Online Trading System

Working of Online Trading System

Submitted To Submitted by
Prof. Ruchi Chugh Jitesh Kejriwal
FORE School of Management 91084, Sec: Y

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Traditionally stock trading was done through stock brokers, personally or through telephones. As
number of people trading in stock market increased enormously in the last few years, some
issues like location constrains, busy phone lines, miss communication etc started growing in
stock broker offices. Information technology helped stock brokers in solving these problems with
Online Stock Trading.

Online Stock Trading:

Online Stock Market Trading is an internet based stock trading facility. Investor can trade shares
through a website without any manual intervention from Stock Broker.

In this case these Online Stock Trading companies are stock broker for the investor. They are
registered with one or more Stock Exchanges. Mostly Online Trading Websites in India trades in
BSE and NSE.

There are two different type of trading environments available for online equity trading

1. Installable software based Stock Trading Terminals

This trading environment requires software to be installed on investor‟s computer.
Software is provided by the stock broker. These softwares require high speed internet
connection. These kind of trading terminals are used by high volume intraday equity
traders.
Advantages:
 Orders directly send to stock exchanges rather than stock broker. This makes
order execution very fast.
 It provides all information which is required to a trader on a single screen
including stock market charts, live data, alerts, stock market news etc.
Disadvantages:
 Location constraint - You cannot trade if you are not on the computer where you
have installed trading terminal software.
 It requires high speed internet connection.
 These trading terminals are not easily available for low volume share traders.

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2. Web (Internet) based trading application:

This kind of trading environment doesn't require any additional software installation.
They are like other internet websites which investor can access from around the world
through normal internet connection.
The major Stock Trading Websites in India are:

 ICICI Direct  ShareKhan

 IndiaBulls  5Paisa
 Motilal Oswal Securities  HDFC Securities
 Reliance Money  Religare
 Geojit  IDBI PaisaBuilder
 Networth Stock Broking  Kotak Securities

 Standard Chartered: STC Capital Markets Ltd  Angel Trade

Advantages of Online Stock Trading (Website based):

 Real time stock trading without calling or visiting broker's office.
 Display real time market watch, historical data, graphs etc.
 Investment in IPOs, Mutual Funds and Bonds.
 Check the trading history; demat account balance and bank account balance at any
time. Provide online tools like market watch, graphs and recommendations to do
analysis of stocks.
 Place offline orders for buying or selling stocks.
 Set alert to inform you certain activity on the stock through email or sms.
 Customer service through Email or Chat.
 Secure transactions.

Disadvantages of Online Stock Trading (Website based):

 Website performance - sometime the website is too slow or not enough user
friendly.
 Little long learning curve for people who don‟t know much about computers.
 Brokerages are little high.

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Both NSE and BSE have switched over to computerized Online Trading system from open
outcry trading system. BSE has BOLT (BSE Online Trading) and NSE has NEAT (National
Exchange Automated Trading). With these highly efficient online trading systems efficiency and
transparency of BSE and NSE have increased dramatically.

Essential of Online Trading -

 Online trading account - You have to open an online trading account with any of the bank
or financial trading system like ICICIdirect.com. There will be nominal annual charges.
These charges vary from bank to bank but should not be more than Rs.1000 annually.
 A computer with internet connection or can do trading in internet cafe.
 After successfully opening the online account you will receive the username and
password with the help of which you can login in online trading system and trade
yourself.
 The trading system executive (with whom you opened trading account) will help you
initially about how to use the online trading system.
 Once you get familiar with the system then you can trade yourself at your home or in the
internet cafe.
 Nowadays you can get internet enabled on your cell (which is called GPRS) whose speed
will be sufficient to do trading and also the charges of GPRS are very nominal.

Buying or Selling a Share

Once the account is active you can buy shares from BSE or NSE. For every buy or sell transaction
you will have to pay a brokerage to the broker normally ranges between 0.4% to 0.8%. Suppose
you buy 100 shares with price 100. So total amount is Rs. 10000. For a .5% brokerage firm you
will have to pay 0.5% of 10,000 i.e. Rs. 50. Same amount you have to pay when you sell it. So
totally Rs 100 will be reduced from your total profit.

