New Delhi: ICICIdirect.com, the Internet trading platform of ICICI Securities Ltd, has become the second brokerage house to start offering an international trading window to Indian investors.
The brokerage house has tied up with Penson Financial Services Inc., the fourth largest clearing agent and broker in the US. With the tie-up, Indian investors would be able to invest in stocks, exchange traded funds, and index options listed on key stock exchanges such as New York Stock Exchange (NYSE), Nasdaq and American Stock Exchange.
Reliance Money Ltd, the broking arm of Reliance Capital Ltd, also offers an international trading option to investors through a tie-up with UK-based CMC Markets Plc. and Chicago-based Alaron Trading Corp. for investing in commodities.
ICICI Securities will offer the trading window at a one-time cost of Rs999. Both the existing as well as the prospective investors will have to bear the cost. In addition to the one-time fees, the brokerage company also will levy a brokerage of 0.75% of the transaction value or $9 (Rs355), whichever is higher. However, the prospective investors also will have to shell out more money towards opening local trading or demat accounts with ICICIdirect.
After registration, the investors will have to remit money to Penson Financial Services, through any of the ICICI Bank branches. Online remittance is not yet allowed because the Reserve Bank of India (RBI) rules prescribe that a physical form (hard copy) has to be filled by the investor.
The remittance process could take up to three days. Once the money is remitted, the investor will be able to trade in the US exchanges in the same manner as they do in Indian equities.
In comparison, Reliance Money allows every investor, whether it is a client or not, to invest overseas, without any one-time charge, said the company’s spokesperson, who did not wish to be identified.
Such overseas investments can be made as per RBI’s liberalized outward remittance scheme, which allows each individual to invest up to $200,000 in each financial year. The money can be remitted to acquire assets or open bank accounts abroad. Over the past few months, the central bank has hiked this limit several times, encouraging individuals to invest in overseas market.
On 25 September, the limit was raised from $100,000 to $200,000. In December 2006, RBI increased the outward remittance limit to $50,000 and in April again, the limit was doubled to $100,000. However the scheme comes with few riders. For instance, the money remitted abroad cannot be utilized towards payment of margin money for stocks or commodities. RBI’s latest annual report reveals that until December last year, Indian investors remitted $13.3 million abroad under the scheme. This figure grew to $42 million by the end of March.
As Mint reported on 27 September, despite the remittance amount being increased several times, not many players have come forward to offer an international investing window. While many financial advisers and planners actively are recommending overseas investing options to their clients or facilitating them to do such transactions, some are cautious also.
Kartik Jhaveri, director of Transcend Consulting (I) Pvt. Ltd, a Mumbai-based private wealth management firm, said it will take some time before Indian investors take on overseas investing.
“People are not jumping on to the bandwagon just because it’s a new thing,” says Jhaveri, who isn’t advising his clients in a big way. “They need a lot more understanding about the overseas markets and the currency risks, the safety aspect of the remitting money abroad and opening of an overseas bank account.”