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Commentary

SEBI allows Mobile Trading, Smart Order Routing and More…

In a sudden flurry of announcements, SEBI changes the technology game.

  1. Mobile trading will be allowed. Meaning, you will soon be able to trade directly from your mobile phone. I believe this is useful for people that travel a lot in the day. Mobile trading may be possible using “mini” sites like Sharekhan has recently provided, but the functionality is limited (can’t easily see order book changes, modify orders etc.). A mobile app will be more useful and can easily piggy back the current layers that brokers use online (SSL, web service layer). Plus mobile charting, screeners etc. are useful in that you can use them to actually place trades. The mobile operators, though, are of no use – brokers don’t even need them other than if they will cut costs dramatically.
  2. Smart Order Routing. When you place your order it has to go on a specific exchange. With Smart Order Routing the broker can check the pricing on different exchanges (currently BSE/NSE but MCX-SX is coming soon) and place the order appropriately. Divided into chunks, this makes a lot of sense for automated order routing for which complex algorithms have already been designed; institutions like mutual funds or pension funds can use such a facility to auto-route orders appropriately. It’s strange that this needed “authorization” from SEBI – brokers should have been able to do it already, or provide the programs to the client to do it. Strange, indeed.
  3. Call Auctions at market open: Brokers allow investors to place orders outside market hours, and these are placed into the exchange at 9 AM during hte market open. If there are a lot of orders at “market” there is a problem – the “market” hasn’t yet been discovered for the day, and prices can go haywire (they indeed do, as noted in many stocks, and brokers/punters take undue advantage). Call auctions help streamline the price discovery process – the original circular was a July 15 one.
  4. Private treaties to be disclosed by media. Many press entities like Times of India own stake in certain businesses as part of “Private Treaties”, in return for (partly) advertising real estate and coverage. This skews incentives in that sometimes negative news about the entity is held back or is spun around because the equity ownership may otherwise be in danger of losing value. In India selling editorial space is considered okay – that is, you buy an ad, and they’ll write a column about your company; I have been offered this kind of deal at multiple times. SEBI along with the Press Council has decided that such private equity ownership must be revealed on the media web sites. [I think this is a good rule, though our media companies will continue to act like hedge funds until they can.]