc.
But with the onset of e – Banking , dematerialisation & e-commerce laws will mitigate such risks.