Trading terminals abroad hit snag

MUMBAI, MAR 6: Finance minister Yashwant Sinha's attempt to enable investors abroad to trade in Indian stock markets through terminals se...

MUMBAI, MAR 6: Finance minister Yashwant Sinha8217;s attempt to enable investors abroad to trade in Indian stock markets through terminals set up by Indian brokers has hit a roadblock owing to almost unaffordable charges. A broker would need to pay about Rs 40 lakh per annum as fee for an international private leased circuit connectivity for a 64 kbps line, which would make the entire exercise of opening up a trading terminal abroad economically unviable considering the falling rates of brokerage.

As a result of this calculation of the minimum charges, the National Stock Exchange NSE, has embarked on an exercise to find a way out of the high charges by finding a different medium of connectivity. NSE managing director RH Patil said that one possibility is that of the government giving transponder space on the new satellite being launched in which case a V-Sat connectivity could be attained between the broker8217;s Indian and foreign office. But sources say, that this too could be fairly costly.

The only viableoption at this stage appears to be that of utilising the services of shared private networks abroad. NSE officials are, however, trying to ascertain the cost associated with this and say that whether this is a cheaper option would only be known once the details of the costing have been worked out.

Sources said that even though VSNL has recently reduced its international leased line charges, it is still about Rs 15 lakh for half a circuit for Asia and Europe and about Rs 17.25 lakh for the USA. These figures till recently were Rs 17.25 lakh and Rs 19.83 lakh respectively. These charges are for half a circuit and the remaining circuit charge would be levied by the international carrier. quot;Their charge is usually the same or slightly higher. In addition to this, there is charge of Rs 2.50 lakh for the local loop including its installation. Taking into account other sundry charge, the total cost could work out to Rs 35-40 lakh per annum, which is fairly high for an Indian brokerquot;, said an NSE source.

Thecharges worked out are expected to be forwarded to Sebi, which is in talks with the Department of Telecommunications DoT for regulatory approval for connectivity.

Patil said that another option that could be considered is the dial-up facility. quot;In any case, Reuters provides quotes on an on-line basis. The trades could be executed through a dial-up facility but as of today this is not permitted. A more feasible solution would have to be foundquot;, he said.With fierce competition and a depressed market, brokerage charges have been falling sharply over the past few years. The recent shift to dematerialisation has further brought down brokerage to very low levels and hence brokers have been forced to diversify their business. A lot of the bigger ones have become depository participants. Several smaller ones have already folded up and a lot more are expected to follow suit.

The idea of opening terminals abroad was first mooted over three years back by Patil. However, the plan was in the cold storage all theseyears and the government only woke up recently when it was realised that this step could lead to greater portfolio investment inflow from the non-resident Indian community.

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Several NRIs have expressed keenness in investing in the Indian markets in the wake of the depository system becoming the norm.

NSE to expand in 57 cities

BANGALORE: The National Stock Exchange NSE is setting up its trading terminals in 57 cities in the country during the calendar year. With this, the total number of NSE terminals will go up to 300 from the existing 243 in India. NSE is also exploring the possibilities for setting up trading terminals in the Middle East. According to NSE managing director RH Patil, the exchange is in talks with both the Department of Telecom DoT and Videsh Sanchar Nigam Ltd VSNL for providing the Internet services for NSE. 8220;But both the parties have to change their certain regulations for offering the connectivity to the NSE which is in the process of reviving the domestic capitalmarket. By setting up terminals abroad, we could bring more foreign exchange funds to the country,8221; he added. The main constraint, he said, is the requirement of huge funds for setting up the trading terminals abroad. As compared to the cost for a domestic terminal, the funds required for a foreign trading terminal is about Rs 40 lakh. 8220;Another possible option for exploring the non resident Indians NRIs is connecting them through the Reauter services which is already available with the NSE,8221; he said. Patil was addressing a seminar on Revival of capital markets 8211; role of NSE8217;. The seminar was conducted by the Federation of Karnataka Chambers of Commerce and Industries FKCCI here on Saturday. He said the much-hyped stock prices of many pharmaceutical and infotech companies are not realistic.