MF Global, the world's largest broker of exchange-traded derivatives, has announced that its Indian subsidiary has become the country's first broker to secure permission from both the Bombay Stock Exchange and National Stock Exchange to conduct fully-developed direct market access into the Indian marketplace for all exchange-traded products.
In April, the country's financial regulator, the Securities and Exchange Board of India, encouraged DMA access into India by allowing brokers to offer their institutional clients direct access to the exchange trading system through the brokers' infrastructure.
'Electronic trading and DMA are important businesses for MF Global, and being the first to market demonstrates our commitment to this important segment,' says Vineet Bhatnagar, the firm's managing director and chief executive in India. 'We look to provide the most robust yet flexible DMA solutions to our derivatives and equities clients worldwide.'
Up to now, brokers' institutional clients have not enjoyed access to the broker's trading system, instead having to place orders with the broker to execute the trade. DMA allows clients anywhere in the world to access the trading platform without manual intervention.
According to the regulator, DMA benefits clients by offering direct control over orders, faster execution of trades, a reduced risk of errors stemming from manual order entries, greater transparency, increased liquidity, lower impact costs for large orders, better audit trails and better use of hedging and arbitrage opportunities through the use of trading decision support tools and algorithms.
In order to offer DMA to their clients, brokers must apply for permission from the stock exchanges they use, submitting details of the software and systems to be used for security certification. They remain responsible and liable for all orders routed through the system, and must authorise individual users at the client, including completing KYC checks.
Sebi, which has directed the country's exchanges and brokerage firms to prepare model agreements for clients, says it will review the working of the system six months after its introduction.