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    D-Street buzz about DMA spooks broking firms, stocks tank up to 8%

    Synopsis

    Under the DMA, investors will be able to trade directly from the exchange instead of going through stockbrokers. This may result in a drop of brokerage revenue.

    Tech View: Nifty forms indecisive Spinning Top, stays above 50-DMAGetty Images
    Market experts believe if the buzz happens to the true, it will be a massive trigger for the stock exchanges, as they will earn better brokerage and fee from demat holdings.
    New Delhi/Mumbai: Shares of brokerage firms declined up to 8 per cent in afternoon trade on Monday after rumours on a social media platform that said market regulator Securities and Exchange Board of India (Sebi) has developed a direct market access system (DMA).

    Under the DMA, investors will be able to trade directly from the exchange instead of going through stockbrokers. This may result in a drop of brokerage revenue.

    Shares of ICICI Securities fell 6.64 per cent to Rs 501.60 around 12.40 pm (IST), while Geojit Financial Services traded nearly 8 per cent down at Rs 36.10. BSE benchmark Sensex traded 0.31 per cent lower at 38,009 at around the same time.

    Shares of Motilal Oswal Financial Services, Emkay Global Financial Services and Edelweiss Financial Services were down 2-5 per cent.

    Market experts believe if the buzz happens to the true, it will be a massive trigger for the stock exchanges, as they will earn better brokerage and fee from demat holdings.

    To be sure, there is no official communication on the development from the government or the market regulator.

    Brokers shrugged off the buzz on rumors but agreed that DMA was technologically possible. However, implementing it would give rise to a lot of challenges.

    “This is an old buzz. There is nothing new in it. It is just making rounds on social media. Broking businesses will close down. Every market participant has a role to play,” said Deven Choksey, group managing director, K R Choksey Investment Managers.

    “Technology can enable this and there is no doubt. Brokers are very much important in the chain, in terms of taking the market closer to the investor. The role of the broker may evolve to take the product out to the customer, and help execute trades,” he added.

    Nithin Kamath, founder & CEO of top discount brokerage Zerodha shared the view.

    “We don’t know if the buzz is for real. DMA has been there for a long time, but only for institutions, but they still need a broker in the system, as the structure in India demands an intermediary. The exchange also acts as a level of regulator,” Kamath said.

    “Is it possible to allow DMA for retail? Yes, it is,” he said.

    “However, people come to a place like Zerodha for the platform with superior technology. I don’t think DMA would be suitable for retail investors. Biggest task for us is to reply to investors’ queries and provide support,” he said adding that stock exchanges will have to set up such an infrastructure, which will be a huge task.

    Reacting on the development, shares of leading stock exchange BSE gained nearly 9 per cent to Rs 536.

    BSE in May reported a net loss of Rs 1.94 crore for the quarter ended March 2020, down sharply from Rs 51.86 crore profit reported for the year-ago period.




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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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