Infrastructure

10:27 AM
Arin Ray and and Sreekrishna Sankar
Arin Ray and and Sreekrishna Sankar
Commentary
50%
50%

Technology Adoption Brings Change to Indian Capital Markets

While foreign brokers have influenced the adoption of high-touch DMA and the FIX protocol in India, Celent analysts say fully automated DMA remains a distant pipe dream as regulators are skeptical.

India has been an early adopter of the various technological changes occurring in the capital markets. One of the main reasons for this has been that economic liberalization and strengthening of the capital markets coincided with technological innovations in the markets worldwide.

DMA: A Difficult Beginning but Good Prospects Direct market access was introduced in India in April 2008, making India one of the earliest emerging Asian markets to adopt DMA. There are few reasons for adoption (in terms of number of brokers offering DMA service) of DMA, namely: highly electronic market, advanced trading infrastructure with trading in dematerialized form of securities and a central counterparty with straight-through-processing (STP), improvement in the execution quality and greater buy side control over trades.

While the advantages of DMA are there for all to see, the launch of DMA coincided with the crisis, and this impacted adoption. The timing could not have been worse — brokerages and institutional equity firms cut down on their IT investments. But the takeoff, albeit late, is happening in 2010.

The potential market for DMA providers and users is large—it consists of over 1,000 brokerage firms and around 1,350 domestic and foreign financial institutions. The foreign brokerages, which already possess the technological capabilities and know-how, are bringing a sea change in terms of the technology adoption among the domestic brokerages. In an already fragmented brokerage market, any technique to increase market share is embraced. To gain market share, even from foreign investors, domestic brokerages are driving technology adoption, with top players having already adopted DMA.

In India DMA remains high-touch, mainly due to regulatory requirements and constraints. However, even this manually intrusive DMA has reduced manpower and costs, and the brokerages are starting to appreciate this efficiency improvement. A fully automated DMA stands as a distant dream, with the regulator not yet fully convinced about the implications of such a system.

Previous
2 of 3
Next
Comment  | 
Print  | 
More Insights
More Commentary
What Will the Financial Back Office of Tomorrow Look Like?
Asset managers are increasingly looking to automate their manual back office workflows. Confluence calls it the "back office revolution."
Bankrolling Technical Debt: A Financierís Guide
Technical debt represents the effort required to fix source code or application problems that put the business at risk.
Staying Ahead of the Game With Continuous Delivery
The need to develop better software faster is leading financial organizations to continuous delivery (CD), a practice pioneered by SaaS companies like Salesforce.
Shore Up Cyber Security Now
Knowing that a data breach can and will happen at some point, asset management firms can manage new operational and regulatory risk with a layered approach to cyber security.
Is Big Data a Problem or an Opportunity?
When it comes to data, financial services firms are, as a rule, quite circumspect. They fear cyberattacks, data theft, data loss, security breaches, data privacy, and human error.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - July 2014
In addition to regular audits, the SEC will start to scrutinize the cyber-security preparedness of market participants.
Video
7 Unusual Behaviors That Indicate Security Breaches
7 Unusual Behaviors That Indicate Security Breaches
Breaches create outliers. Identifying anomalous activity can help keep firms in compliance and out of the headlines.