Damani Allays Small Brokers Apprehensions Over Rating
The Bombay Stock Exchange (BSE) president M G Damani yesterday allayed fears of smaller brokers over the exchanges plans to introduce brokers rating.
BSEs plan to introduce rating for its member brokers had kicked off a controversy with a section of brokers welcoming the proposal, while the other opposed any such move.
While the supporters of the proposal say the system will bring in more transparency and help improving investor confidence, smaller brokers, on the other hand, are a worried lot saying it will affect their volumes.
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Damani, while allaying the fears of smaller brokers, said the net worth of brokers will not be the only criterion while rating. It is the quality of service which matters most and not the sheer size of the brokerage.
One may not be a big broker in terms of net worth, but still the quality of service provided to investors could fetch the brokerage the highest of ratings, he said.
He listed some criteria which will be the benchmarks while rating brokers:
Prompt payment and delivery to clients: Brokerages will be rated on the basis of how much time they take in making payments or delivering shares to their clients
Percentage of bad delivery: Higher ratings would be given to those brokers who have a very low percentage
Clean record with the exchange: Brokers having a good track record with the exchange in terms of pay-in/pay-outs and prompt payment of margins will be rated high
By this process, a small broker and a large broker could have identical ratings if the quality of service is of similar high standards, Damani said.
The process of rating is not binding on any brokerage, he said. No broker would be compelled to go through this process. To start with, only those brokers who volunteer to undergo the process will be rated by a reputed credit rating agency, Damani said.
Besides, if any brokerage approaches a credit rating agency on its own, then the cost of rating will be high when compared to the BSE scheme, which is a cumulative deal for all its members, he said.
On the criticism that smaller brokers may lose business if their ratings are made public, Damani said total secrecy will be maintained while rating a brokerage.
Apart from the exchange, only the broker concerned will be privy to his rating, the Bombay Stock Exchange president added.