Apart from this brokerage you will have to pay many other charges like Service tax on the
brokerage i.e. 12.25% for every transaction it is 12.25% of Rs. 50 i.e. 6.125% for buy and
another 6.125% for sell. Then there are other charges like Securities Turnover Tax (.125%),
Stamp duty, Education Cess, minimum buy/sell commission etc. These amounts vary from
broker to broker.
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NEAT SYSTEM:

NSE is the first exchange in the world to use satellite communication technology for trading. Its
trading system, called National Exchange for Automated Trading (NEAT), is a state of-the-art
client server based application.

The NEAT screen consists of various functions to make trading a pleasant experience. These
functions help us in performing various tasks like placing a buy order, placing a sell order,
modifying the orders already placed, keeping a watch on the market movement, finding market
depth, checking the status of an order which had been placed earlier and other various
supplementary functions.

At the server end all trading information is stored in an in-memory database to achieve minimum
response time and maximum system availability for users. It has uptime record of 99.7%. For all
trades entered into NEAT system, there is uniform response time of less than one second.

On logging into the system the following screen appears:

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User Id: Each trading member can have more than one user. Each user has a unique ID and will
be a registered NSE trading member.

Trading Member Id: The trading member is a registered member of the exchange owning NSE
ticket who participates himself or on behalf of its clients. The Trading Member ID is unique and
functions as a reference for all orders/trades of different Users.

Password: User password expires every 15 days which can be reset by typing new password in
the new field.

Display Screen:

Title Bar:

a. Logo

b. Name of the software

c. Name of the company: Name of the Trading Member who has taken membership
with exchange, is displayed.

d. Login ID number: The login ID of the user is displayed. To get this ID, user has to
clear NCFM certification in the desired module.

e. Current date in format date month year (for example 01.01.2007 should01 JAN 2007)

f. Current time in format - hours: minutes: seconds

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Sub- title bar: Indicates the index current value along with change in points from yesterday‟s
closing. E.g. NIFTY 5480 (+25)

Second Sub- title bar: Indicates last traded trades of each security in the sequence of symbol,
series, market type, quantity, and price in red color for sell and white color for buy.

Market Watch: Here we can select securities of our choice and also choose attributes related to
our choice along with the current buy/sell bids and buy/sell quantity. For example we may
choose RIL securities and parameters we could choose can be OHLC, Volume traded, Last
trading price, and Average trading price.

System message window: It gives the share messages regarding order/trade Confirmation /
modification /cancellation etc.

Function Keys

S. No Function Keys Function

F1- Buy & (+) F2- Sell & (-) Function of Buying & Selling scripts.
1.

2. F3- Outstanding Order (OO) Pending Orders which are Confirmed but not Traded.

It Inserts new Scrip and refresh the rates by only

3. F4- Market Watch (MW)
pressing enter on scrip.

4. F6-Market By Price (MBP) It Displays best 5 Buyers & Sellers on selected scrip.

Displays the whole activity done in scrip (Buying,

5. F7- Activity Log (AL)
Selling, Modify and Trade).

6. F8- Previous Trades (PT) It Displays Buy Sell Trades with avg. & total value.

It is used to view rates of any scrip without disturbing

F9- Snap Quote (SQ)
7. the market watch.

9. F10- Message View It is a Partial display of Full Message.

10. F11- Market Enquiry (MI) Info. Of particular selected scrip (OHLC).

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BUYING OF SECURITY (F1 OR ‘+’)

This function is used for placing buy orders. Buy orders can also be placed by using „+‟ key or
by clicking on the „buy icon‟ on the tool bar. For a stop loss buy orders, the trigger price has to
be lesser than or equal to the limit price.

 Symbol – Shows the symbol of the scrip.

