Securities Exchange Board of India (SEBI) is now readying a proposal for mobile trading. It has put up a framework that lists guidelines and safeguards for brokers wishing to introduce such a service and has invited comments.
Download the draft of the framework from here (PDF).
SEBI has refrained from discussing the role of mobile operators. The regulator has, however, included them in its flowchart, so we’ve tried to look at how this could actually work out with all the players working together.
Extension Of Internet Guidelines
SEBI has introduced mobile trading as an addendum to its Internet trading framework, unlike RBI, which has treated mobile banking as a wholly different market from e-banking.
Considering that there are 403.66 million wireless connections in the country, it would have been wise to factor in the scale and investments required by brokers while launching such a service. Rules that will simplify trading and usage for the end user are the need of the hour.
The Face Of M-Trading: Operator Or Broker?
The regulator has noted that individual brokers who are already offering Internet trading could offer this service or a few could collectively approach an ISP to set up such a trading facility. This is presumably to set up a private network (VPN) with the mobile operator so data is transferred securely. But SEBI goes on to say that in case this connectivity is severed, brokers must ensure trading information continues to flow – either via the Internet or via telephones. M-trading would reach those who do not may not own an Internet connection, so offering Internet as an alternative may not be suitable for the masses. SEBI has said that the exchanges should set up a cell to monitor complaints from investors. If the service went down, users would have to call the exchange to make inquiries – not the broker, nor the operator. This may be a cause for confusion for users. Would it be better to make operators liasons?
Speed: Whose Responsibility?
The prime advantage of mobile trading would be convenience and speed – for this, SEBI has directed that brokers should ensure information made available on the hand held device should be timely and should not put the user at a disadvantage vis-à-vis other means of communication. This means brokers would have to take up the responsibility of the entire information flow cycle, which could be better handled by mobile operators who run the networks. Trades are based on real time updates of market information, and in this case, the broker will have to take the responsibility of the information being up to date. Given that connectivity speed over mobile Internet is limited and unreliable, this may well put off brokers, who would not want to be penalized for such issues.
Security & Authentication
SEBI has directed brokers to maintain an electronic record of all the transactions and should ensure it is tamper-proof, but will they be able to scale up to handle mobile traffic? The board has approved Internet-style authentication of user ids and passwords but suggested that a second level of authentication using smart cards or biometric devices be implemented to improve security, a good move. In case of RMoney.mobi, a mobile trading portal launched by Reliance and three other firms, the additional security measure in place is a VASCO Digipass GO 3 token.
Know Your Client
In the aftermath of the Pyramid Saimira case, SEBI’s directive to brokers to collect sufficient, verifiable information about clients could be taken as an opportunity to improve transparency. Mobile service providers could share the database of m-commerce users with brokers – it could eliminate redundancy and also lower the risk for the bourses.
Details of charges for such a service and revenue sharing between the broker and operator, if any, would be key.
Modification And Cancellation Of Orders
Even as good governance is threatening to sweep the VAS market, like in case of Airtel’s Start/Stop service being launched and IAMAI announcing a code of conduct, SEBI has also put in clauses that offer mobile trading customers more power. Confirmation of an order or trade is to be provided on the mobile along with a facility to modify or cancel it. The client would also be able to view a history of trades on the mobile.
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