Final Report

A STUDY ON ONLINE TRADING SYSTEM IN
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CHAPTER -01
INTRODUCTION AND STUDY DESIGN
1.1 INTRODUCTION
The internets arrival and its subsequent popularity in India have made online
trading in India, which is about the online purchase and sales of shares, one of
the extremely popular means of trading. Both beginner and experienced traders
and investors in India are milking this opportunity by trading online in futures
and options, stocks and currencies worldwide. Such opportunities are in the
form of reduced brokerage and commissions, better broking services etc.
Constructive uses of new technologies have always contributed positively
towards improving human life standards and the economy of a country .Such as
online trading, in equity markets it increased trade volumes and number of
investors trading in stock markets. Online trading was started in India in the
year 1995, where a new system is formed which allows the investor to trade
through an internet site where the major financial products and services like
equities, mutual funds, life insurance, general insurance, loans, share trading,
commodities trading, portfolio management and financial planning etc. are
directly available for the customer.
There is also stock option trading in India. An option is a financial agreement,
with a predetermined maturity period and price, for the purchase or sales of the
underlying products. Stock options enable the protection of dealers and control
of their stocks, in addition to generation of higher earnings.
For carrying out online trading in India, you have to open an online demat and
trading account
, followed with online trading software. For this purpose, you would require a
Depository Participant (DP), selection of which should be preceded by
extensive research on various determinants.
This is time consuming and inefficient. This imposed limits on trading volumes
and efficiency. In order to provide efficiency, liquidity, and transparency NSE
and BSE introduced nationwide online fully automated SCREEN BASED
TRADING SYSTEM.
Kousali Institute of management studies, DharawadPage

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Online trading in India is the internet based investment activity that involves no
direct involvement of the broker. There are many leading online trading portals
in India along with the online trading platforms of the biggest stock houses like
the National stock exchange and the Bombay stock exchange. The total portion
of online share trading India has been found to have grown from just 3 per cent
of the total turnover in 2003-04 to 16 per cent in 2006-07.
The investor has to register with an online trading portal and get into an
agreement with the firm to trade in different securities following the terms and
conditions listed down on the agreement. The order processing is done in
correct timings as the servers of the online trading portal are connected to the
stock exchanges and designated banks all around the clock. They can also get
updates on the trading and check the current status of their orders either through
e-mail or through the interface. Brokerages also provide research content on
their websites, such that the clients can take their own decisions on stocks
before investing.
In spite of many private stock houses at present involved in online trading in
India, the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange)
are among the largest exchanges. They handle huge daily trading volumes,
supporting large amounts of data traffic and processing a countrywide network.
The automated online systems used for trading by the national stock exchange
and the Bombay stock exchange are the NIBIS or NSEs Internet based System
and NEAT for the national stock exchange and the BSE online trading system or
BOLT for the Bombay stock exchange.
Thanks to the ever-rising number of people owning computers along with a
readily available internet access, online stock trading in India is simplified
manifolds. This is because investments can now be easily controlled by traders
themselves as a result of extensive availability of all types of information on the
web.
Online Trading is aimed at developing a web-based system. In this system the
person can sales online and do many things. The details of all the things are
made available to them through the website.

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Online trading is conducting stock transactions on the internet via several

websites. Such businesses have a great role in emerging trends and online
business has a great impact over many financial services consists of check
writing, credit and debit cards, electronic bill paying. Over years the emerging
businesses have a brief history of success all due to internet. The online
transaction processes of finance inclusive of buying and selling of bonds, stocks
and other investments, these all comes under online trading. The actual scenario
of all the business trends have diversified their business into online transaction
of their goods and services and literally it has a great impact on their sale of
business. For instance we can take the example of any website which deals in
several goods and services provided by them over the website and we see that
all the perspective relating to the business is avail on the website whether it may
concern to the discount, lump sum amount, certain taxes, etc. Consumers plays
an important role and their zest, zeal and desire are being fulfilled by online
business. This is the reason why the online trading businesses are on the pace to
the success. Moreover analyzation of the process becomes out of risk and risk
management process be easily handled time to time.
In a country like India, where penetration of online trading business services is
very low, there is a great scope for growth for any online business company
now. The Government of India after realising the importance of saving the
entire stock exchange industry from closing down which was running in to huge
losses before 90s, decided to formulate New policy [11-17]. The draft of the
new policy was circulated in December 1998 to all concerned for comments.
The cabinet approved the online trading ventures with the MNCs. During those
years because of announcement of Lok Sabha Elections in April 1999, ventures
could not be implemented to existing service providers up till 2000. But that
new policy of venturing in the online world of business is now totally in force.
Gradually from 2000 the online business has expanded so far.
STATEMENT OF PROBLEM:
Online trading and Demat are the two emerging concepts in
stock market. It involves personal factors, technical factors,

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business factors and economic factors. The interplay of these

factors on stock market requires a deep study about the
pattern process and procedures and performance. This study is
intended to identify the various problems in online trading
system that are being faced by the traders.
SIGNIFICANCE OF THE STUDY:

In a country like India, where penetration of online trading business services is
very low, there is a great scope for growth for any online business company
now. The Government of India after realising the importance of saving the
entire stock exchange industry from closing down which was running in to huge
losses before 90s, decided to formulate New policy. The draft of the new policy
was circulated in December 1998 to all concerned for comments. Online trading
is conducting stock transactions on the internet via several websites. Such
businesses have a great role in emerging trends and online business has a great
impact over many financial services consists of check writing, credit and debit
cards, electronic bill paying. Over years the emerging businesses have a brief
history of success all due to internet. The online transaction processes of finance
inclusive of buying and selling of bonds, stocks and other investments, these all
comes under online trading. The actual scenario of all the business trends have
diversified their business into online transaction of their goods and services and
literally it has a great impact on their sale of business.
LITERATURE REVIEW:
Dr. Ramesh onkareppaolekar(2013) online stock
trading.
The term "market" can have many different meanings.
One usage of the term denotes the primary market and

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the secondary market. These two markets distinguish

between the market where securities are created and the
market where they are traded among investors. Their
function is the key in understanding how securities are
traded. The primary market is where securities are
created. It's in this market that firms sell (float) new stocks
and bonds to the public for the first time. Secondary
market is where most trading occurs, the secondary
market is the one in which securities are traded after
having been initially offered in the primary market. It is
basically a market in which an investor purchases an asset
from another investor, rather than an issuing corporation.
This includes the NYSE, NASDAQ and all major exchanges
around the world. The defining characteristic of the
secondary market is that investors trade among
themselves. For example, if you go to buy Microsoft stock,
you are dealing only with another investor who owns
shares in Microsoft. Microsoft (the company) is in no way
involved with the transaction. However there was an
improvement in the mechanism of trading whereby it was
seen that there was a shift from the traditional method of
physical trading to the updated the version of online
trading.
Andrew B. Winston

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University of Texas at Austin(2010) E-Broking as a

Tool.
Anew electronic financial market is fast emerging.
Connected by high-speed networks, buyers and sellers are
gathering in virtual marketplaces and revolutionizing the
way business is conducted. The financial services industry,
among the most innovative and aggressive in its use of IT,
has created an entirely new online brokerage industry in
just a few years. In 1996, there were only 1.5 million
online brokerage accounts. That number was estimated to
be 5.3 million at the end of 1998, and today, these
accounts are responsible for 25 percent of all retail
trades.1 Future technological advances will introduce new
trading mechanisms and other new electronic markets.2
The principal functions of financial markets are to bring
buyers and sellers together and to provide a price
discovery mechanism for the assets being traded. In this
article, we describe our financial bundle trading system
(FBTS), a Web-based continuous electronic market that
traders can use to execute bundle orders. With a bundle
order, a trader can order a combination of stocks or
assets. We used a novel bundle trading mechanism
developed by the Center for Research in Electronic
Commerce at the University of Texas at Austin, described
in the sidebar Automated Matching Mechanism. FBTS
provides universal access to traders on the Internet,

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allows interactive information exchange between traders

and market makers, and executes trades using the
automated matching mechanism. FBTS is in an
experimental stage and is being extensively used for
research at the University of Texas at Austin. We
developed FBTS using a distributed object model based on
Java RMI (remote method invocation), which supports
interactive communication between trading applications
and the market.
Laveena M and Jindal.s, Diman .M:
Chitkara University, India(2015) Online Trading:
The Future ofStock Market
Online trading is conducting stock transactions on the
internet via several websites. Such businesses have a
great role in emerging trends and online business has a
great impact over many financial services consists of
check writing, credit and debit cards, electronic bill paying.
Over years the emerging businesses have a brief history
of success all due to internet. The online transaction
processes of finance inclusive of buying and selling of
bonds, stocks and other investments, these all comes
under online trading. The actual scenario of all the
business trends have diversified their business into online
transaction of their goods and services and literally it has
a great impact on their sale of business. For instance we
can take the example of any website which deals in
several goods and services provided by them over the

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website and we see that all the perspective relating to the

business is avail on the website whether it may concern to
the discount, lump sum amount, certain taxes, etc.
Consumers plays an important role and their zest, zeal
and desire are being fulfilled by online business. This is
the reason why the online trading businesses are on the
pace to the success. Moreover analyzation of the process
becomes out of risk and risk management process be
easily handled time to time.
Proposed that online trading is all about cost saving.
However, majority of Indian investors have not realized its
benefits so it only targets the educated investors.
Sarika Srivastava (2013) online trading & future options

trading
Examined the impact of internet on online trading. She

remarked on the availability of high speed internet that
can remove all hassles related to the field as it is a major
problem.
Dr. A Abdul Rahim(2009) procedure of online
trading
Discovered the pitfalls related to online trading. He
suggested that investors should be protected from all
hassles and problems so as to remain confident while
trading online.
Madan Lal(2007)

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Reviewed certain facts related to online brokers. He

stressed upon the importance of online brokers and the
problems they face while trading.
Nidheesh K.B(2007) Online Stock Trading in India: An

Empirical study
Reviewed upon the role of the NSE and BSE in online

trading and about the regulations on trading by these
Stock Exchanges about how they regulate the trade
account of investors and various brokers.
Brad M Barber and Terrance Odean (2001) the
internet and investor
Studied the deep relationship between the investor and
his major weapon, the internet, suggesting that a
combination of internet and shareholders voting could
become a new tool for organizations promoting special
society welfare like corporate social responsibility,
environmental actions and consumer help.
Arwinder Singh(2010) online trading system impact.
Claimed that online trading is highly beneficial and cheap

in terms of money and time. Certain alterations are
however required to make it more fruitful.
Yannis Bakos (2005) the Impact of e-commerce on retail

investors

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Stated that online trading is on a rising track and is

gaining its momentum very fast.
Allen (2009) online trading investors and take change
Shared his thoughts and stated the process which goes

simultaneously in the business during online transactions.
The ordered items get dispatched after identification
process immediately. Softwares used in application
process by the online traders.HILL stated there are many
options in online trading to access every corner of real
world in the online trading business. The emerging trends
of online options has exploded over the recent years and
is now being popularized well. The internet has fuelled a
booming business of small investors throwing money at
the derivatives market. The investors who have the skills
of daily trading can expand their finance array. For an
amateur investor who is ready to learn how to trade stock
options the derivatives market can be enticing, but also
frightening.
ChandanSwamy (2013) Problems and prospects of online

share trading practices in India
In India, the Securities Exchange Board of India (SEBI) has
allowed internet trading of stocks in a limited form. In
internet stock trading, the net is used as a medium to
communicate orders to the stock exchange through the

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brokers website. The user cannot directly trade in the

exchange because trading is permitted only for registered
brokers. The user can, however, place orders through a
brokers site. These E-broking sites also provide the client
with an opportunity to buy and sell securities from the
confines of ones home or office. The client is able to
track the fluctuations in a particular stock and the market
as a whole while deciding to execute the order and also
while the order is being executed. The confirmation of the
executed order will be available in real time. Natarajan
(2000) feels that prices will be determined by market
forces and the availability of a particular product.
Depending on the supply and a comparative list of similar
products, the customer will be able to choose the best
stocks available in the market. Internet trading started in
India on 1st April 2000 with as many as 79 members
seeking permission to do so.
David Whitely (2010) investors adoption of stock
trading.
Has started that the use of the internet is taking off among
private investors in stocks and shares. The internet can
make available to the private investors the minute
information. The use of online brokerage services
automates the process of buying and selling and hence
allows a reduction of commission charges. Also the
commodity being traded is intangible; the ownership of