 Series – Shows the series of the security, i.e. EQ or BE etc.
 Total Quantity – Here the user has to specify the quantity to be bought/sell.
 Price – The price at which the shares are to be bought is to be specified.
 Pro/Cli – Here the user has to select whether the shares are to be bought in the
Proprietor‟s account or in Client‟s account.
 Client – If the shares are to be bought in client‟s account, the client code is specified.
 Disclose quantity (DQ) – The user can disclose a minimum of 10% of the buy/sell
quantity. If nothing is mentioned in disclose quantity box then the entire buy/sell quantity
is disclosed in the market.

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SELLING OF SECURITY (F2 OR ‘-‘)

Sell orders can also be placed by using (-) key or by clicking on the sell icon on the tool bar. Sell
orders are placed with different parameters. All the parameters for sell order are same as of Buy
orders. The only difference is of stop loss orders in which, for sell orders, the trigger price has to
be greater than or equal to the limit price.

Submission of Order – After entering relevant data in all fields press “Enter and Ctrl” key to
submit the order. As the order placed the message comes with Time, Order No, Symbol, Series,
Quantity, Rate, Member ID, User ID with last word CONFIRMED.

Outstanding Order (F3):

This function is used to enable the User to view the outstanding orders (buy/sell) for a selected
security. An outstanding order is an order that has been entered by the user, but which has not yet
been completely traded or cancelled.

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If the outstanding orders of a particular client are required, the client A/c no. has to be specified.
Press enter to view the outstanding orders of the above mentioned security by filtering the above
book type. Left side of the window displays „Buy Orders‟ & the right side displays „Sell Orders‟.

MARKET WATCH (F4)

This screen is used to set-up and view trading details of the securities that are selected by the
users. For each security in the market watch, market information is dynamically updated. The
one line market information displayed is for current best price orders available in the Regular Lot
Book. For each security the following information is displayed:

 Symbol, Series and Market type.

 The corporate action indicator "Ex/Cum"
 The total buy order quantity available at best buy price
 Best buy price
 Best sell price
 Total sell order quantity
available at best sell price
 The last traded price
 The last trade price change
indicator
 Increase/Decrease indicator
 The no delivery period
indicator "ND"

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MARKET BY ORDER (F5)

The purpose of Market by Order (MBO) is to enable the User, to view outstanding orders in the
order books, in the order of price/time priority for a selected security. It shows best five orders
by price time priority for buyers as well as for sellers for the selected scrip. This function is not
available for Equity market; it only works for Auction markets.

Best Orders (F6)

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Activity Log (F7)

The Activity Log (AL) shows all the activities which have been performed on any order
belonging to that User. These activities include order modification/cancellation, partial /full
trade, trade modification/cancellation.

Previous Trades (F8)

Provide security wise information to Users for their own trades. For example, if 10 shares of ITC
@ Rs.166.80 and another 10 shares are purchased @ Rs.168.80 after 10 minutes. The
information reflected in the Net Integrated Position window will show that 20 share of ITC are
bought @ 167.80, hence to view individual details of trade the individual can press F8.

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Snap Quote (F9)

The Snap Quote is a feature available in the system to get instantaneous market information on a
desired security. This is normally used for a security that is not setup in the Market Watch
window.

Partial Message Log (F10)

This function shows the messages regarding Order/Trade Confirmation/Modification/

Cancellation etc. It provides few messages in this window.

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MARKET ENQUIRY (F11)

The purpose of the Market Enquiry is to enable the User to view the market statistics of a
particular security in the particular market. It also displays the open price and previous close
price for a security. This function is used to view the total market information of the selected
scrip. It shows:

Normal market as of the current time Today‟s open price

Name of the scrip Today‟s high price
Series of the scrip Today‟s low price
Total traded quantity for the day till that Last traded price
time
52 weeks high price. Average Price
52 weeks low price Net change.
Previous day closing price Last traded quantity
Last traded time Last traded date
Today‟s current best buyer/seller with
their quantity.

Most Active Securities

The Most Active Securities

window is used to view the
most active securities or top 10
securities sorted in the order of
traded value. It is dynamically
updated. The securities which
are displayed are those which
have been traded most actively
since market opening till
current time.

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