According to a report published by HDFC Securities in March 2019, the Indian online trading industry took a quick rise.
The trading shares surged from 22% in FY13 to 29% in FY18. This also depicted that an increasing number of millennials are moving towards trading in the stock market, as financial awareness rises.
This brings us to the topic of today’s article.
It has been reported that SEBI is considering allowing Direct Market Access (DMA) to retail investors.
If you do not absorb the gravity of this consideration/decision, we will help you understand it better.
Although before proceeding, know that if SEBI chooses to successfully implement this, it is going to completely change the functioning of India’s trading market.
What is ‘DMA’ in Stock Exchange?
Direct market access (DMA) means accessing the electronic facilities and order books of financial market exchanges, which facilitate daily securities transactions.
This DMA requires a sophisticated technology infrastructure and is often owned by sell-side firms, or brokers.
The main job of such a broker is to handle customer queries and complaints, amidst others.
The industry has tens of thousands of employees for this.
What is the Deal with DMA Now?
Until now (currently) DMA has always been available to institutions but always through a broker.
These retail investors use a broker for the platform on which they trade, DMA is not suitable.
Now, the Securities and Exchange Board of India is under considerations about discarding the process of DMA for retail investors only through a broker.
This means Direct Market Access (DMA) could be allowed for retail investors.
If this happens, it is completely going to change the way in which India’s trading market functions.’
‘This could obviously threaten the roles and existence of the country’s broking industry.
However, in response to this consideration, Nithin Kamath, co-founder of Zerodha, one of the biggest online stock trading platforms in India, tweeted his concerns.
He questioned, “If DMA is allowed to retail investors, can exchanges take place smoothly, along with acting as a regulator to regulate itself when it comes to customer grievances? Maybe not.”
Retail Brokers in India
As per a report by ICICI Securities, the top 10 brokers alone contribute to over 63% of the industry size.
This brings us to the top 10 broking platforms for retail investors (in India) that will be impacted by this move, if implemented.
These platforms are listed in accordance to the number of active clients in 2020, with #1 having the highest number of active clients.
- RKSV (Upstox)
- Motilal Oswal
- Axis Securities