Brokers log out of incompatible system

With the arrival of computer technology, main brokers can do trading directly with other brokers through the electronic trading system without the help of jobbers or sub-brokers. At the BSE alone, at least a dozen brokers have defaulted as they are having large scale bad deliveries (shares which are duplicate or mutilated and not accepted by the buyer). Nearly a dozen brokers of the National Stock Exchange (NSE) surrendered their membership card due to meagre returns. "The stock-broking business has lost its charm," said M Shankar who gave up his NSE membership card and joined the family business in Bangalore.

Currently, there are about 8,850 registered brokers and less than 2,000 registered sub-brokers in the country who have retained their broking firms and offices. About 10,000sub-brokers and about over 50,000 small unregistered brokers who used to be attached to main brokers to bring outside business from retail investors have almost disappeared from Dalal Street — which houses the BSE — and other markets in the country as they don’t have any business at all.

The maximum amount of brokerage that a broker could charge on share transactions of customers has fallen to a meagre less than half per cent compared to an average 1.5 per cent which prevailed earlier. Due to the introduction of computerised share trading system in all the major stock exchanges including the regional exchanges, around 10,000 jobbers (who used to act as market intermediaries to buy and sell shares on behalf of outside clients) have also disappeared from the market.

Said Dharnidharka who works as a sub-broker at Dalal Street, "Introduction of computers has affected the spread (difference between buying and selling prices of shares) affecting the profitability of jobbing business. When the spread was high,we could manage to get better profit even from small transactions." Dharnidharka has now started a catering service, especially for marriage parties and other social events. "Most of the sub-brokers have been thrown out of business. Many of them have gone back to their native places in Gujarat and Rajasthan."

"The volume of business handled by me has come down by 50 per cent," said a top BSE broker who sold his 1,500 sq ft office area on the busy Dalal Street a couple of months ago.

It’s not only card prices, even real estate prices of broker offices on Dalal Street have also fallen. "Even to start a business, I needed minimum Rs 10 lakh which has come from banks in the form of a loan," said a sub-broker who started a travel agency. "Many of my friends who wanted to start some petty business could not find the seed capital. Now they continue to do self business which is highly risky. Although the present sensex level (an indication of the market health) is satisfactory, only some shares mainly in the Agroup are traded on a daily basis. "The recession at the retail market level is continuing for the third consecutive year. The value of a broker card – the license issued by the stock exchange authorities – which exceeded Rs 4 crore two years back has now come down to around Rs 1 crore," said broker Anand Divan.

India has a record 9,900 companies listed on 22 stock exchanges – this number exceeds the number of shares listed even on the New York Stock Exchange. However, the number of shares which are traded regularly is only 20 per cent of this because many of the companies which have collected public money and got their shares listed on various stock exchanges have disappeared from the scene. The prices of a large number of shares (having a Rs 10 face value) have dropped even to 50 paise, Rs 1 and Rs 2 level, leaving no chances for making any business in such dud shares.