‘Big Data & Robo Analytics to drive next phase of growth’

Broking houses have had to grapple with some of the tectonic shifts in the equity broking industry led by technological advancements in recent years. Subdued domestic equity market performance has also added to the challenges faced by this industry.

B Gopkumar, who recently joined as the CEO of Reliance Securities, the broking and distribution arm of Anil Ambani-led Reliance Capital, shared with BusinessLine his views about the new trends in the broking industry. Excerpts:

Broking industry has always been about commission/ brokerage income. Do you see a change?

Technology has been changing the world around us. People used to pay a premium for information and content. Companies, such as Google, Twitter, Facebook and WhatsApp have eliminated these premiums. As companies and content go online, and searches become more and more intelligent, we see people willing to pay for intelligence rather than transaction. We clearly see technology, and not brokerage, driving the next phase of growth for the broking sector.

What kind of technologies do you see influencing this change?

Big Data and Robo Analytics are some of the technologies that will make an impact on trading. Human intervention will be limited as new technologies take over. Today, data analysis is used more as a technical analysis tool — checking historical data to identify patterns or signals and price correlation. Trades are taken based on the ‘history-repeats-itself’ strategy and most technical analysts also work on similar logic. However, data analytics help the investor execute the trade on real-time basis and on multiple stocks.

These analytics do not rely on price alone, but use other variables, such as volumes, delivery data and technical signals while executing trades. Risk management is also taken care of by the software which brings in much-needed discipline and removes the emotional quotient from the trade.

But these are expensive and available to institutional buyers only…

Till now, this has been the case and the retail investor has been short changed. High-end technologies have been only available to large investors and high net worth retail investors. This will change as technologies become cheap and broking houses are able to customise these to suit individual trading goals and patterns

How will it impact business?

Technology has already started impacting the broking business. Brokers are also cutting back on their physical presence. The number of company-owned offices of equity broking houses had become 2,621 in 2014-15 from 2,705 in 2013-14 and sub-broker offices reduced to 33,762 from 35,150 during the same period. A lot of this is on account of shift toward Internet-based broking.

On the NSE, the turnover of mobile transactions has increased by nearly 130 per cent over the past year, to ₹1.16 lakh crore in August 2015 from ₹50,800 crore in August 2014.

These figures could easily double in the next two years as smart phone sales surge. The contribution of mobile trading to total turnover could go up to 3-4 per cent in the next few years from 1 per cent now.

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