The Hindu Business Line : Broking houses ramping up jobbing, arbitrage desks

Mumbai, Sept. 15 Brokerage firms are wooing jobbers and arbitrageurs in a big way to make the most of rising volumes and increased volatility in the equity markets.

The number of such associates engaged by the firms is likely to jump by 30-40 per cent in the coming few months, say officials at brokerages.

Both big and small firms are ramping up their jobbing and arbitrage desks as market activity is picking up. Although there is always a market for arbitrage, the returns are manifold when the market is more volatile, said an official from Motilal Oswal, which has over 80 jobbers and plans to engage more.

Speed is key

Motilal Oswal, Sharekhan, Religare, India Infoline, and Bonanza Portfolio are some of the broking outfits that are planning to engage more jobbers and arbitrageurs in the next three-six months.

Jobbers and arbitrageurs work on a profit sharing basis for brokerages. They focus on intra-day gains by spotting price discrepancies, sometimes settling for a gain of as low as Rs 0.20-Rs 0.40 on a share. The transaction volumes they generate make up for the low gains.

This is a job that calls for speed, for the punching of buy and sell orders in a matter of seconds. The associates are not generally of high academic qualifications, but it is their ability to spot arbitrage opportunities, punch in trades in a jiffy and earn a neat spread that sets them apart from the regular dealers.

While a jobber concentrates his or her energies on the cash market, an arbitrageur has a wider canvas to play on, and looks for arbitrage opportunities across exchanges, futures and options, etc.

Mr Rakesh Goyal, Senior Vice-President, Bonanza Portfolio, says that the jobber-arbitrageur business model is profitable most of the time, and also helps some broking firms cover their fixed costs.

Profitable biz

Bonanza plans to increase the number of jobbers and arbitrageurs by at least 30-40 per cent during the next three-six months. It currently has around 300-odd jobbers and arbitrageurs punching trades.

Broking firms such as Religare, Arcadia Shares and Stock Broking, LCP Securities and Matrix Equitrage Pvt too have put in recruitment advertisements for jobbers. Religare has called for over 100 arbitrageurs and jobbers.

“The volumes in the market have gone up in the past few weeks. Given the upswing in the markets, we also plan to ramp up the strength of the jobbing and arbitrage desk in the coming three-four months by 30-40 per cent. They are a very good source of business,” said Mr Ullhas Pagey, Head of Human Capital and Organisation, Sharekhan Ltd.

No fixed costs

Jobbers and arbitrageurs are highly skilled people. What is attractive for broking homes about these associates is that there are no fixed costs associated with engaging them. Unless there is business, there are no operating costs, which is a big benefit this model holds.

Brokerage houses usually assign trading limits to the jobbers and arbitrageurs they appoint. They cannot have overnights position in the market. Trades put in by jobbers and arbitrageurs account for at least 35-40 per cent of the market volume. In fact, it is the jobbers and arbitrageurs who generate volumes in the market, said a broker.

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