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stocks and shares can be recorded electronically so that

there is no requirement for physical delivery.
Antony Saunders and Marcis Million Cornett

(2005) problems of online trading at stock market
Has stated that, the major stock markets currently start
functioning at 9.30 a.m., Eastern standard time and closes
at 4.00 p.m. Eastern standard time. Extended, hours
trading involve any securities transaction that occurs
outside these regular trading hours. Almost all extended
hours trading are processed through computerized
Alternative Trading System, [ATS], also known as
Electronic Communications Network [ECNS]. ECNS are
computerized systems that automatically match orders
between buyers and sellers and serve asan alternative to
traditional market making and floor trading. They are also
the major vehicles for extended hours trading.
Rajagopalan. V (2001) impact of internet on
financial service industry.
Expressed the problem faced by him on online share
trading. What he cannot stomach is how his ID number
was interchanged with another client, and his account
debited to pay for derivatives, while he did not order.
Worse his scripts were sold to cover losses which he had
not incurred. Luckily, the broker admitted his mistake and
compensated him, but the episode has left Rajagopalan
extremely chary of online trading.
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OBJECTIVES OF THE STUDY:

To identify the problems in the online trading system that
are adopted by the exchanges.
It is to analyze the changes in trading after the exchange
shifted from outcry to online trading system.
To know about the latest and future development in the
stock exchange
Trading system.
To analyze and conclude what is customers perception

towards online trading, its usefulness and its ease in
availability.
To study the procedure of trading in online trading and
finding its advantages over the manual trading.
To study the percentage of savings of online trading.
To know the online screen based trading system adopted
by exchanges
and about its communication facilities.
SCOPE OF THE STUDY:

It understands stock market operation through window
based online trading system.
It helps to know where the traders or brokers exactly
facing the problem while doing the trading on internet.
To study the mechanism of online trading system.
To understand how the trading is going on online trading.
To study related to derivatives and stock market.
To identify the benefits of online trading.
It helps to know market leaders in this segment.
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RESEARCH METHODOLOGY:
Methodology:
Research methodology is a way to systematically solve the research problem. It

may be understood as a science of studying how research is done scientifically.
In this we study the various steps that are generally adopted by a researcher in
studying his research problem along with the logic behind them.
The scope of research methodology is wider than that of research methods.

Research methodology has many dimensions and research methods do
constitute a part of the research methodology. Thus, when we talk of research
methodology we not only talk of the research methods but also consider the
logic behind the methods we use in the context of our research study and
explain why we are using a particular method or technique and why we are not
using others so that research results are capable of being evaluated either by the
researcher himself or by others. Why a research study has been undertaken, how
the research problem has been defined, in what way and why the hypothesis has
been formulated, what data have been collected and what particular method has
been adopted, why particular technique of analyzing data has been used and a
host of similar other question ones are usually answered when we talk of
research methodology concerning a research problem or study.
Research Type:
The type of research used in this project is Descriptive Research.
Descriptive research includes surveys, observational methods and fact-finding

enquiries of. The methods of research utilized in descriptive research are survey
methods of all kinds, including personal interviews, naturalistic observations.

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Primary Data:
Questionnaires Under the primary method we shall take up the survey method,
where in we will select a sample population according to which we will further
proceed with the questionnaire. In the project as the descriptive method has
been used, we will have to rely on the questionnaires that will be filled by the
employees of the perpetual trading system company and investors, business
people who are involved in this share business at Regus business center
Bangalore.
Secondary Data:
Secondary data refers to data that was collected by someone other than user.
These are the common sources data that was originally collected for some other
purposes.
Articles and other researches and other related studies, journals and books.
Sample Population:
Population of sampling is the process of taking a subset of subjects that is
representative of the entire population.
People at Regus business center Bangalore.
Sample size:
Sample size determination is the act of choosing the number of observations or
replicates to include in a statistical sample.
100
Tools:
Percentage analysis in excel
Location of the study:

The study is conducted in Perpetual trading system, UB city Bangalore.
.
Duration of the study:
The time duration for the study was 60 days.

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Brief PROFILE OF THE COMPANY:

Perpetual trading system is a proprietary concerned founded in 2009 under the
able leadership of Mr. Aurel David. With a strategic partnership of Indias
leading broking house share khan ltd, the concern aims at adding value to the
online trading experience of traders and investors in Bangalore.
Perpetual trading system offers its customers a wide range of equity related
services included trade execution on BSE, NSE, Derivatives commodity
services, depositary services, online trading, investment advice etc. the
objective has been to let customer make informed decisions and to simplify the
process of investing in stock. This was for the first time that the net based
trading station of this caliber was offered to the traders.
Perpetual trading system has always believed in technology to build its

business. The company used different company share for trading.
LIMITATIONS OF THE STUDY:
1) For performing these king of research large data base is

required. The data collected for this study is not sufficient to
analyze the investment pattern of retail investors in India.
2) There may be many variables which influences the result but

this analysis reveals only few variables.
3) There can be some deviations in the data as the human

psychology changes from time to time.
4) The feedback we got may not be correct as the respondent

might have filled in the information with no interest or in hurry.
5) Scientific research on the part of research is also required.

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6) Understanding the psychology of human is not the cup of

every one tea so, might be some interpretations go wrong.
7) Accuracy level may be effected when data is subjected to

weighing.
Time was the biggest constraint as these studies cannot be

completed with accuracy in two month.
1.10 Chapter Schemes:
1. Introduction and Study Design: This chapter covers the small introduction
about the topic of the project, Statement of the problem, Significance of the
study, review literature helps in understanding the project in detail, Objectives
of the study, Scope of the study, Research methodology which gives research
type, data collection method, location, duration,profile of company, and
limitation of the study, chapter scheme.
2. Theoretical Study: of online trading, growth of online trading in India,

features of online trading, online trading by NSE &BSE, process of online
trading, some of definitions and explanations, difference between online and
offline trading, procedure electronic settlement of trade,benefits of online
trading, problems of online trading, why people bending towards online trading,
Reasons for online trading in India.
3. Industry profile: Introduction to stock market, definition, history of stock

exchange, structure of Indian financial system, stock markets in India, various
stock exchanges in India, Major stock exchanges India, Regulatory frame work
of stock exchange, About SEBI , objectives and functions SEBI, types of
orders, trading procedure.
4.Company Profile: Introduction of the company, Nature of the business

carried, Vision, Mission and Quality policy of the company, products and
services of the company, area of operation,trading , different types of trading,
Infrastructure facility, Competitors information, brief introduction about
business partners sharekhan , SWOT Analysis future growth and prospective
the company, Financial Statement Analysis.
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5. Analysis and interpretation: analysis the data in in excel and table and
interpretation.
6. Findings, Suggestion and Conclusion: Findings of the can be made on the

data collected through questionnaire & analysis and interpretation. Suggestions
and conclusion.

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Reference:
Walia N, Kumar R (2007) Online Stock Trading in India: An Empirical

Investigation. Indian Journal at Marketing
.Srivastava S (2011) Impact of Internet growth on online stock trading in

India. International Journal of Marketing, Financial Services and
Management Research
Rahim AA (2013) Problems and prospects of online share trading

practices in India.
4. Nidheesh KB (2008) Foreign Investment in India: Pain or Panacea? - A

Study With Reference to BSE and NSE. Indian journal of finance.
5. Barber BM, Odean T (2001) The Internet and the Investor. Journal of
Economic Perspectives.
Books:

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Meaning of Online Trading
"Change is the law of nature". There were times when man was a
wanderer or a normal. He himself had to go place to place in search of food,
water and now everything is available at your doorstep just at the click of the
mouse. The growth of information technology has affected almost all sectors
of life. Internet has enabled us to get every information at our doorstep.
When Internet has affected all sectors he could "stock markets" the most
important player of the economy, has remained far behind? Like all other
sectors Internet has set its feet in the stock markets also.
Internet trading commissions are clearly posted on the websites of the

various services, and are typically a fixed rate charge, depending upon the
type of security being traded and the size of trade. In theory, therefore, an
Interest investor always knows what commission he is being charged on
each trade. Internet investors can take as much time as they would like to
take prior to placing a trade order. Similarly the online investor likely does
not have to worry that his broker is making unauthorized trades. Since there
is no individual broker making a commission, the only person who is
authorized to trace in the account is the actual investor. Furthermore, the
internet investor can never become a victim of excessive trading (where for
the broker) since the investor maintains total control over the number of
transactions which take place in the account.

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All of these positive features of internet trading may lead the unwary
investor to believe that Internet trading is a way to take control of their
finances and save more money in the process. Unfortunately, this is not
always the case. The advantages of Internet stock trading have also its
weaknesses and these weaknesses present significant drawbacks for the
average investor.
First and foremost, the average investor is not an expert in the financial
markets. There is a danger for allowing the autonomy of online trading to
hull you into the belief that you are an expert investor. An online investor
sitting at home at a personal computer also foregoes proper investment
advice and financial planning, perhaps among the most valuable services
provided by traditional brokers.
There are, of course, additional risks relative to performing transactions over

the Internet especially on a shared computer. Those people whom investors
have provided their account number and password can freely trade that
account while the investor will have little, if any, resource against the
brokerage firm for the breach of security.
When was online trading introduced in INDIA?
Online trading started in India in February 2000 when a couple of brokers

started offering an online trading platform for their customers.

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GROWTH OF ONLINE TRADING
According to an article by Krishnamurthy B in 2005 after inception of online

trading in India in the year 2000 online trading is gained momentum with
trading volumes growing by 150 per cent per annum in the years 2003-2005
and it was more than approx. 200% in the year 2008 The volume of all trades
executed through the Internet on the National Stock Exchange had grown from
less than Rs 100 crore (Rs 1 billion) in June 2003 to over Rs 700 crore (Rs 7
billion) in July 2005 which was a handsome growth in the year 2005in the
starting of 2008 the growth of online share was good but at the mid of the year
when subprime crisis affected India including all over the world, market of
online trading got shrunk by more than 50%
Now the growth of online trading is on its right track , Indian stock
market has been announced the one of the Safe and stable market of the
world, so here in India the online trading is growing like anything in
comparison to the whole world
At the end of July 2008, there were more than 168 registered brokers on
the NSE and the number of Internet trading subscribers to about 2.024
million. In the year 2007 India has 8 crore (80 million) internet user, the %
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of internet user is growing in each year

At the same time the number of subscribers trading through the portal of
Kotak Securities had gone up significantly by 150 per cent and the number
of online trading customers had grown from 30,000 to 75,000. And the
company expected to have at least 130,000 customers by the end of that
fiscal. In the recent past years of 2005 ICICI Direct and India bulls recorded
an annual volume growth of 100 per cent and India bulls had about 30 per
cent of India's online trading volumes.
Today the total volume of online trade in India is about 29-31 % of

total trades.
According to brokers the better broadband connectivity across the country

and wider awareness of equity as an asset class will raise the online trade
volumes to over 50% of total trade. In India the demography is such that
75% of the population is under the age of 36 and more than 50% of the 75%
is under age of 25 and this is another supporting factor
The Chief Executive of Reliance Money Ltd says that online investing
is still at a nascent stage in India and expects that Internet-based trading will
eventually take about half of the total stock market trading as like with
developed markets such as the US. Philippines has the highest online trade
with about 55-60% execution of trade is online. The reason is because they
had wider Internet connectivity years before India. The biggest challenge in
India remains better Internet connectivity. The earlier Web-based technology

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used for Internet trading has been replaced by specialized software which
gives real-time global data streaming rates to trader helping investors to
analyze the market trends and helps in faster execution of trades. Earlier the
investors made trade calls over the phone which sometimes led to the delays.
Online share trading in India was at a boom in the end of 2006 with
daily-traded volumes more than tripling from Rs 1 ,500 crore to Rs 5,000
crore in the last one year and terminals was set up in small towns such as
Rajkot, Hubli and Vijayawada .In that year the share of online trading rose
dramatically from 7% last year to 20% as a percentage of overall traded
volumes. Due to this factor the top five US brokerage firms decided to make
a foray into India in the next year driven by strategic interest. Also at that
time non-metros accounted for half of the daily turnover of online trading.
Graph is showing the declining in the turnover of online trading in

Indian stock exchange during slowdown in economy due to subprime
mortgage crisis.
FEATURES OF ONLINE TRADING:
The Online Trading is having many features which make it most suitable for
the investors to go for. Some of these features are as follows:
Freedom of Information
The Internet can provide a new sense of control over your financial future. The

