Penalising brokers for tech glitches not ideal for market development: Jones George of Geojit Financial (2024)

Last Updated: Mar 08, 2024, 12:36:00 PM IST

As big brokerages are finding it difficult to remain free of all technical glitches, traders have been demanding that brokers should compensate for losses. Jones George, Executive Director at Geojit Financial Services, says the internet is a shared resource and when all factors are not under brokers' control, penalising brokers for glitches is not ideal for market development.

“The underlying technology ecosystem covering brokers, exchanges, banks, and clearing corporations is with interdependencies, complex and hence penal decisions should be after careful examination of an independent root cause analysis,” he says.

Edited excerpts from a chat:

Tell us about what has been Geojit's strategy for growing its market share using both digital as well branch networks. Is it more about phygital these days than just digital?

The obvious strategy is to increase the overall penetration of the market. Digital and branch networks are enablers. We have clients who have a faceless relationship with us, or a hybrid relationship as well as those who have an entirely offline relationship. Both digital and branch networks co-exist to enable all services. Geojit’s growth strategy is definitely phygital. We are also seeing an increasing number of clients moving their long-term investment funds to us from online-only counterparts, for the reason that physical relationships enhance the level of trust and ensure institutional relationships.

A lot of the young crowd entering Dalal Street in the last few years have opted for discount brokers. Where do you see yourself fitting in within this evolving landscape?

The best year for discount brokers, was also the best year for full-service brokers generally. While the number of accounts opened has been different, it doesn’t mean only one side is growing. Unlike the past, when it was about online vs offline, today it has become about discount vs full-service brokers. There is a clear distinction of client needs. I don’t see why there is a concern about where either of us fits as there is a distinct need of both participants.

Since you look at the digital side of the business, what is your opinion on the kind of tech glitches that we have noticed in the last couple of years on major platforms? Is tech glitch inevitable for a broker?

Any entity with a dependency on technology, irrespective of the sector, is vulnerable to glitches. To my knowledge, there is no foolproof system in this world. We can only try to reduce the downtime to the maximum possible. Even the largest cloud providers in the world, whose networks many of India’s largest companies depend on, only offer up to 99.99% uptime. Besides, technology glitches are inevitable as there are various dependencies. An example of a dependency is the internet service provider. If there is a downtime at ISP, it will have a significant impact on stockbrokers. To mitigate this, brokers maintain multiple internet service providers. At Geojit, we have also provided interfaces like call centres and branches to help clients take positions in the event of a platform downtime.

For option traders in particular, even a second counts. And many times, the bigger platforms have failed to meet expectations due to delays in the execution of trades. As and when we extend the timings, do you think the intensity of the problem would grow bigger?

All potential tech issues that exist during current market hours, will continue to exist if timings are extended. Mitigation depends on how the broker’s infrastructure is planned for contingency. I don’t think the intensity will grow bigger. Rather, at any time, the intensity can be severe.

At an industry and regulatory level, what steps would you recommend should be taken to minimise damage to traders? Are you in favour of traders being given compensation mandatorily by the broker in case of a technical failure?

Exchanges and most of the specified brokers have designed and built resilient systems. Clients/Traders should be educated about alternate options available in case of technical glitches. We have a dedicated and secured customer care centre where our clients can call to execute their transactions. In addition to this, we also have a vast branch network in case our clients do not have access to the internet.

The Internet is a shared resource and when all factors are not under brokers' control, penalising brokers for glitches is not ideal for market development. The underlying technology ecosystem covering brokers, exchanges, banks, and clearing corporations is with interdependencies, complex and hence penal decisions should be after careful examination of an independent root cause analysis.

Sebi is working on rules for algo trading. As a broker, what is your take on open APIs?

This is much needed in the market today. As a broker, we get many requests from clients to open our systems to algo platforms. Due to inadequate regulations around it, we never ventured into it. Now that SEBI is working on the framework, it will be a big boost for the industry.

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