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Brokers in rating race for better credibility

21 Aug 10 11:47 AM
ET
MUMBAI: More broking firms are keen to get themselves rated, as it helps them get a better deal from banks while borrowing from them, say officials at rating agencies. A healthy rating enhances the credibility of brokers, who plan to issue debentures — often used as underlying debt papers in structured investment products — and also improves their standing with stock exchanges.

India Infoline, Religare Securities, Networth Stock Broking, Motilal Oswal Financial Securities, Edelweiss Capital, Indiabulls, ICICI Securities and Aditya Birla Money are among the brokers who have got themselves rated. A broker rating is different from grading, as it essentially involves the assessment of financial strength of a broking firm and its subsidiary companies. Customer service is not a very important criterion in broker rating.

“A normal broking business uses ratings to secure bank guarantees; strong assurance from banks helps brokers get higher trading limits in exchanges. A highly-rated broking firm gets easy-interest borrowing options from banks,” said Abhinav Sharma, manager-ratings, CARE.

Raters like Care Ratings, Crisil and ICRA primarily assess the credit exposure of brokers. They also look into the quality of capital raised by way of borrowings and analyse the repayment options available with the broker. Another aspect that goes under the lens is proprietary trading positions of brokers. Brokers who have high leveraged positions are rated lower taking into consideration the risk on borrowed capital.