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amount of investment information available online is truly astounding. It's one

of the best aspects of being a wired investor. For the first time in history, any
individual with an Internet connection can:
Know the price of any stock at any time
Review the price history of any stock in chart format

Follow market events in-depth
Receive a wealth of free commentary and analysis about
stock markets and the global economy
Conduct extensive financial research on any company
Control of your money
One of the great appeals of using an online trading account is the fact
that the account belongs to you, and is under your direct control.
When you want to buy or sell stock, you no longer need to call your
broker on the phone; hope that he is in the office to place your order;
possibly argue with the broker about the order; and hope that the
transaction is executed instantly.
To Access to the market
At the most basic level, an online trading account gives you more

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agility in buying and selling stocks. This is through sophisticated

information streams, dedicated trading platforms and sophisticated
tools for accessing the markets.
Ensures the best price for investors
Every broker house aims at providing the investor with the best price
available. Also due to the high level of transparency with regard to
display of information relating to the specific stocks and company
profiles, you will be able to get the best quote for your orders.
Offers greater transparency
Online trading offers you greater transparency by providing you with

an audit trail. This involves a complete integrated electronic chain
starting from order placement, to clearing and settlement and finally
ending with a credit into your depository account. All these stages are
subject to inspection, thus bringing in transparency into the system .
Enables hassle free trading
Online trading integrates your bank account, your trading account and
your demat accounts, which leads to easy and paperless trading for
you.
Allow instant trade execution
You as an Investment online customer will be able to execute the

entire trading transaction, right from logging on to our site, to the
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execution and settlement of your bank account, in a very short period

of time.
Provides a level playing field

Trading on the net, gives even the smallest retail investor access to
information that earlier was available only to the big traders. This
provides a level playing field for all investors in the securities market.
It reduces the settlement risk
This method of trading reduces the settlement risk for the investor, as
in this case all short sell orders are squared off at the specified cut-off
time and not allowed to be carried forward.
In the case of a demat account your demat account is checked by us

before executing your sell transaction. This reduces the settlement risk
for the buyer, who is assured of the delivery of the securities and for
you as a seller of the securities
Instant order trade confirmation
Every trade is confirmed immediately and you will receive an on-

screen confirmation following every trade with full details for your
records. This avoids costly errors that would have been discovered
when it is too late .
Integrated Accounts
Your Bank, Depository and online account are integrated for your

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convenience. Various broking houses provide access to many of the

popular banks.
ONLINE TRADING BY NSE &BSE
The central computer located at the Exchange is connected to the

workstations of the Brokers through satellite using Very Small Aperture
Terminals (VSATs). Orders placed at the Brokers' workstations reach the
central computer and are matched by the computer based on price and time
priority.
Both the exchanges have switched over from the open outcry trading system
to a fully automated computerized mode of trading known as BOLT (BSE
On Line Trading) and NEAT (National Exchange Automated Trading)
System. It facilitates more efficient processing, automatic order matching,
faster execution of trades and transparency. The scrips traded on the BSE.
have been classified into 'A', 'B1', 'B2', 'C', 'F' and 'Z' groups. The 'A' group
shares represent those, which are in the carry forward system (Badia). The 'F'
group represents the debt market (fixed income securities) segment. The 'Z'
group scrips are the blacklisted companies. The 'C' group covers the odd lot
securities in 'A', 'B1' & 'B2' groups and Rights renunciation.

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Picture showing online trading system on internet:

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PROCESS OF ONLINE TRADING
An investor interesting in trading through Internet shall have to, firstly

register himself with an Internet brokerage firm. Some formalities such as
filling the account opening form of the e-broker, copies of identity proof,
copy of residence proof are made to register himself with the e-trader.
Secondly, the investor would be required to open a bank account with a
scheduled bank and sufficient balance should be kept in the account. Thirdly
he would be required to open account with a depository participant because
only dematerialized shares can be traded on the internet.
1. The client places order via the net by logging on to his
2. The broker accepts and executes the order and places it with the
exchange
3. The exchange accepts the order after checking the share limit for
4. The broker makes the payment either directly via the client bank account
or pays or pays through its own account and recovers it later from
5. The exchanges receive the money and completes the settlement
6. The client is intimated about the settlement either.

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Step-1:
Those investors interested in doing the trading over Internet system, that is,
NEAT - ISX (NSE), should approach the brokers and register with the Stock
Broker.
Step-2:
After registration, the broker will provide to them a login name, password
and a personal identification number (PIN).
Step-3:
Actual placement of an order, Using the place order window as under can
then place an order:
(a) First by entering the symbol and series of stock and other parameters
such as quantity and price of the scrip on the place order window.
(b) Second, fill in the symbol, series and the default quantity.
Step-4:
It is the process of review. Thus, the investor has to review the order placed
by clicking the review option. He may also re-set to clear the values.
Step-5:
After the review has been satisfactory the order has to be send by clicking
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the send option

Step-6:
The investor will receive an "Order Confirmation" 'message along with
the order number and the value of the order.
Step-7:
In case the order is rejected by the Broker or the Stock Exchange for certain
reasons such as invalid price limit, an appropriate message will appear at the
bottom of the screen. At present, a time lag of about ten seconds is there in
executing the trade.
Step-8:
It is regarding charging payment, for which there are different modes. Some
brokers will take some advance payment from the, investors and will fix
their trading limits. When the trade is executed, the broker will ask the
investor for transfer of funds by the investor to his account.

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DEFINITIONS AND EXPLANATIONS
1. Shares:-
In everyday language, when we talk of shares we normally refer to equity

shares or ordinary shares of a company. The terms shares and stock
essentially means the same things, the letter being a more common
American usage.
An equity share is evidence of ownership in a company. The physical
evidence of this ownership of this document is called the Share
Certificate. Now days, shares are usually kept in electronic, or
dematerialized, form with a depository participant (Banks, brokers,
financial institutions) of the National Securities
Depository Limited (NSDL). However, if one wants one can still hold the
share in the physical form which has your name endorsed on it, and is
proved that you are a part owner of the company. Your ownership rights
are proportionate to the number of share you own.
Companies issue shares of a certain fixed denomination, called face value

or par value of that share, which is clearly indicated on a share certificate
in the physical form.
2. Investment: -
Investment essentially refers to what you do with your

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savings in order to preserve them and make them grow or yield an income. If
you keep your savings in the form of cash, they are certainly going to
diminish in value because the purchasing power of money is constantly
going down as a result of inflation. (The value of money is judged by the
quantity of goods and services you can buy with it). Therefore, if you want
to maintain or increase the value of your savings, you have to keep them in
the forms other than cash. This is what is investment is all about,
development t of your saving with the intentions of preserving or increasing
their value. This deployment can be done by using your savings to buy land,
residential properties, gold, jewelry, works of art , fixed deposits in banks
and companies ,shares ,bonds or anything whose value is likely to either
remain constant or appreciate with time.
DEMAT A/C
On doing an online business ever customer has to open and demat account in
any bank whichever he likes. Demat account is the account in which the trading
done by the customer is mentioned. If the customer sales or purchases any share
details of this sale and purchasing are in demat account. This account contents
the name of the shares and also the number of the shares held or sold and also
the rate of the share with his demat account. It is also compulsory for every
customer to open a saving account in the bank because the amount which is to
be received when the customers sales the shares transferred from the demat
account to the saving account.
It is the responsibility of the customers that the share which he purchased or
sales are properly transferred in demat account from the stock exchange
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whichever he deals. The amount of dividend whichever to be received on the

shares when held for one or more year are also transferred in this demat
account. It is compulsory for every customer to have a PAN no. For opening an
demat account. If PAN no. Is not there is no chance for the customer to do any
trading on line. There is no limit of amount to deal in this account.
4. Circuit Limit:-
While issuing the shares to the public the company has to fix a particular limit
of the rate of the per share this limit is called as circuit limit. This circuit limit is
generally fixed on the percentage basis. This circuit limit is applied to both the
ends of the share. That is to the upper limit also and also to the lower limit
actually circuit limit is of two types
1) Upper limit
2) Lower limit
It is compulsory for every company to fix the circuit limit. This limit is
beneficial to both. The customer and also to the company generally every
company fix below 10%of the rate of per share.
5. Upper Limit: -
While issuing the shares to the public the company has to fix the upper limit

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this limit is also calculated in percentage the limit is also beyond which the
rate of the shares cannot exceed nor that the customer doing the trading can
sell above the level.
6.Lower Limit: -
At the time of issuing share the company has to fix the lower limit
also. This lower limit is calculated on the basis of the rate of the
shares. This limit bears the same percentage, which is mentioned for
the upper limit of the share. Like upper limit in this limit also the
share minimum rate of the share is fixed the customer who wants to
see; the holding shares has to first consider the upper& lower limit of
the share he cannot sell the share below the lower limit and not
above the upper limit like the upper limit Percentage generally in this
limit also the percentage is below 10% of the face value of the shares the
percentage is below 10% of the face value of the shares the percentage of
the upper & lower limit is equal to every type of share.
For ex. Suppose the person wants to sell the shares and the rate of the share is Rs.
10/- and the lower limit percent 8is 10% of the rate. So in this case the person cannot
sell the share at below Rs. 9/-. He will have to sell at above Rs. 9/- or up to the upper
limit of the share.
7. Sensex:-

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When the shares are issued to the public the stock exchange gives a particular
group to the company. For ex. The Reliance Group is given the group "A" like
this there are several companies which fall in "A" Group. The weightage mean
is calculated according to its equity when all the companies of Group "A" has
calculated this weightage mean they are added all together when this addition
is done the result which comes down is known as "Sensex".
The trading of shares of "A" group is totally depended on this Sensexvalue. The
price of the share rises this sensex value also rises and when the price of this
share comes down the sensex value also comes down.
8. Scripts:-
The company, which has more than one working area, it has to issue the share
separately than that company is the company which has the script of its name.
For Ex. The Reliance this company has its several working area Namely
Reliance, Capital Reliance, Infocom Reliance Energy, Reliance Industry. So
reliance company issues separate share for separate working area but the bold
name which is given to the working area is "Reliance". So in this case Reliance
has its own scripts. Other example Ambuja, Birla, Etc.
9. Groups:-When the shares are issued by the company they are given the

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particular group by the Stock exchange according to its demand in the market.
There are mainly 7 groups.
BUYING AND SELLING
The first step is to open a demat account with your selected

Depository Participants (DP). All transactions on both the SSE and NSE are
done in demat securities.
When you buy shares, you are required to pay money to your broker or sub-
broker immediately upon getting the contract note/confirmation memo for
the purchase of shares. The broker issue as contract note, whereas sub-broker
issues a confirmation memo. Similarly, when you sale shares you are
required to give delivery of your shares by transferring them to the demat
account of your broker/sub-broker immediately upon getting the contract
note or confirmation memo. When you buy the shares then the share you
have purchased will come first to demat account of your broker/sub-broker.
Once this happens, you can instruct your broker/sub broker to transfer those
shares to your demat account for receiving shares in your demate account
you will have to give your broker or sub-broker the details regarding your
demate account.
When you sale shares you are required to give delivery of share from your
demate account by instructing your DP to transfer the number of shares that
you have sold from your account to the demate account of your broker.
In this regard, you will be required to include the details of the demate account

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of your broker in the instruction slip that you give to your DP. Your broker or
sub-broker will help you to fill in the delivery instructions. These instructions
are of a technical nature and the delivery instruction forms and procedures differ
from DP to DP.
DIFFIERIENCE BETWEEN ON LINE AND' OFF
LINE TRADING
Nevertheless, with all the convenience of online trading there are still
investors who prefer the old fashion way of offline trading. Offline trading
has lost some popularity but it is still the main form of investing. Offline
trading offers many benefits as well.
1. The one benefit that an investor appreciates the most is that they are not
alone when making investment decisions.
2. There are experienced and professional brokerage companies that handle

their investments for them.
3. Investors are not faced with the challenge of making these vital
investment decisions; especially, if they do not have the experience
necessary to make the appropriate investments.
4. Also, there is someone there to answer any questions that may cause
concerns. Not to mention, with offline trading mistakes are less likely to take
place. No one wants to throw their money away or stand by and watch
someone else throw their money away. It may be wise to hire a professional
to assist you in making the correct investment decisions if you feel you lack
the knowledge necessary.

