Rules on mobile trading likely soon

NSE chief says they're ready; encouraging feedback to Sebi draft.

Trading in markets through mobile phones could soon become reality with final guidelines expected in the next few months, National Stock Exchange (NSE) Chief Executive Ravi Narain said today.

“We had discussions with the regulator on security and other issues. We are ready with the set-up,” said Narain.

NSE’s 15-20 per cent volumes came from internet trading and things could become more interesting once the Securities and Exchange Board of India (Sebi) allowed mobile trading, he added.

Sebi had proposed a draft framework for wireless trading in May 2009 and invited reactions. Sources said the industry feedback had been positive.

“We are ready with the software. We will seek approvals from stock exchanges and the regulator after final guidelines are out. The client feedback has been encouraging. This will also give a boost to mobile banking, which been lagging,” said Shashi Bhushan, chief executive of Way2Wealth Stock Broking.

The Reserve Bank of India had recently issued revised guidelines on mobile banking that said banks might do transactions involving up to Rs 50,000 per customer for both fund transfer and purchases of goods and services. Till now, these two transactions were subject to caps of Rs 5,000 and 10,000, respectively. India has more than 500 million mobile phone users.

According to Sebi’s proposal, brokers who provide internet-based trading are eligible to use wireless technology after geting approvals from stock exchanges. The net worth requirement per broker is proposed at Rs 50 lakh if he provides the facility on his own. In case a service provider provides the internet trading facility on behalf of a group of brokers, the net worth criteria stipulated by his stock exchange will apply.

Brokers have been working with software vendors to put application and putting systems in place. Once Sebi approves mobile trading guidelines, the software will be vetted by stock exchanges. NSE currently has a list of empanelled vendors, including Omnesys and Religare Technova, for online trading. It is yet to set up empanelled vendors for mobile trading.

The way it will work is like this: A software vendor will provide the application to the broker. Clients of the broker will have to install the particular software on their general packet radio services-enabled mobiles or personal digital assistants. The software will thus enable them to trade as well as access streaming quotes and stock information after confirming the user name and password. All these will come with no extra cost. The broker will not charge clients for trading through mobiles; it is only the service provider who will charge the customer.

While security is a major issue to be resolved, software vendors say there are technologies which address this issue. Sebi, too, has provided for detailed consumer protection measures in its draft report.

“Adequate measures should be taken for user identification, authentication and access control, using means such as user-ID, passwords, smart cards, biometric devices or other reliable means to prevent misuse of the facility by unauthorised persons,” their concept paper said.

"It is a great thing, as investors will be able to do transactions on the move. However, it is more of a convenience measure for existing investors, rather than bringing new investors into the fold. With 3G auctions delayed, there could be issues with the speed and seamlessness of the transactions," said Vinay Mehta, managing director, Almondz Global Securities.