Brokers face bleak future, surrender cards

"The reasons are quite obvious. The volume of business is low and the element of speculation — the key fuel to drive the Sensex up — has been cut down to size by the SEBI. Besides, the business of the FIIs has also dried up… brokers, especially from the NSE, are the worst hit,” says P Dhandharajaka, a BSE broker.

It is not surprising, therefore, to witness BSE brokers blindly following the former big bull, Harshad Mehta, who is injecting (excess) speculation into the dormant markets. "The introduction of BOLT and two-way quotes in the computer screen robbed the brokers of a very important element of business. Earlier in manual trading, a broker could sell a scrip for any price as the buyers were not having access to an indicative quote… In BOLT trading, the scrip is having both the Buy and Sell quote which makes itdifficult for the brokers to rig prices,” says a old timer, Pradeep Shah.Analysts say the recent payment crisis emerged, as brokers, desperate to make money, jumped into the bandwagon of Harshad Mehta as he rigged prices of few select scrips which rose to dizzying heights. Though these scrips were not backed by any fundamentals, it showed how badly the market wanted to revive its fortune.

“We agree that we have taken the advice of Mehta… but as all the transactions were stuck on phone and without any papers, no one can prove the involvement of the Big Bull,” says a broker.

“Brokers will have to make money to pay exchange fees,stamp duty, SEBI fees, meet staff expenses, send gifts to clients, besides maintaining a fully computerised office. In the recent years, only few hundred brokers all over the country are making money and the rest are as good as any jobless,” he said.

Though brokers say the collapse of their business is due to overregulation of SEBI and inefficiency of the Exchange’sgoverning board, the truth is that the small investors have given a complete thumbs down to the stock markets. “In the last few years, small investors have only burned their fingers. Though the individual volume of business was small, it was a huge amount when calculated as total investment,” Shah said.

“It would take a long time get the small investors back to the markets. The primary market, one of the most economical way to raise funds, has closed down even for the good corporates. Only the banking scrips have done well in the public offering,” says UTI Investment Advisory chief, S S Nayak. The future, brokers say, in not encouraging. Most of the brokers are sending their next generation abroad to get degrees like MBA etc. Very few of the generation next are planning to get into the family business of trading.Says President of Association of NSE members of India, Vinod Gupta, “BSE brokers are better positioned as compared to their counterparts in NSE as the latter have acquired the card at a totalRs one crore investment, besides annual recurring expenses of nearly 15 lakhs.”

As the earnings have fallen short of the expenses, many have surrendered their cards even before starting any trading. “After surrendering the card, a NSE broker would get its security deposit back and invest this fund into some other bsuiness. Most of the brokers who have surrendered the cards were finance companies who are anyway facing tough times,” says Bharat Shah of NSE. Kiran Agrawal of NSE is, however, hopeful.