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Points of difference between online trading and off line trading are
as follows:
1. Online trading is very expensive as compare to manual trading or offline

trading.
2. Online trading consumes less time as compare to manual trading.
3. Online trading has very helpful to finding the records easily but offline
trading takes more time to finding the records.
4. In the help of online trading, there is no chance of any errors while doing
the trading. in offline trading there are some errors exist like barriers of
communication.
5. With the help of online trading, we know the international market rate of
share very easily.
DEMATERIALISATION OF SHARES
Dematerialization is the process wherein shares certificates or other
securities held in physical form are converted into electronic form and
credited to demat account of an investor opened with a depository
participant. SEBI has made compulsory trading of shares of all the
companies listed in stock exchanges in demat form with effect from 2nd
January 2002.The procedure of opening a demat account with DP is similar
to opening an account with a banks.

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ELECTRONIC SETTLEMENT OF TRADE
A. Procedure for purchasing dematerialized securities:-
The procedure for purchasing dematerialized securities is also similar to the

procedure for buying physical securities.
1. Investor instructs DP to receive credits into his account in the
prescribe form There may be one time standing instruction or
separate instruction each time to receive credits.
2. Investor purchases securities in any of the stock exchanges linked
to depository through a broker.
3. Broker receives payment from investor and arranges payment to

clearing corporation.
4. Broker receives credit to securities in clearing account on the
payout day.
5. Broker gives instructions to DP to debit clearing account and credit
client's account. Investor receives shares into his account by way of
book entry.

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B. Procedure of selling dematerialized securities
The procedure for selling dematerialized securities in stock exchanges is

similar as selling physical securities. The only major difference is that
instead of delivering physical securities to the broker, the investor instructs
his DP to debit his demat account with the number of securities sold by him
and credit the brokers clearing account. The procedure for selling
dematerialized securities is given below:
1. Investor sells securities in any of the stock exchange linked to

depository through a broker.
2. Investor instructs his DP to debit his demat account with the
number of securities sold and credit the broker's clearing
account.
3. Before the pay-in-day, broker of the investor transfers the
securities to clearing corporation.
4. The broker receives payment from the stock exchange.

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5. The investor receives payment from the broker for sale of

securities in the same manner as received in case of sale of
physical securities.
REMATERILISATION OF SHARES
Rematerialization is the process of conversion of electronic holdings of

securities into physical certificate form. For rematerilisation of scrip's, the
investor has to fill up a remat request form (RRF) and submit it to the DP. The
DP forwards the request to depository after verifying the investor's balances.
Depository in turn initiates the registrars and transfer agent or the issuer
company. RTN Company prints the certificates and dispatches the same to the
investor.
Internet based trading on conventional exchanges, uses the Internet as a medium
for communicating client orders to the exchange, through broker web sites.

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Broker's web sites may serve a variety of functions. These may include;
Allowing the clients to directly trade through investors;
Advertise the broker dealers' services to potential investors;

Offer market information and investment tools similar to those
offered by information vendor or SRO web sites;
Offer real-time or delayed quote information, continuously
update quotes while the user visits other sites, or allow investors
to create a personal stock ticker;
Provide market summaries and commentaries, analyst reports
and trading strategies and market data on currencies, mutual
funds, options, market indices and news; and
Offer investors access to portfolio management tools and
analytic programs;
Information on commission and fees; and
Account information and research reports.
In an Order Routing system, a broker offering Internet trading facility
provides an electronic template for the customer to enter the name of the
security, whatever it is to be bought or sold, the quantity and whatever the
order is a market or limit order. Once the broker's system receives this
information.
Use of Internet as Alternative Trading Systems (Provision for price

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discovery and matching outside conventional exchanges)
In foreign jurisdiction, Alternative trading systems have been developing

outside conventional securities markets, which provide investors with
additional proprietary electronic trading facilities for securities that are
traded principally on securities exchanges, or other organized markets. They
have price discovery functions, matching systems and crossing systems. The
systems that are currently in use in outside jurisdictions are closed systems
and are not accessible to the general public through the Internet. The
securities markets regulators abroad the maintained flexible and open
policies designed to encourage innovation in the secondary securities
markets. As a result, a number of market participants, usually broker-dealers,
have developed computerized "alternative trading systems" by which the
system centralize, display, match, cross or otherwise execute trading interest.
Use of Internet for making Initial Public Offerings
Issues of securities of using the Internet to communicate directly with their

shareholders, potential investors and analysts by disseminating corporate
information. In foreign jurisdiction, they are also using the Internet to

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communicate to the public for the following:
Public offerings;
Private offerings; and
Disclosure and communication
Issuers are using the Internet to market themselves to potential investors.
The Internet is also being used for fulfilling necessary disclosure
requirements, for disseminating the prospects in electronics form and
even for receiving share applications in public issues electronically. In
India, SEBI has taken initiative in permitting use of the network of stock
exchange for collection of investor applications in public offerings by the
issuer companies.
Investment Advisory Services
Brokers as well as other service provides such as investment firms, research

outfits etc. are using the Internet for marketing and advertising purposes, for
presenting information on portfolio analysis and market information, and for
communicating with and receiving orders from potential investors. The services
offered by the service providers to the investors are generally the following:
Advertising
Providing investment information and investment
advice;
Underwriting
Communicating with the investors;
Customer orders; and
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Record keeping
BENEFITS OF ON LINE BROKING
1) Less Costly:
The most significant advantage of the online broking is the cost reduction in
the brokerage. Due to the power of the Internet one has the privilege of
becoming the clients of really large brokerages with the benefits of enjoying
the low charges before enjoyed only by the big players. As the DP account
has got linked to the trading account most players do not charge a minimum
transaction cost thus truly allowing one to buy a single share and achieve
meaningful rupee price averaging whatever be your buying power.
2) Peace of Mind:
One can never have complete peace of mind but online investing does away
with the hassles of filling up instruction slips, visits to the broker for handing
over these slips and consequent costs.
3) Keeping Records:
The site one trades on keeps a record of all transactions down to unexecuted
orders and cancelled orders thus keeping one abreast of all your transactions

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24 hours a day. No paperwork means more time at one's disposal for

research and analysis.
4) Access to Information and investment Tools:
Most online investing sites have a wealth of information for their registered
members. This includes research reports, results, analysis and even gossip
and the buzz in the market.
5.) Unparalleled Liquidity:

The bank account linked with the trading account invariably has an A TM
free. Most partner banks offer Internet banking as well. This results in one's
money becoming available to him whenever he like from his trading
account. Conversely in case he spot an opportunity in the market he can
immediately allocate money from his savings account to his trading account
and make profits.
6) Unparalleled Safety:
Most sites are secure using 128-bit algorithms -highest available

commercially anywhere in the world. Moreover even if somebody broke in
and tampered with one's account the money from the stocks he sold or the
stock bought from the money in his account is in his account only.

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7)Reduces the settlement risk:
This method of trading reduces the settlement risk for the investor, as
in this case no Short sale is possible i.e. the seller will not be able to
sell the securities unless he has their actual possession. In the case of a
demat account (required for an online transaction), when a seller
wants to sell the securities, his demat account is checked by the
Depository Participant before executing the sale transaction. This
reduces the settlement risk for the buyer, who is assured of the
delivery of the securities.
8) Offers greater transparency:

Online trading gives greater transparency to the investors by providing
them an audit trail. This involves a complete integrated electronic
chain starting from order placement, to clearing and settlement and
finally ending with a credit to the depository account of the investor.
All these stages are subject to inspection, thus bringing in
transparency into the system.
9) Ease of trade:
It is the ease of doing the trade through net, with a click of mouse, one can buy
or sell any share that is dematerialized. Other than the above-mentioned
advantages, Internet trading provides some additional advantages to the
investors, brokers and also helps the nation to channelize the resources. Net
trading would increase competition in the market hence increase in the
bargaining power of the investors. The entire communication between the

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investor, broker and exchange would take place within milliseconds.
PROBLEMS OF ONLINE BROKING
There is a flip side to everything and online trading is no exception.
1.) "Server not found":
This may appear on one's screens when he is desperately trying to get out of
an unprofitable position. Some of the online sites are providing a telephone
number for use in case their sites are overloaded or their server down.
2.) Connectivity of the Broker with NSE:
Recently ICICI Direct had a connectivity problem with the NSE for two and
half-hours during trading hours. This problem is rare but be alive to its
possibility.
3.) Cyber-attack:
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In the event of a malicious attack on the systems of one's broker he is

protected only if the company is taking proper precautions against such
attacks and if proper backup is regularly been taken. He may like to choose a
brokerage that has a stated security policy and contingency plan in place.
4.) Non-availability of a seamless interface:

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As a client one will access the NSE through a server of the online brokerage
and this may involve queuing delays. If a number of client access the server
the server takes its own time sending the orders to the NSE server. He must
check out the seamlessness of this interface before selecting an online
brokerage. The faster the orders are processed the more seamless is the
interface.
5.) Non- availability of personalized advice:
If one like to ask his broker "Aajkyaachcha lag rahahathe may not be able to
do so. If he want advice on a particular stock in his portfolio he may not
even be able to get that.
6.) Margin:
If Internet trading alone is not fast and furious enough; many people are
trading on margin. That is where the brokerage firm lends you money by
leveraging his account, allowing him to buy a large amount of securities by
putting up only a small amount of money. He may have forgotten what he
read in the small print of his agreement, but the brokerage firm has the right
to change the maintenance margin requirements without any warning or
notice to him. In fact, the firm has the right to liquidate his securities
holdings (and it can pick and choose which ones) without any notice to one
if he fail to meet the margin call. And there he was leveraged to the hilt,
hoping to hit a home run when he discovered that he is required to make a
large deposit that he cannot make. The next thing one know, the firm is

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selling off his securities at a point in time that is not the best for him. These
are the perils of trading on margin.
7.) Little use of advisory services:
The advisory services being promised by the brokers would be of little use to
investors looking for an insight into the market. Many would not like to rely
on research reports, which are there for all. So, net investors will have to do
their own research and take their own decision, whether wild or wise.
8.) Increased charges:
Some of the brokers are of the view that they would have to provide advisory
services to the customers. But with increased volumes, they will have to
follow the international practice of charging a little more than the normal
charges from a customer looking for personal advice.
WHY PEOPLE ARE BENDING TOWARDS ONLINE TRADING

Several broking houses now offer online trading facilities. You can trade
online with e-brokerages such as ICICI Direct, Kotak securities, India bulls,
India info line's 5paisa.com and HDFG securities.
If you are already comfortable trading with your regular broker, here are few
reasons why you may consider switching to trading online, or at least
another avenue of trading. An obvious advantage of online trading is that
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your transaction would be virtually paperless. Your trading account would be

linked to your demat and bank account, ensuring a smooth transaction
process. This is especially helpful in the extent T +2 settlement system,
where you have just two days to settle your transaction.
The normal process of issuing of delivery note, in case of a sale, or arranging

for a payment in case of purchaser of shares, is all taken care of the minute
your order is executed online. The absence of manual intervention ensures
that you are completely in control of all transaction.
There is also little room for error, as your order is always confirmed before it
is executed. You can also make better decision as you have a clear record of
all your previous transaction. When you trade offline, a demat statement is
normally sent to you only on a quarterly basis .keeping track of your
portfolio can be a hassle in such a case. The inter net can provide a new
sense of control over your financial future. The amount of investment
information available online is truly astounding. Its one of the best aspect of
being a wired investor for the first time in history, any individual with an
internet connection can:
Know the price of any stock at any time

Review the price history of any stock in chart format
Follow market events in-depth
Receive a wealth of free commentary and analysis about stock
markets and globe economy.
Conduct extensive financial research on any company

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Talk with other investors around the world
At invest smart you can get real-time stock quotes, daily roundups of the
stock market, experts commentary, and a deep community of fellow
investors.
Convenience is probably the greatest advantage online trading offers

investors. if don't have time to trade during market hours ,perhaps you are at
work, you can log on the web-trading site and place your order offline,
during off market hours. Your order would join the queue and be expected
the next day. You would need to enjoy a good relationship with your broker,
for you to be able to reach him in the late hours. For non-resident Indians
(NRI), trading online is perhaps their easiest option to invest in the Indian
stock markets.
What is more, the time difference, in some cases, can work to their
advantage .Antony, an NRI-based in New York, places his order in the
evening after when it is day time India and the markets are open. We also
have access to considerable information online. By just logging on to ICICI
direct online, for instance, we can get the latest news, market information
and company research.
Moreover, if our connection is maddeningly slow and we want to get
your order executed immediately, most e-brokerages also provide a

