Thursday, November 16, 2006

Brokers reduce rates to fight Reliance Money

AHMEDABAD: Reliance Money's foray into stock broking has set the cat
among borkerage pigeons, who are now slashing rates drastically to
fight the onslaught and stay afloat. Among other initiatives, it is the
pre-paid card concept from Reliance Money that is all set to
revolutionise stock broking activities.

The new wonder is Reliance Money's pre-paid card for stock market brokerage. Reliance Money, the financial services division of Anil
Dhirubhai Ambani Group-promoted Reliance Capital, is bringing to the
market pre-paid cards in denominations of of Rs 500,Rs 1,350 and Rs
2,500 with validity period of two months, six months and twelvemonths

These cards would offer brokerage at one-third of the rate being
charged by institutional and individual brokerage houses.Sample this.
For a pre-paid card worth Rs 500, an investor can trade upto Rs 90lakh
in futures and option segment or can undertake intra-day trade of
similar amount. Besides, an investor can undertake a delivery-based
activity of Rs 10lakh.

The Rs 1350 worth pre-paid card, total trading limit would reach Rs 3
crore, of which Rs 2.70 crore is for the F&O segment and balanceRs 30
lakh for delivery-based activities.

For Rs 2500 pre-paid card,total trading limit is fixed at Rs 16
crore, that include F&O limit of Rs15.40 crore and balance Rs 60 lakh
for delivery-based broking, says Jigar Bhatt of Times Commodity, a
franchisee of Reliance Money and has begun online trade.

For all categories,investor would have to pay Rs 12 for every
transaction. "We would not like to comment on this as we have not yet
finalised our offering," a Reliance Capital spokesperson said.

An electronic-code will be issued to investors purchasing pre-paid
card and all market related transactions will be done under this
e-code. The e-code can be used for both online and off-line trading in
the stock market. The broking fraternity feels that rates offered by
Reliance Moneyare competitive and may wean away high net worth
clientele from other institutional and individual brokerage houses.

Sensing a fierce rate-war in brokerage space, it's not only the
online broking service provider firms but local brokers too have begun
slashing rates to pre-empt Reliance Money from taking away their high
net worth clients.

"Local brokerages have begun reducing rates for delivery-based and
square-off based activities. For every Rs 100, brokerage for
delivery-based activities has gone down from 25paise to 10-15 paise.
For square off trade, rates are down to between one and two paise,"
says Atul Manhar of Kunvarjee Finstock.