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Business EconomyPosted at: Feb 18 2018 9:21PM


Upstox tech-driven platform redefines financial brokerage

New Delhi, Feb 18 (UNI) Amidst reports that financial brokerage market in India will grow at a considerable CAGR rate to reach over Rs 330 billion by 2020, many new entrants in the market have jumped up to tap it with their innovative tech-tools.
Upstox is one such new age discount broking firm that is pushing the limits of finance with technology. It has developed proprietary low latency trading algorithms for investors trading on the NSE and BSE.
Data-driven trading has come a long way right from where it started. Its future depends on how well the trading platforms at the disposal of investors enable them to back-test their strategies while pursuing real-time order placements. “Going forward, systems which will advise clients not only on risk and position sizing but also on timing entries and exits will become critical elements of trading the markets” says Upstox Founder Raghu Kumar.
In the coming years, the market for discount brokerage is likely to get consolidated, while some of the discount brokers will be acquired by few big brokerage houses. Discount brokers who could provide cutting edge technology and offer ample of services at least cost is likely to grow incessantly in the coming years.
Using the correct data driven tools to ensure you are on the right path is something that platforms like Upstox ensure. The rise of Algo-based trading has opened up huge opportunities for tech-driven companies in the broking sector. Investors are now warming up to companies like Upstox who not only offer them the comfort of keeping their costs low but also offer them strategies to scale up quickly and reduce slippages too.
The emergence of discount brokers in India has opened a new avenue of money making opportunities for traders and investors through online means. Measured against parameters like market share, client activity levels and even profitability, discount brokers have showcased enormous growth in the past.
Client convenience is something that comes first. According to Raghu Kumar, factors like ease of opening an account are a paramount need for the industry where a mere 3-5 per cent of the population has Demat accounts. Bank accounts, with the Jan Dhan trigger, are today around 40-45 per cent of the population and that in itself is a challenging procedure for the financial non-literate population. Therefore, ease of procedure is the key.
As Kumar asserts, if documentation is in place, a client can have an account opened at Upstox within an hour. Indeed, with the e-KYC process in place, hardly any physical signatures are needed and most of the work can be done on the basis of Aadhaar, bank account documents and similar verifiable papers.
Online broking is going to be the future for broking sector. The country has 56 million Internet users, while online demat accounts is just 5.6 million, which is just 10 per cent of total target population.
While costs are a primary factor that goes into the decision of investors to seek a discount broker, what is always lost in the maze of discussions on discount broking is the fact that it offers much more than just a price advantage. Every up tick that the stock sees after a transaction is executed accumulates to the investor has his profit.
Discount broking is not just about lower costs. Its scope and benefits go well beyond the cost advantage that is currently being looked upon as investors to be as the only factor to look for. Players in this field have been innovating and enhancing technology to ensure investors get the best of both worlds.
Investors have become increasingly disciplined and evolved where developing a strategy for trading is just one aspect of success. What is more important is the testing of the strategy before you put it work.
Likewise, the speed and ease of transaction in the case of a technology-driven discount broking business with minimal human interface is another influencer. Like in the case of account opening, speed, simplicity and convenience are big factors.
Everything said and done, the Indian equity market is absolutely ripe for the discount broking model. In the US equity market, where retail is 40 per cent of total volumes, discount broking is 70 per cent of the retail volumes, which indicates that it has a quarter of the total market. In India, by contrast, while the retail volume is comparable, discount broking is barely 7-8 per cent of the total volume.
Therefore conceptually, given the growth visible in equities, the massive potential for rise in equity-holding households (as evinced by the gap in bank and Demat accounts) and then the potential for discount broking as a proportion of total brokerages, the business case for discount broking is highly exciting.
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