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facility to trade offline by placing our order via the phone.
Reasons for the emergence of online trading in India
The reasons for providing online trading facility to investors by the

Indian companies are various. They are as follows: Online trading has a
very good future in India as it is not exploited properly so far. Consistent
increase in the number of users of interest. Consistent increase in the
number of personal computer users. Part of diversification. Less
investment in technology and other areas compared to the returns, More
awareness in investors about the stock

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Reference:
Books:
Name of the author- title- Indian Financial System-year-publisher-
-M.Y.Khan
Investment management -Preethi Singh
Articles:
Singh A, Sandhu HS, Kundu SC (2010) Investors Adoption of Internet
Stock Trading. JIBC 15.
Bakos Y, Simon G, Lucas HC, Viswanathan S, Weber BW, et al. (2005)

The impact of e-commerce on competition in the retail brokerage
industry. This version is Forthcoming in information systems research.
http://www.forbes.com/sites/jamesmarshallcrotty/2012/02/21/allen-
iversonearned-over-200-million-in-his-nba-career-hes-now-broke-say-
what/
Krishnan A (2006) Online trading clicks big with investors: Business

Line. International Journal of Marketing, Financial Services and
Management Research 2: 150-155. 10. Lynnwoods (2003) Online trading
investors take change. Kiplingers personal finance.
Website:
www.Share Khan.com
www.bseindia.com
www.sebi.com

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About the Industry:

INTRODUCTION TO STOCK MARKET
STOCK MARKET
A stock market is a public market for the trading of companystock and
derivatives at an agreed price; these are securities listed on a stock exchange as
well as those only traded privately. The stock market is one of the most
important sources for companies to raise money. This allows businesses to be
publicly traded, or raise additional capital for expansion by selling shares of
ownership of the company in a public market.
The size of the world stock market was estimated at about $36.6 trillion US at
the beginning of October 2008. The total world derivatives market has been
estimated at about $791 trillion face or nominal value, 11 times the size of the
entire world economy.
Stock exchanges are the perfect type of market for securities

whether of government and semi-govt bodies or other public
bodies as also for shares and debentures issued by the joint-
stock companies. In the stock market, purchases and sales of
shares are affected in conditions of free competition.

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EXCHANGES
Government securities are traded outside the trading ring in

the form of over the counter sales or purchase. The bargains
that are struck in the trading ring by the members of the stock
exchanges re at the fairest prices determined by the basic laws
of supply and demand.
DEFINITION OF STOCK EXCHANGE:-

Stock exchange means anybody or individuals whether
incorporated or not, constituted for the purpose of assisting,
regulating or controlling the business of buying, selling or
dealing in securities.
HISTORY OF STOCK EXCHANGE:-

The only stock exchanges operating in the 19 th century were
those of Mumbai setup in 1875 and Ahmadabad set up in 1894.
These were organized as voluntary non-profit-making
associations of brokers to regulate and protect their interests.
Before the control on securities under the constitution in 1950,
it was a state subject and the Bombay securities contracts
(control) act of 1925 used to regulate trading in securities.
Under this act, the Mumbai stock exchange was recognized in
1927 and Ahmadabad in 1937. During the war boom, a number
of stock exchanges were organized. Soon after it became a
central subject, central legislation was proposed and a
committee headed by Mr.A.D.Gorwala went into the bill for
securities regulation. On the basis of the basis of the
committees recommendations and public discussion, the
securities contract (regulation) act became law in 1956.

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Following diagram gives the structure of Indian financial

system:

62
EXCHANGES

63
EXCHANGES
FINANCIAL MARKETS:
Financial markets are helpful to provide liquidity in the

system and for smooth functioning of the system. These
markets are the centres that provide facilities for buying and
selling of financial claims and services. The financial markets
match the demands of investment with the supply of capital
from various sources.
According to functional basis financial markets are classified

into two types.
They are:
Money markets (short-term)

Capital markets (long-term)
According to institutional basis again classified in to two types.
They are:
Organized financial market

Non-organized financial market.

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EXCHANGES
The organized market comprises of official market

represented by recognized institutions, bank and government
(SEBI) registered/controlled activities and intermediaries. The
unorganized market is composed of indigenous bankers,
moneylenders, individual professional and non-professionals.
MONEY MARKET:
Money market is a place where we can raise short-term capital.
Again the money market is classified in to
Inter-bank call money market

Bill market and
Bank loan market Etc.
E.g.; treasury bills, commercial papers, CD's etc.
CAPITAL MARKET:
Capital market is a place where we can raise long-term capital.
Again the capital market is classified in to 2 types and they are
Primary market and

Secondary market.
E.g.: Shares, Debentures, and Loans etc.
My emphasis is more on capital market.

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PRIMARY MARKET
Primary market is generally referred to the market of new
issues or market for mobilization of resources by the companies
and government undertakings, for new projects as also for
expansion, modernization, addition, and diversification and up
gradation. Primary market is also referred to as New Issue
Market. Primary market operations include new issues of shares
by new and existing companies, further and right issues to
existing shareholders, public offers, and issue of debt
instruments such as debentures, bonds, etc.
The primary market is regulated by the Securities and

Exchange Board of India (SEBI a government regulated
authority).
FUNCTIONS:-
The main services of the primary market are origination,

underwriting, and distribution. Origination deals with the origin
of the new issue. Underwriting contract make the shares
predictable and remove the element of uncertainty in the
subscription. Distribution refers to the sale of securities to the
investors.
The following are the market intermediaries associated with the

market:
1. Merchant banker/book building lead manager

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EXCHANGES
2. Registrar and transfer agent

3. Underwriter/broker to the issue
4. Adviser to the issue
5. Banker to the issue
6. Depository
7. Depository participant
INVESTORS PROTECTION IN PRIMARY MARKETS:-
To ensure healthy growth of primary market, the investing

public should be protected. The term investor protection as a
wider meaning in the primary market. The principal ingredients
of investors protection are
Provision of all the relevant information

Provision of accurate information and
Transparent allotment procedures without any bias.
SECONDARY MARKET:-
The primary market deals with the new issues of securities.
Outstanding securities are traded in the secondary market,
which is commonly known as stock market or stock exchange.
The secondary market is a market where scrips are
traded. It is a market place which provides liquidity to the
scrip issued in the primary market. Thus, the growth of

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secondary market depend on the primary market. More the

number of companies entering the primary market, the greater
is the volume of trade at the secondary market. Trading
activities in the secondary market are done through the
recognized stock exchanges which are 23 in number including
Over the Counter Exchange of India, National Stock Exchange
of India and Interconnected Stock Exchange of India.
Secondary market operations involve buying and selling of

securities on the stock exchange through its members. The
companies hitting the primary market are mandatorily required
to list their shares on one or more stock exchanges in India
including stock exchanges. Listing of scrips provides liquidity
and offers an opportunity to the investors to buy or sell the
scrips.
The following intermediaries in the secondary market:
1. Broker/member of stock exchange buyers broker and

sellers broker
2. Portfolio Manager
3. Investment advisor
4. Share transfer agent
5. Depository
6. Depository participants.

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STOCK MARKETS IN INDIA
Stock exchanges are the perfect type of market for securities

whether of government and semi-govt bodies or other public
bodies as also for shares and debentures issued by the joint-
stock companies. In the stock market, purchases and sales of
shares are affected in conditions of free competition.
Government securities are traded outside the trading ring in
the form of over the counter sales or purchase. The bargains
that are struck in the trading ring by the members of the stock
exchanges re at the fairest prices determined by the basic laws
of supply and demand.
DEFINITION OF STOCK EXCHANGE:-
Stock exchange means anybody or individuals whether

incorporated or not, constituted for the purpose of assisting,
regulating or controlling the business of buying, selling or
dealing in securities.
The securities include:
1. Shares, scrip, stocks, bonds. Debentures stock or other

marketable securities of a like nature in or of any
incorporated company or other body corporate;
2. Government securities; and
3. Rights or interest in securities.

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EXCHANGES
HISTORY OF STOCK EXCHANGE:-

The only stock exchanges operating in the 19 th
century were those of Mumbai setup in 1875 and Ahmedabad
set up in 1894. These were organized as voluntary non-profit-
marking associations of brokers to regulate and protect their
interests. Before the control on securities under the constitution
in 1950, it was a state subject and the Bombay securities
contracts (control) act of 1925 used to regulate trading in
securities. Under this act, the Mumbai stock exchange was
recognized in 1927 and Ahmedabad in 1937. During the war
boom, a number of stock exchanges were organized. Soon after
it became a central subject, central legislation was proposed
and a committee headed by a.d.gorwala went into the bill for
securities regulation. On the basis of the basis of the
committees recommendations and public discussion, the
securities contract (regulation) act became law in 1956.
FUNCTIONS OF STOCK EXCHANGE:-

Stock exchanges provide liquidity to the listed
companies. By giving quotations to the listed companies, they
help trading and raise funds from the market, savings of
investors flow into public loans and to joint-stock enterprises
because of this ready marketability and unequalled facility for
transfer of ownership of stocks, shares and securities provided
by the recognized stock exchanges as a result, over the

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EXCHANGES
hundred and twenty years during which the stock exchanges

have existed in this country and through their medium, the
central and state government have raised crores of rupees by
floating public loans; municipal corporations, improvement
trust, local bodies and state finance corporations have obtained
from the public their financial requirements, and industry, trade
an commerce- the backbone of the countrys economy-have
secured capital of crores or rupees through the issue of stocks,
shares and debentures for financing their day-to-day activities,
organizing new ventures and completing projects of expansion,
diversification and modernization. By obtaining the listing and
trading facilities, public investment is increased and companies
were able to raise more funds. The quoted companies with wide
public interest have enjoyed some benefits and assets
valuation has become easier for tax and other purposes.
VARIOUS STOCK EXCHANGES IN INDIA:-
At present there are 20 stock exchanges recognized under the

securities contracts (regulation), Act, 1956. Those are
Region Exchange City

Northern Ludhiana Stock Exchange
Ludhiana
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EXCHANGES
Region Delhi Stock Exchange Delhi
Jaipur Stock Exchange Jaipur
U.P. Stock Exchange Kanpur
Southern Hyderabad Stock Exchange

Hyderabad
Region Bangalore Stock Exchange

Bangalore
Mangalore Stock Exchange Mangalore
Madras Stock Exchange Chennai
Coimbatore Stock Exchange Coimbatore
Eastern Calcutta Stock Exchange Calcutta
Region Gauhati Stock Exchange Gauhati
Magadha Stock Exchange Patna
Bhubaneswar Stock Exchange Bhubaneswar
Western Bombay Stock Exchange Mumbai

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Region National Stock Exchange Mumbai
OTCEI Stock Exchange Mumbai
M.P. Stock Exchange Indore
Pune Stock Exchange Pune
MCX Exchange Mumbai
Inter connected Exchange Mumbai
OUT OF THESE MAJOR STOCK EXCHANGES ARE:-
NSE
The Organization
The National Stock Exchange (NSE) of India Limited has genesis

in the report of the High Powered Study Group on
Establishment of New Stock Exchanges, which recommended
promotion of a National Stock Exchange by financial institutions
(FIs) to provide access to investors from all across the country
on an equal footing. Based on the recommendations, NSE was
promoted by leading Financial Institutions at the behest of the
Government of India and was incorporated in November 1992
as a tax-paying company unlike other stock exchanges in the

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EXCHANGES
country.
On its recognition as a stock exchange under the Securities

Contracts (Regulation) Act, 1956 in April 1993, NSE commenced
operations in the Wholesale Debt Market (WDM) segment in
June 1994. The Capital Market (Equities) segment commenced
operations in November 1994 and operations in Derivatives
segment commenced in June 2000.
NSE's mission is setting the agenda for change in the securities markets in India.
The NSE was set-up with the main objectives of:
Establishing a nation-wide trading facility for equities, debt

instruments and hybrids,
Ensuring equal access to investors all over the country

through an appropriate communication network,
Providing a fair, efficient and transparent securities market

to investors using electronic trading systems,
Enabling shorter settlement cycles and book entry

settlements systems, and

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EXCHANGES
Meeting the current international standards of securities

markets.
The standards set by NSE in terms of market practices and technology has
become industry benchmarks and is being emulated by other market
participants. NSE is more than a mere market facilitator. It's that force which is
guiding the industry towards new horizons and greater opportunities.
BSE
INTRODUCTION:
The Stock Exchange, Mumbai, popularly known as "BSE" was

established in 1875 as "The Native Share and Stock Brokers Association". It
is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was
established in 1878. It is a voluntary non-profit making Association of Persons
(AOP) and is currently engaged in the process of converting itself into
dematerialized and corporate entity. It has evolved over the years into its present
status as the premier Stock Exchange in the country. It is the first Stock
Exchange in the Country to have obtained permanent recognition in 1956 from
the Govt. of India under the Securities Contracts (Regulation) Act, 1956.
The Exchange, while providing an efficient and transparent market for

trading in securities, debt and derivatives upholds the interests of the investors
and ensures redresses of their grievances whether against the companies or its
own member-brokers. It also strives to educate and enlighten the investors by
conducting investor education programmers and making available to them
necessary informative inputs.

