LIMITED

A SUMMER INTERNSHIP PROJECT ON

A STUDY ON ONLINE TRADING

FOR THE PARTIAL FULFILLMENT OF POST-GRADUATION DEGREE IN

MASTER OF BUSINESS ADMINSTRATION

INTERNSHIP DONE AT

SHAREKHAN LIMITED

UNDER THE ESTEEMED GUIDENCE OF

PROF. RAVI KUMAR

(FACULTY, AGBS HYDERABAD)

SUBMITTED BY

MITHUN KUMAR PATNAIK

ROLL NO: A30601909082

AMITY GLOBAL BUSINESS SCHOOL

BANJARA HILLS ROAD NO: 11

ADJACENT TO LAKE VEIW APARTMENT

HYDERABAD
LIMITED

I hereby declare to the best of my knowledge and belief that the Summer
Training Project Report entitled as STUDY ON ONLINE TRADING

for SHAREKHAN LIMITED HYDERABAD being submitted as the partial

fulfilment of Master of Business Administration, has been written and
submitted under the guidance of Mr. Shayam Sundar and Mr K.P.Singh
Industry guides and Mr Ravi Kumar my faculty guide.

I further declare that it is original work done as a part of the academic

course and has not been submitted elsewhere.

The conclusions and recommendations written in this project are based on

the data collected by me while preparing this report.
MITHUN KUMAR PATNAIK

A30601909082
LIMITED

certificate

(whom so ever it may concern)

A STUDY ON

ONLINE TARDING SHAREKHAN LIMITED

Mr. MITHUN KUMAR PATNAIK

A30601909082 AMITY GLOBAL BUSINESS

SCHOOL

MASTER OF BUSINESS

ADMINISTRATION Summer Internship Program

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ACKNOWLEDGEMENT

Dr. Prasad Rao (Director AGBS

Business School

Hyderabad) and D.Surekha Thakur (corporate relations), Amity

Global Share Khan

prof. Ravi Kumar (Faculty

Guide-AMITY GLOBAL BUSINESS SCHOOL, Hyderabad)

Mr.K.P.Singh

Territory Manager, Share Khan Mr.Shyam Sundar,

Marketing Manager,

Share khan

MITHUN KUMAR PATNAIK

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EXECUTIVE SUMMARY

As per the title suggest the project report has been prepared regarding the growth
and development of online trading in India. Online trading was initiated by NSE in
India and soon after the other exchanges also followed it. There was a major boom in
yr. 2000 when lots of online trading companies came with a bang but only few were
survived because of lack of computer knowledge and low internet penetration. There
are two types of online trading companies one is the banking online trading
companies and the other is non-banking trading. A few examples of banking online
trading companies are HDFC securities, ICICI direct.com, UTI securities etc. On the
other hand non banking trading companies are sharekhan.com, Angel Broking,
Reliance Money etc. Today online trading contributes are about 8-10%. It is
continuously growing and has a huge market potential. A study was undertaken to
determine the growth of various online trading companies in India in terms of trade
done by them through online and services provided by them.

Major findings indicates that out of a survey of 50 respondents it was seen that major
investors prefer online trading because of few major factors such as time saving
convenience, protection through Freudian brokers etc. although during my research
project Ive seen that most of the respondents feel online trading, a secure way of
investing into stock market still a few of them feel it unsafe and a bit complicated but they
posses information about online trading. Today the online trading companies having cut-
throat competition in our offering whose brokerage discounts lower margin money and
zero balance account. Due to the rising education awareness and use of internet there is a
huge potential for online trading in future and companies must come up with innovative
offerings to capture the untapped market.
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CHAPTER I

OBJECTIVES AND
METHODOLOGY OF
STUDY
LIMITED

CHAPTER-1

OBJECTIVES OF THE STUDY:

It is to analyze the changes in trading after the exchange shifted

from

outcry to online trading system.

It is to study the functions of SHAREKHAN through various

departments.

To know the online screen based trading system adopted by

SHAREKHAN and about its communication facilities. The appropriate

configuration to set the network, which would link the SHAREKHAN to

individual / members.

To know about the latest and future development in the stock

exchange trading system.

METHODOLOGY OF THE STUDY:

The data collection methods include both primary and secondary

collection methods.

Primary method: This method includes the data collected from the
personal interaction with authorized members of Share khan
Securities limited.

Secondary method: The secondary data collection method

includes:

The lecturers delivered by the superintendents of respective

departments. The brochures and material provided by Sharekhan
Securities limited and Data collected through distribution of
questionnaires from a sample. The data collected from the
magazines of the NSE, economic times, and etc., various books
relating to the investments, capital market and other related topics.
LIMITED

NEED FOR THE STUDY:

The present study to review the online trading procedure a case study
of ONLINE

TRADING at SHAREKHAN., as the exchange has changed its trading

from the outcry mode to online trading on 20th February 1997, there
is need to assess the performance of the capital market.

