There is still work to be done before the full potential of direct market access (DMA) trading in India can be realised, according to Asian electronic trading solutions provider Tora Trading and global bank Morgan Stanley.
On 22 September, Tora became the latest firm to offer DMA connectivity to India for clients using its TORA Compass platform. Tora worked with Morgan Stanley to deploy the required FIX and DMA connections.
However, Scott Field-Marsham, managing director and head of electronic trading in Asia at Morgan Stanley, thinks sell-side technology needs to advance further to allow companies to take full advantage of DMA in India.
“The baseline capabilities are there, but the sell-side has not yet developed all the tools and technology platforms required to support electronic execution,” he told theTRADEnews.com. “The exchanges have taken the right first steps. It’s now up to the sell-side to build out their trading platforms.”
There are also regulatory hurdles that need to be cleared before traders can make the most of DMA in India, according to Chris Jenkins, managing director of Tora Trading. “India has regulated direct market access flow as if it were regular retail flow, which means that it is not quite as simple as in certain other markets,” said Jenkins. “A bigger problem may be the delays that can occur in regulatory approval process before firms can offer DMA services in India.”
Nevertheless, the Indian regulatory environment is becoming more favourable to DMA. Jenkins noted that the country has relaxed the authentication rules, and although this will require greater investment in technology from the buy-side, it also removes a high-touch, manual step from the DMA process.
Morgan Stanley’s Field-Marsham regarded the regulatory environment and other obstacles – such as the adoption of FIX connectivity – “as a function of the development cycle”, and expects to see a growth in the use of execution algorithms and algorithmic trading platforms in India by Q4 2008.
“I think the large brokers are interested both in bringing new trading opportunities in India to their global clients, and in servicing new local clients,” added Tora’s Jenkins. “With Indian regulations forcing local asset managers to spread their business between brokers, there is potentially a lot of flow on offer.”