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EXCHANGES
A Governing Board having 20 directors is the apex body, which decides

the policies and regulates the affairs of the Exchange. The Governing Board
consists of nine elected directors, who are from the broking community (one
third of them retire ever year by rotation), three SEBI nominees, six public
representatives and an Executive Director & Chief Executive Officer (CEO) & a
Chief Operating Officer (COO).
The Executive Director as the Chief Executive Officer is responsible for the
day-to-day administration of the Exchange and the Chief Operating Officer and
other Heads of Departments assist him.
The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining
to constitution of the Executive Committee of the Exchange. Accordingly, an
Executive Committee, consisting of three elected directors, three SEBI
nominees or public representatives, Executive Director & CEO and Chief
Operating Officer has been constituted. The Committee considers judicial &
quasi matters in which the Governing Board has powers as an Appellate
Authority, matters regarding annulment of transactions, admission, continuance
and suspension of member-brokers, declaration of a member-broker as
defaulter, norms, procedures and other matters relating to arbitration, fees,
deposits, margins and other monies payable by the member-brokers to the
Exchange, etc.
REGULATORY FRAME WORK OF STOCK EXCHANGE:

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EXCHANGES
The Securities Contract Regulation Act, 1956 and Securities

Exchange Board of India 1952 provided a comprehensive legal
framework. Three tier regulatory structure comprising
Ministry of finance
The Securities And Exchange Board of India
Governing body
MEMBERS OF STOCK EXCHANGE:-
The securities contract regulation act 1956 has provided

uniform regulation for the admission of members in the stock
exchanges. The qualifications for becoming a member of a
recognized stock exchange are given below:
The minimum age prescribed for the members is 21 years.
He should be an Indian citizen.
He should be neither a bankrupt nor compound with the

creditors.
He should not be convicted for fraud or dishonesty.
He should not be engaged in any other business connected

with a company.
He should not be a defaulter of any other stock exchange.

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The minimum required educational is a pass in 12 th standard

examination.
SECURITIES AND EXCHANGE BOARD OF INDIA {SEBI}
The securities and exchange board of India was

constituted in 1998 under a resolution of government of India.
It was later made statutory body by the SEBI act
1992.according to this act, the SEBI shall constitute of a
chairman and five other members appointed by the central
government.
With thee coming into effect of the securities and exchange

board of India act, 1992 some of the powers and functions
exercised by the central government, in respect of the
regulation of stock exchange were transferred to the SEBI.
OBJECTIVES AND FUNCTIONS OF SEBI
I. To protect the interest of investors in securities.

II. Regulating the business in stock exchanges and any
other securities market.
III. Registering and regulating the working of
intermediaries associated with securities market as
well as working of mutual funds.

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EXCHANGES
IV. Promoting and regulating self-regulatory

organizations.
V. Prohibiting insider trading in securities.
VI. Regulating substantial acquisition of shares and
takeover of companies.
VII. Performing such functions and exercising such powers
under the provisions of capital issues (control) act,
1947and the securities to it by the central
government.
SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK

EXCHANGES):
1. Board of Directors of Stock Exchange has to be

reconstituted so as include non-members, public
representatives and government representatives to the
extent of 50% of total number of members.
2. Capital adequacy norms have been laid down for the
members of various stock exchanges depending upon
their turnover of trade and other factors.
3. All recognized stock exchanges will have to inform
about transactions within 24 hrs.
Types of order:

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EXCHANGES
Buy and sell orders placed with members of the stock exchange
by the investors. The orders are of different types.
Limit orders: Orders are limited by a fixed price buy Reliance

Petroleum at Rs.50.Here, the orders has clearly indicated the
price at which it has to be bought and the investor is not willing
to give more than Rs.50.
Best rate order: Here, the buyer or seller gives the freedom
to the broker to execute the order at the best possible rate
quoted on the particular date for buying. It may be lowest rate
for buying and highest rate for selling.
Discretionary order: The investor gives the range of price for

purchase and sale. The broker can use his discretion to buy
within the specified limit. Generally the approximation price is
fixed. The order stands as this buy BRC 100 shares around
Rs.40.
Stop loss order: The orders are given to limit the loss due to
unfavorable price movement in the market. A particular limit is
given for waiting. If the price falls below the limit, the broker is

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EXCHANGES
authorized to sell the shares to prevent further loss. E.g., Sell

ANDHRABANK at Rs.105 stops loss at Rs.100.
Buying and selling shares: The to buy and sell the share the
investor has to locate register broker or sub broker who render
prompt and efficient to service to him. The order to buy or sell
specified number of shares of the company of investors choice
are placed with the broker. The order may be of any of the
above any mentioned type. After receiving the order the broker
tries to execute the order in his computer terminal. Once
matching order is found, the order is executed. The broker the
delivers the contract note
To the investor. It gives the details regarding the name of the

company, number of shares bought, price, brokerage, and the
date of delivery of share. In this physical trading form, once the
broker gets the share certificate through the clearing houses he
delivers the share certificate along with transfer deed to the
investor. The investor has to fill the transfer deed and stamp it.
The stamp duty is one of the percentage considerations, the
investor should lodge the share certificate and transfer deed to
the register or transfer agent of the company. If it is bought in
the DEMAT form, the broker has to give a matching instruction
to his depository participant to transfer shares bought to the
investors account. The investor should be account holder in any
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EXCHANGES
of the depository participant. In the case of sale of shares on

receiving payment from the purchasing broker, the broker
effects the payment to the investor.
Share groups: The listed shares are divided into 3 categories:
Group A shares, B1 shares, B shares. The last 2 groups are

referred to cleared securities or non-specified shares. The
shares that come under the specified group can avail the carry
forward transaction. In A group, shares are selected on the
basis of equity, market capitalization and public holding.
Further it should have good track record and dividend paying
company. It should have good growth potential too. The trading
volumes and the investors base are high in A group shares.
Any company when it satisfies these criteria would be shifted
from B group to A group.
In the B1 group actively traded share are included. Carry

forward transactions are not allowed in this group. Settlement
takes place through the clearinghouse along with the A group
shares. The settlement cycle and the procedure are identical to
A group security. The rest of the company shares listed from
the B group.
Rolling settlement system:

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EXCHANGES
Under rolling settlement system, the settlement takes place n

days (usually 1, 2, 3 or 5days) after the trading day. The shares
bought and sold are paid in for n days after the trading day of
the particular transaction. Share settlement is likely to be
completed much sooner after the transaction than under the
fixed settlement system.
The rolling settlement system is noted by T+N i.e. the

settlement period is n days after the trading day. A rolling
period which offers a large number of days negates the
advantages of the system. Generally longer settlement periods
are shortened gradually.
SEBI made RS compulsory for trading in 10 securities

selected on the basis of the criteria that they were in
compulsory demat list and had daily turnover of about Re.1
crore or more. Then it was extended to A stocks in Modified
Carry Forward Scheme, Automated Lending and Borrowing
Mechanism (ALBM) and Borrowing and lending Securities
Scheme (BELSS) with effect from Dec 31, 2001.
SEBI has introduced T+5 rolling settlement in equity market

from July 2001 and subsequently shortened the cycle to T+3
from April 2002. After the T+3 rolling settlement experience it
was further reduced to T+2 to reduce the risk in the market
and to protect the interest of the investors from 1 st April 2003.

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EXCHANGES
Activities on T+1: conformation of the institutional trades by

the custodian is sent to the stock exchange by 11.00 am. A
provision of an exception window would be available for late
confirmation. The time limit and the additional changes for the
exception window are dedicated by the exchange.
The exchanges/clearing house/ clearing corporation would

process and download the obligation files to the brokers
terminals late by 1.30 p.m on T+1. Depository participants
accept the instructions for pay in securities by investors in
physical form up to 4 p.m and in electronic form up to 6 p.m.
the depositories accept from other DPs till 8p.m for same day
processing.
T+2 activities: The depository permits the download of the

paying in files of securities and funds until 10.30 am on T+2
from the brokers pool accounts. The depository processes the
pay in requests and transfers the consolidated pay in files to
clearing House/clearing Corporation by 11.00am/on T+2. The
exchange/clearing house/clearing corporation executes the
pay-out of securities and funds latest by 1.30 p.m on T+2 to
the depositories and clearing banks. In the demat mode net

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EXCHANGES
basis settlement is allowed. The buy and sale positions in the

same scrip can be settled and net quantity has to be settled.
TRADING PROCEDURE
OUTCRY SYSTEM
TRADING IN THE STOCK EXCHANGE:

-THE CONVENTION DAY
The broker has to buy or sell securities for

which he has received the orders. For this, the broker or his
authorized representatives goes to the stock exchange. This
method is called the open outcry system. Basically the brokers
shout while buying or selling the securities. The floor of the
stock exchange is divided into a number of markets also known
as post pit or wing based on particular securities dealt there.
In the post pit or wing, the broker using open outcry method
makes an offer or bid price. For making the necessary bargain,
he quotes his purchase or sale price, also known as offer or bid
price. The dealer, to whom the price is quoted, quotes his own
price when the quotation of the dealer suits the broker, he may
loose the bargain. If he is not satisfied with the quote price, he
may turn to some other dealer. On the close of the bargain, the

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EXCHANGES
dealer as well as the broker makes a brief not of the particulars

of the deal. Such notes are made on some pad and on it the
number of shares, the price agreed upon, the name of the
party, what membership number etc., are noted.
DISADVANTAGES OF OUTCRY SYSTEM:
It lacks transparency.
The scope of manipulation, speculation and mal practice
more.
The time gap between many of the trading operations
used to be met quickly and easily.
Signal were more important in the outcry system any
member who could not interpret the buy/sell signal
correctly often landed himself in disastrous situation.
In audibility was another disadvantage of the outcry
system.
Due to the above disadvantages of the outcry system, the
SHAREKHAN has shifted from outcry system to online trading
from February 29 1997.
MANUAL TRADING
TRADING PROCEDURE BEFORE INTRODUCTION OF

ONLINE TRADING:-

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EXCHANGES
Trading on stock exchanges is officially done in the trading ring.

In the trading ring the space is provided for specified and non-
specified sections, the members and their authorized assistants
have to wear a badge or carry with them on identity card given
by the exchange to enter the trading ring. They carry a sauda
book or confirmation memos, duly authorized by the exchange
and carry a pen with them. The stock exchanges operations are
floor level are technical in nature .Non-members are not
permitted to enter in to stock market. Hence various stages
have to be completed in executing a transaction at a stock
exchange .The steps involved in this method of trading have
given below:
CHOICE OF BROKER:-
The prospective investor who wants to buy shares or the
investors, who wants to sell shares and transact business, have
to act through member brokers only. They can also appoint
their bankers for this purpose as per the present regulations.
PLACEMENT OF ORDER:-
The next step is the placing order for the purchase or sale of
securities with a broker. The order is usually placed by
telegram, telephone, letter, fax etc or in person. To avoid delay,
it is placed generally over the phone. The orders may take any

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EXCHANGES
one of the forms such as At Best Orders, Limit Order,

Immediate or Cancel Order, Limited Discretionary Order, and
Open Order, Stop Loss Order.
EXECUTION OF ORDER OR CONTRACT:-
Orders are executed in the trading ring of the BSE. This works
from 11:30 to 2.30 P.M on all working days Monday to Friday,
and a special one-hour session on Saturday. The members or
the authorized assistants have to wear a badge given by the
exchange to enter into the trading ring. They carry a suada
Block Book or conformation memos, which are duly authorized
by the exchange when the deal is struck; both broker and
jobber make a note in their suada block books. From the suada
book, the contract notes are drawn up and posted to the client.
A contract note is written agreement between the broker and
his clients for the transaction executed.
DRAWING UP AND BILLS:-

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EXCHANGES
Both sale and purchase bills are prepared along with the
contract note and it is posted on the same day or the next day.
This in a purchase transaction, once the shares are delivered to
the client effects payment for the purchases and pays the
stamp fees for transfer, a bill is made out giving the total cost
of purchase, including other expenses incurred by the broker in
the price itself. With this, the process ends.
DEMATERLIZATION:
Dematerialization is the process by which physical certificates

of an investor are converted to an equipment number of
securities in electronic from and credited in the investor
account with his DP. In order to dematerialization his certifies
an investor has to first open an account with a DP and then
request for the Dematerialization Request Form, which is DP
and submit the same along with the share certificates. The
investor has to ensure that he marks Submitted for
Dematerialization on the certificates before the shares are
handed over to the DP for demat. Dematerialization can only be
done to those certificates, which are already registered in your
name and belong to the list of securities admitted for
Dematerialization at NSDL.