LIMITATIONS OF THE STUDY:

The study is confined to online trading procedure only. Problems of

listing are not covered due to limited time and to keep the study in
manageable limits.

SAMPLE SIZE:

Questionnaire 1: sample size 30 Questionnaire 2: sample size 50

TIME LINE: Project started on 1st June 2010 and concluded on 15th
July 2010.
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CHAPTER 2

INDUSTRY ANALYSIS

FINANCIAL SYSTEM

DIFFERENT TYPES OF MARKETS

STOCK EXCHANGES

SEBI FRAMEWORK
LIMITED

CHAPTER-2

Following diagram gives the structure of Indian

financial system:
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FINANCIAL MARKET:

Financial markets are helpful to provide liquidity in the system

and for smooth functioning of the system. These markets are the
centers 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.

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.

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CAPITAL MARKET:

The capital market is the market for securities, where companies

and the government can raise long term funds. The capital market
includes the stock market and the bond market. Financial regulators
ensure that investors are protected against fraud. The capital
markets consist of the primary market, where new issues are
distributed to investors, and the secondary market, where existing
securities are traded.

Capital market thus plays a vital role in channelizing the savings of

individuals for Investment in the economic development of the
country. As a result the investors are not constrained by their
individual abilities, but by the abilities of the companies, which in
turn enhance the savings and investments in the country, liquidity
of capital market is an important factor affecting growth.

Since projects require long term finance, but on the other hand, the
investor may not like to relinquish control over their savings for a
long time. A liquid stock market ensures a quick exit without
incurring heavy losses or costs. Thus development of efficient
market system is necessary for creating conductive climate for
investment and economic growth.

Capital market is a place where we can raise long-term capital. Again

the capital market is classified in to two types and they are

Primary market and

Secondary market.
E.g.: Shares, Debentures, and Loans etc.
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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). Function:

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:

Merchant banker/book building lead manager

Registrar and transfer agent

Underwriter/broker to the issue

Adviser to the issue

Banker to the issue

Depository

Depository participant

Investors protection in the primary market:

To ensure healthy growth of primary market, the investing public

should be protected. The term investor protection has a wider
meaning in the primary market. The principal ingredients of
investors protection are:

Provision of all the relevant information

LIMITED

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 scrips issued in the
primary market. Thus, the growth of secondary market depends on
the primary market. More the number of companies entering the
primary market, the greater are 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 (OTCE),
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 mandatory to list their shares on one or more stock
exchanges in India.
Listing of scrips provides liquidity and offers an opportunity to the
investors to buy or sell the scrips.

The following are the intermediaries in the secondary market:

Broker/member of stock exchange buyers broker and sellers broker

Portfolio Manager

Investment advisor

Share transfer agent

Depository

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 are at the fairest prices
determined by the basic laws of supply and demand.

Definition of a stock exchange:

Stock exchange means any body 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:

Shares of public company.

Government securities.

Bonds

History of Stock Exchanges:

The only stock exchanges operating in the 19th century were those
of Mumbai setup in 1875 and Ahmadabad 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 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 A.D.Gorwala went into the bill for
securities regulation. On the basis of the
LIMITED

committees recommendations and public discussion, the securities

contract

(regulation) act became law in 1956.

Functions of Stock Exchanges:

Stock exchanges provide liquidity to the listed companies. By giving quotations

to the listed companies, they help trading and raise funds from the market.
Over the 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, trust and local bodies have obtained from the public their financial
requirements, and industry, trade and 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 23 stock exchanges recognized under the securities
contracts (regulation), Act, 1956. Those are:

Ahmadabad Stock Exchange Association Ltd.

Bangalore Stock Exchange

Bhubaneswar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchange Ltd.

Coimbatore Stock Exchange

LIMITED

Delhi Stock Exchange Association

Guwahati Stock Exchange Ltd

Hyderabad Stock Exchange Ltd.

Jaipur Stock Exchange Ltd

Kanara Stock Exchange Ltd

Ludhiana Stock Exchange

Association Ltd

Madras Stock Exchange

Madhya Pradesh Stock Exchange

Ltd.

Magadh Stock Exchange Limited

Meerut Stock Exchange Ltd.

Mumbai Stock Exchange

National Stock Exchange of India

OTC Exchange of India

Pune Stock Exchange Ltd.

Saurashtra Kutch Stock Exchange

Ltd.

Uttar Pradesh Stock Exchange

Association

Vadodara Stock Exchange Ltd.