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EXCHANGES
Most of the active scrips in the market including all the scrips
of S&P CNXNIFTY and BSE SENSEX have already joined NSDL.
This list is steadily increasing.
Briefly, the process is as follows: after completion of transfer,

the investor gets the option to dematerialize such shares.
Investors willing to exercise this option sends a Demat request
along with the option letter sent by the company to his DP. The
company or its R&T agent would confirm the Demat request on
its receipt from the DP to reduce risk of loss in transit.
Dematerialized shares do not have any distinctive or certificate

numbers. These shares are fungible-which means that 100
shares of a security are the same as any other 100 shares of
the security. Odd lot shares certificates can also be
dematerialized.
Dematerialization normally takes about fifteen to thirty days. To

get back dematerialized securities in the physical form, request
DP for Rematerialization of the same is made.
Rematerialization is the process of converting electronic shares

in to physical shares.
BENEFITS OF DEMAT:-
Transacting the depository has several advantages like

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EXCHANGES
It reduces the risk of bad deliveries, in turn saving the cost and
wastage of time associated with follow up for rectification. This
has lead to reduction in brokerage to the extent of 0.5% by
quite a few brokerage firms.
In case of transfer of electronic shares, you save 0.5% in stamp

duty. You avoid the cost of courier / notarization. The need for
further follow-up with your broker for the
Shares returned for company objection.
You can receive your bonuses and rights issues into your DA as
a direct credit, this eliminating risk of loss in transit.
You can also expect a lower interest charge for loans taken
against Demat shares as compared to internet for loans against
physical shares.
There is no lost in transit, thus the overheads of getting a

duplicate copy in such circumstances is reduced.

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EXCHANGES
RBI has increased the limit of loans against dematerialized

securities as collateral to Rs.1 per borrower in case of loans
against physical securities.
RBI has also reduced the minimum margin to 25% for loans
against dematerialized securities as against 50% for loans
against physical securities.
Reference:
Web site:
www.nseindia.com
www.moneycontrol.com
www. Economictimes.com
Books:

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COMPANY PROFILE:
INTRODUCTION OF COMPANY:
Perpetual trading system is a proprietary concerned founded in 2009 under the

able leadership of Mr. Aurel David. With a strategic partnership of Indias
leading broking house sharekhan ltd, the concern aims at adding value to the
online trading experience of traders and investors in Bangalore.
Perpetual trading system offers its customers a wide range of equity related
services included trade execution on BSE, NSE, Derivatives commodity
services, depositary services, online trading, investment advice etc. the
objective has been to let customer make informed decisions and to simplify the
process of investing in stock. This was for the first time that the net based
trading station of this caliber was offered to the traders.

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Perpetual trading system has always believed in technology to build its

business. The company used different company share for trading.
The table2.1: The table showing the company profile:
Name of the Perpetual trading

company system
Year of establishment 2009
Headquarter Bangalore
Nature of business Financial service

provider, Services
depositary services,
Online services,
Technical research
NO. of employees 25
VISION, MISSION AND QUALITY POLICIES:
VISION: To be the best source of information on all kind of financial products

and reliable adviser for all our customer.
MISSION: To educate and empower the individual investor to make better

investment decisions through quality advice and superior services.

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QUALITY POLICIES:
1. To provide high quality financial services to our customer.
2. To continuously satisfy the need of our customer and exceeds these

expectations.
3. To meet the commitments to customer o time.
4. To provide systemic validation of our services and quality process.
5. To continually improved.
PRODUCT/ SERVICES OF PERPETUAL TRADING SYSTEM:
The different types of product and service offered by perpetual trading system
are as follows:
1. Share mobile: Its a multi exchange streaming watch list trading facility in
cash, live market indices and news, it helps for fund transfer and also gives
information about intraday track by track chart. It provides the trade facility in
future and option.
2. Active training cell: Active training cell is one of the best ways to learn
trading in market. Its an online training active training cell training you on
various products and investing strategy in all the major asset class market. It
trains the people themselves to trade.
3. Trade tiger: Trade tiger is the blazing fast online stock trading application.
Its a single plot form for multi exchange BSE and NSE. Its an online fund
transfer bank; its a short key for fast access to order placement and report.
Trade tiger is an advanced online trading platform offering an integrated three in
one solution. It is application based and packs a punch with everything a trader
need in single screen. It provides multiple exchanges, International market
watch, one click filters.
4. Portfolio management services: Perpetual trading system portfolio

management service use the expert management skill of our independent fund

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managers backed by the expertise of 35 financial research analysts to get the

best possible return and portfolio to reduce risk.
5. Fortune finder: Its a scientific system powered by a trend evolution

algorithm which capture the changing trend pattern for each stock. This helps
the investor to get a clear and simple call to action for portfolio traders, and
its a simple decision making system to generate high profitability call with only
three action caus.
6. Perpetual picks: perpetual picks is an advisory services for these customer

who do not have the time and expertise to take trading decisions timely
recommendation are sent with entry stop and targets by SMS, customer would
only need to purchasing order from these clients.
AREA OF OPERATION:
The Company operates in the financial service sector in the city of Bangalore
providing advisory services for the traders of stocks commodities and
currencies. The company assists new traders in opening a trading and demat
account with share khan, trains them in using the website and or software and
provides recommendation. Apart from trading services company also advises
clients on other investment options like mutual funds, bonds and real-estate.
Though the area of operation is not restricted to single city or state. The bulk of
its customer based in Bangalore.
TRADING: Trading is the process of implementing investment decisions and

other types of financial asset purchases or sales. Whereas investment tends to
focus on what to do, trading is more directly concerned with how to do it. An
important impetus for trading is the portfolio management process. Specific
decisions in the trading process are dominated by economicsreal or expected
costs and benefits resulting from the trading choices made.
The impact of economics has always been an important determinant in trading,

and this importance has increased as the percentage of trades generated
primarily to profit from trading has grown. When a portfolio manager decides to
modify a portfolio by buying or selling instruments, he or she generates an order

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to buy or sell. The order to buy or sell is usually passed to someone charged
with managing the order through the execution process.
Whether that person is the portfolio manager acting in a different role, a

dedicated buy-side trader, or an agent.
DIFFERENT TYPES OF TRADING:
* Day trading: Day trading buys and sells stock through the day in the hope
that the price of the stock will fluctuate in value during the day, allowing them
to earn quick profits. A day trader will hold a stock anywhere from a few
seconds to a few hours, but will always square off all of those stocks before the
close of each day. The day trader does not own any positions at the close of any
day therefore immune to overnight risks.
Day trade can be further divided they are:
* Scalpers: Scalper day trading involves the rapid and repeated buying and
selling of a large volume of stock within seconds or minutes. The objective is to
earn a small per share profit on each transaction while minimizing the risk.
* Momentum traders: This type of day trading involves identifying and

trading stock that is in a moving pattern during the day, in an attempt to buy
such stock at bottoms and sell at tops.
* Swing traders: The trade is taken at the beginning of the price swings and
closing at the end of the price swing and on the same day of opening the trade.
Swing trader are willing to hold stock for more than one day, if it necessary to
give the stock price some time to move or to capture additional momentum in
the stocks price. Swing trading has the capability of providing higher returns
than day trading. However, unlike day trader who liquidate their position at the
end of each day.
* Positional trading: Positional trading is similar to sing trading, but with a

longer time horizon. Positional traders hold stock for a time period anywhere
from one day to several weeks or months. These trader seek to identify stocks

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where the technical trends suggest large a possible large movement in price is
likely occur, but which may not be fully played out of several weeks or month.
* Online trading: Online trading is not really properly

described as a trading style. Online trading is simply a term
that refers to the medium used to enter and execute trades.
Online traders, which can include long term investors, as well
as day, swing and position traders, use either an internet
connection or direct traders, access online trading platform to
access and execute trades with web based brokers.
INFRASTRUCTURTE FACLITY:
The Company operates in a very flexible working environment

at the Regus business center in UB city. The center has been
chosen due to its central location premium infrastructure and
high-tech facilities. The center spread over two floors covered
over twenty thousand sq ft. consisting of office rooms work
stations meeting rooms, pantry and lounge area. There are
around hundred employees working in five different
departments. The center is equipped with Wi-Fi, internet, air-
conditioning and power back up. The company does not pay
any rent to Regus business center however it pays service
charges depending on the extent of use of its facilities by the
employees.
COMPITATORS:
1. HDFC BANK: HDFC Bank is one of the leading Depositary Participant in

the country with over 8 lac demat accounts.
HDFC Bank demat service offers you a secure and convenient way to keep
track of your securities and investment, over a period of time, without the hassle
of handling physical documents that get mutilated or lost in transit.
HDFC Bank is depositary participant both with national securities depositories

limited ant central depository services limited.

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HDFC Bank ltd provides convenient facility called SPEED-e (Internet based
transaction) whereby account holder can submit delivery instruction
electronically through SPEED-e website. SPEED-e offers secured means of
transaction of the same across the counter to the depository participant. The
IDEAS facility helps in viewing the current transactions and balances of
Demat account on internet on real time basis.
2. ICICI DIRECT: ICICI Direct is stock trading company of ICICI Bank.

Along with stock trading in derivatives in BSE and NSE, it also provides
facility to invest in IPOs, mutual funds and bonds.
ICICI Direct offers 3 different online trading platforms to its customers.
* Share Trading Account: Share trading account by ICICI Direct is primarily for
buying and selling of stock in BSE and NSE.
* Wise Investment Account: Online mutual funds investment allows investor to

invest on-line in around 19 mutual fund companies. ICICI Direct offers various
options while investing in mutual funds like purchase mutual funds,
Redemption and switch between different schemes, Systematic Investment
plans, Systematic withdrawal plan and transferring existing mutual funds in to
Indian Bonds and ICICI Bank Tax Saving Bonds.
3. KOTAK SECURITIES LIMITED: Kotak securities ltd., a strategic joint

venture between Kotak Mahindra Bank and Goldman Sachs is Indias leading
stock broking house with a market share of 5-6%.Kotak Securities ltd has been
the largest in IPO distribution. It has also won the best equity house award from
finance Asia-April 2004.
The company has a full-fledged research division involved in micro Economic

studies, sectorial research and company specific equity research combined with
a strong and well networked sales force which helps deliver current and up to
date market information and news.
Kotak Securities Limited manages assets over 1700 crores under portfolio
management services which are mainly to the high end of the market. Kotak
Securities Limited has newly launched Kotak Infinity as a distinct

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discretionary portfolio management services which looks into the middle end of
the market.
4. MOTILAL OSWAL SECURITIES LTD: Motilal oswal securities is one of

the top-3 stock-broking houses in India, with a dominant position in both
institutional and retail broking, MOS is amongst the best capitalized firm in
the broking industry in term of net worth.
MOS was founded in 1987as a small sub-broking unit, with just two people
running the show. Focus on customer-first-attitude, ethical and transparent
business practices, respect for professionalism, research-based value investing
and implementation of cutting-edge technology have enabled it to blossom into
a thousand-member team.
The institutional business unit has relationship with several leading foreign
institution investor in the US, UK, Hong Kong and Singapore. In a recent media
report MOS was rated as one of the top-10 broking in terms of business
transacted for foreign institutional investors.
About business partners of sharekhan:

Sharekhan Ltd. is one of the leading retail stock broking house
of SSKI Group which is running successfully since 1922 in the
country. It is the retail broking arm of the Mumbai-based SSKI
Group, which has over eight decades of experience in the stock
broking business. Sharekhan offers its customers a wide range
of equity related services including trade execution on BSE,
NSE, Derivatives, depository services, online trading,
investment advice etc.
The firms online trading and investment site -
www.sharekhan.com - was launched on Feb 8, 2000. The site
gives access to superior content and transaction facility to
retail customers across the country. Known for its jargon-free,
investor friendly language and high quality research, the site
has a registered base of over one lakh customers. The content-
rich and research oriented portal has stood out among its
contemporaries because of its steadfast dedication to offering

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customers best-of-breed technology and superior market

information. The objective has been to let customers make
informed decisions and to simplify the process of investing in
stocks.
On April 17, 2002 Sharekhan launched Speed Trade, a net-
based executable application that emulates the broker
terminals along with host of other information relevant to the
Day Traders. This was for the first time that a net-based trading
station of this calibre was offered to the traders. In the last six
months Speed Trade has become a de facto standard for the
Day Trading community over the net.
Share khans ground network includes over 1288 centres in 325
cities in India which provide a host of trading related services.
Sharekhan has always believed in investing in technology to
build its business. The company has used some of the best-
known names in the IT industry, like Sun Microsystems, Oracle,
Microsoft, Cambridge Technologies, Nexgenix, Vignette, Verisign
Financial Technologies India Ltd, Spider Software Pvt Ltd. to
build its trading engine and content. The Morakhiya family
holds a majority stake in the company. HSBC, Intel & Carlyle are
the other investors.
SWOT ANALYSIS:
STRENGTH:
* Multi channel access: Perpetual trading system through its strategic

partnership with Sharekhan provides multi channels access to all its customer
through its strong online presence.250 share shops in 130 cities and a call-center
based dial-n-trade facility.

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* Dedicated research team: with the help of dedicated research team and
promoters experience, the company delivers timely investment advice to its
customer. Research covers both fundamental and technical analysis which
includes visit too and meeting with the various corporate in focus.
* Free investment advice to clients: the research team tracks the pulse of the
market and through its trading plot form provides timely investment advice free
of cost to its customer.
* High performance of track record the Company offers recommendation and

advice which has a strike rate of close to 70-80 percent.
* Strong customer relationship: through a team of fifteen experience

relationship managers the company maintains strong relationships with its high
net worth clients their by maintaining a very high customer retention.
WEAKNESS:
* Non aggressive promotion strategy: lack of awareness among customer

because of non-aggressive promotion strategy. Due to its conservative
philosophy and the companies non willingness to take risk by providing higher
exposure for the
Aggressive trader the company is unable to tap into the trader community their
by letting go of a large revenue to its competition.
* Excessive focus on online trading: most of the product and services are
designed to cater to customer who have on line access, customer are encouraged
to trade online rather than visiting the branches for trading. This has put off
many customer who do not have customer access are not keen to trade on line.
Many of these customers shifted to other competing brokers.
* Poor customization: most of the process are streamlined the company unable
to provide customized services to meet specific customer needs.

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OPPORTUNITIES:
* New customer service and client base, with formation of the new modi
government and the booming capital market it can be successfully lunch and
rise its clients base.
* With an increase in the number of investor and traders entering the capital
market there is a big opportunity to provide training on fundamental and
technical analysis.
* With the more and more people entering the capital market the company plans
to fulfill the need of educating the new investor and traders by lunching both
offline and online courses on aspect such as stock selection and technical
analysis.
* Due to increase in volatility of currencies and the prices of various

commodities more and more exporters and trader are looking to hedge their
risks. Commodity derivatives and currency derivative segments can be a good
revenue source.
* Increasing the usage of internet through broadband.
THREATS:
* Aggressive promotional strategies by close competitors may hamper company

acceptance by new client.
* Lack of sufficient branch office for delivery of services.
* New regulation from SEBI could hamper some of the lunching of the product
which company has planned out.
* Other player are providing margin funds to investors on easy term where as
there is no such facility in company.

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FUTURE GROWTH AND PROSPECTIVE OF THE COMPANY:
A company has copout very aggressive growth plan growth is to be brought

about by
* Lunching new product and services to be sold to existing customer
* Broadening the customer ways their by increasing revenue.
Lunching new product and services, the company has plan to lunch slew of new
advisory products for short term trader and long term industries. They also have
a plan to develop a new platform which will facilitate better communication and
quicker flow of information between advisor and traders. This platform not only
is used by the company it will also be sold to other advisory firms as a monthly
subscription package. The company has plans also to foray into hedging
services in currencies and commodities to cater to growing demand among
manufacture and exporter.
The company has planned to increase revenue through a massive client

acquisition drive.
Table 2.2: Table showing growth future plan of the company.
Plans 2 Year 5 Year 10 Year

New client to
be acquired 2000 10000 50000
Revenue 20 cr 50 cr 100 cr

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2.2.9 FINANCIAL SATATEMENT:
The financial statements are the end product of the financial accounting process.
The financial statements are nothing but the financial information presented in
concise and the financial information is related to the financial position of any
firm. Therefore the financial statements are the depiction of the financial
position of firm.
Table 2.3: Key Financial Ratios of perpetual trading system.
Particular Mar
Mar '14 Mar '13 Mar '12 Mar '11
'15
Dividend Per Share 0.75 0.90 1.00 6.00 2.00
Net Operating Profit
Per Share (Rs) 45.50 35.45 30.10 192.29 145.98
Net Profit
11.45 10.75 15.10 12.69 11.69
Return on Long Term
Fund (%) 135.85 145.89 132.95 121.85 115.65
Net Interest Income /

Total Funds 3.85 5.08 4.05 3.95 5.18
Interest Income / Total

Funds 0.95 0.85 0.45 0.55 0.45
Loans Turnover
0.39 0.25 0.24 0.20 0.30
Capital Adequacy
13.86 16.00 15.01 19.31 13.75
Ratio
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Advances / Loans
Funds(%) -- 81.31 73.85 75.85 70.89
Current Ratio
0.63 0.03 0.02 0.03 0.01
Quick Ratio
22.57 29.58 24.85 26.86 16.25
Inference:
From the above table observed that dividend per share is decreasing compare to
previous years, and the net operating profit varies from year to year and it
decrease from 145.98 to 45 .net profit is increased from 2009 to2011 and
slightly decreased in the year 2012and 2013.Loan turnover increased from .30
to0.39 the company maintained loan for the purchase of stocks. Capital
adequacy ratio is maintained the capital of the shareholder.
Quick ratio and current ratio are maintained they increased 0.01to 0.63 current
ratio and quick ratio is 16.25 to 22.57, actual ratio is greater than standard ratio
is 1:1. The company maintained good profit to increase its revenue and the
reputation of the company for the success of the business.
Reference:
Perpetual trading system company, Bangalore
Proprietor and workers in the perpetual trading system
Company journals
Websites:

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www.sharekhancis.com
FINDINGS :
According to the survey people are investing their money

from 2 years above
After the introduction of dematerialization the stock
market has become more transparent and it attracts more
investors day by day.
Some of traders feel that trading in online not secure.
Chances of hacking are there.
Still there are people who do not want to go for the online
market because they think it is risky and hard to
understand and also due to financial constraints.
According to survey people trade on weekly basis.
According to survey in in the 100 respondents 82 people

prefer online trading rather than offline trading.

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From this study online trading settled in the Indian

investor psyche.
In online we need expertise to do the transaction so this is

one of the shortcomings of the online trading.
Introduction of online trading also increases thus it also

helps to attract the new investors. And also increases
volumes at stock market.
SUGGESTIONS:
The company needs to improve their online trading procedure make it

simple and easy.That helps to investor can easily trade on online.

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So company is to increase the security and powerful firewall.
Trading in online people think that it is very risky one, so we need abolish
that from minds of the trader.
The company should give new attractive offers like zero account opening,
low brokerage fees etc.to motivate them to open a account in demat.
With a view to increasing the effectiveness of online share trading,

particular attention should be paid to the long term strategy.
The online share trading industries must develop new strategies for what
the customers pursue.
There is an urgent need for firms to place a new emphasis on customer

relationship that combines selling the personal financial consultations to
meet clients specific needs.
CONCLUSION:

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The stock exchanges in India, under the overall supervision of the regulatory
authority, the Securities and Exchange Board of India (SEBI), provide a trading
platform where buyers and sellers can meet to transact in securities. The trading
platform provided by NSE is an electronic one and there is no need for buyers
and sellers to meet at a physical location to trade. They can trade through the
computerized trading screens available with the NSE trading members or the
internet based trading facility provided by the trading members of NSE. Online
trading empowers educated investors to make their own decision with close
watch on market sensitivity by browsing through various sites. Besides, net
trading assures achievement of objectives of securities regulation which are
creation of efficient market to meet global requirements and investors
protections.

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BIBILOGRAPHY
BOOKS:
Investment management V.K.Bhalla

Investment management Preethi singh
Security Analysis And Portfolio Management V.A.Avadhani
Marketing of Financial Services V.A.Avadhani
Indian Financial System M.Y.Khan
Secondary market & its functions I.M. Pandey
WEBSITES:
www.Share Khan.com
www.bseindia.com
www.sebi.com
www.moneycontrol.com
www.economictimes.com
www.nseindia.com
www.reuters.com

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A STUDY ON ONLINE TRADING SYSTEM IN

Kousali Institute of management studies, DharawadPage

Kousali Institute of management studies, DharawadPage

Online trading is conducting stock transactions on the internet via several

Kousali Institute of management studies, DharawadPage

business factors and economic factors. The interplay of these

SIGNIFICANCE OF THE STUDY:

Kousali Institute of management studies, DharawadPage

the secondary market. These two markets distinguish

Kousali Institute of management studies, DharawadPage

University of Texas at Austin(2010) E-Broking as a

Kousali Institute of management studies, DharawadPage

allows interactive information exchange between traders

Kousali Institute of management studies, DharawadPage

website and we see that all the perspective relating to the

Sarika Srivastava (2013) online trading & future options

Examined the impact of internet on online trading. She

Kousali Institute of management studies, DharawadPage

Reviewed certain facts related to online brokers. He

Nidheesh K.B(2007) Online Stock Trading in India: An

Reviewed upon the role of the NSE and BSE in online

Arwinder Singh(2010) online trading system impact.

Claimed that online trading is highly beneficial and cheap

Yannis Bakos (2005) the Impact of e-commerce on retail

Kousali Institute of management studies, DharawadPage

Stated that online trading is on a rising track and is

Allen (2009) online trading investors and take change

Shared his thoughts and stated the process which goes

ChandanSwamy (2013) Problems and prospects of online

Kousali Institute of management studies, DharawadPage

brokers website. The user cannot directly trade in the

Kousali Institute of management studies, DharawadPage

stocks and shares can be recorded electronically so that

Antony Saunders and Marcis Million Cornett

OBJECTIVES OF THE STUDY:

To analyze and conclude what is customers perception

SCOPE OF THE STUDY:

Research methodology is a way to systematically solve the research problem. It

The scope of research methodology is wider than that of research methods.

The type of research used in this project is Descriptive Research.

Descriptive research includes surveys, observational methods and fact-finding

Kousali Institute of management studies, DharawadPage

People at Regus business center Bangalore.

Location of the study:

Kousali Institute of management studies, DharawadPage

Brief PROFILE OF THE COMPANY:

Perpetual trading system has always believed in technology to build its

LIMITATIONS OF THE STUDY:

1) For performing these king of research large data base is

2) There may be many variables which influences the result but

3) There can be some deviations in the data as the human

4) The feedback we got may not be correct as the respondent

5) Scientific research on the part of research is also required.

Kousali Institute of management studies, DharawadPage

6) Understanding the psychology of human is not the cup of

7) Accuracy level may be effected when data is subjected to

Time was the biggest constraint as these studies cannot be

1.10 Chapter Schemes:

2. Theoretical Study: of online trading, growth of online trading in India,

3. Industry profile: Introduction to stock market, definition, history of stock

4.Company Profile: Introduction of the company, Nature of the business

6. Findings, Suggestion and Conclusion: Findings of the can be made on the

Kousali Institute of management studies, DharawadPage

Walia N, Kumar R (2007) Online Stock Trading in India: An Empirical