LIMITED

MAJOR STOCK EXCHANGES:

NSE

The National Stock Exchange 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 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 and debt

instruments.

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 Meeting the current international standards of
securities markets.

The standards set by NSE in terms of market practices and

technology, have become industry benchmarks and are 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.
LIMITED

BSE

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
demutualised 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.

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 9 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 and a Chief Operating Officer. 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 Department 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
LIMITED

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

A comprehensive legal framework was provided by the

Securities Contract Regulation Act, 1956 and Securities
Exchange Board of India 1952. Three tier regulatory structure
comprising

Ministry of finance

The Securities And Exchange Board of India

Governing body

MEMBERS OF THE 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.

The minimum required education is a pass in 12th standard

examination.
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SECURITIES AND EXCHANGE BOARD OF INDIA

(SEBI)

The securities and exchange board of India was constituted in 1988

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 four other members appointed by
the central government.

With the 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

To protect the interest of investors in securities.

Regulating the business in stock exchanges and any other securities

market.

Registering and regulating the working of intermediaries associated

with securities market as well as working of mutual funds.

Promoting and regulating self-regulatory organizations.

Prohibiting insider trading in securities.

Regulating substantial acquisition of shares and take over of
companies. 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):

Board of Directors of Stock Exchange has to be reconstituted so as to

include non-members, public representatives and government
representatives to the extent of 50% of total number of members.

Capital adequacy norms have been laid down for the members of
various stock exchanges depending upon their turnover of trade and
other factors.

All recognized stock exchanges will have to inform about

transactions within

24 hrs.
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CHAPTER-3

ELECTRONIC SETTLEMENT
OF TRADE
LIMITED

CHAPTER-3

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.

Investor instructs DP to receive credits into his account in the

prescribed form. There may be one time standing instruction or
separate instruction each time to receive credits.

Investor purchases securities in any of the stock exchanges linked

to depository through a broker.

Broker receives payment from investor and arranges payment to

clearing corporation.

Broker receives credit to securities in clearing account on the

payout day.

Broker gives instructions to DP to debit clearing account and credit

clients account. Investor receives shares into his account by way of
book entry.
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:

Investor sells securities in any of the stock exchange linked to

depository through a broker.

Investor instructs his DP to debit his demat account with the

number of securities sold and credit the brokers clearing account.
LIMITED

Before the pay-in-day, broker of the investor transfers the securities

to clearing corporation.

The broker receives payment from the stock exchange.

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
scrips, the investor has to fill up a demat request form (RRF) and
submit it to the DP. The DP forwards the request to depository after
verifying the investors balances. Depository in turn initiates the
registrars and transfer agent or the issuer company. RTA/ Company
print the certificates and dispatch the same to the investor.

Market timings:

Normal Market / Exercise Market Open time

: 09:00 hours

Normal market close

: 15:30 hours

Set up cut of time for Position limit/Collateral value

: till 15:30 hrs

Trade modification end time / Exercise Market

: 16:15 hour
LIMITED

INTERNET BASED TRADING THROUGH ORDER

ROUTING SYSTEMS

Internet based trading on conventional exchanges, uses the Internet

as a medium for communicating client orders to the exchange,
through broker web sites. Brokers 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 brokers
system receives this information.
LIMITED

USE OF INTERNET AS ALTERNATIVE TRADING SYSTEMS

(PROVISION FOR PRICE

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 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
LIMITED

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 Record keeping

WORKING GROUPS SET UP BY THE COMMITTEE

Considering the present state of capital markets in India and keeping in

view the ongoing developments in Internet based securities business, it
was felt that SEBI as a regulator could strive to identify areas where use
of Internet in the capital market is possible within the existing legal
framework. One such area identified by the Committee, which is also the
central within the existing legal framework. One such area identified by
the Committee, which is also the central theme of this report, is the area
of Internet trading on existing electronic exchange. In this area, through
early introduction of Cyber Laws would be highly describe but their
existence is not a necessary precondition. To look into the existing
regulatory scenario and to bring out some ground rules for use of the
medium of Internet, the Committee therefore constituted the following
two working groups to look into the area of:

Security protocols and standardization of interfaces for Interest

based securities trading, chaired by Prof. Deepak B. Phatak, IIT,
Pawai, Mumbai

Surveillance and monitoring related issues arising due to Interest

based securities trading, chaired by Shri. L.K. S inghvi, Sr. ED, SEBI
LIMITED

The committee also requested Ms D N Raval, Executive Director, SEBI to

examine the legality of introduction of Internet trading and issue of
Alternative trading systems. This report of the standing committee
examines the regulatory and security requirements Internet Based
Trading on Conventional Exchanges. Separate reports

(s) will cover the other areas related to Internet applications in the
securities markets.

The report of the first working group on security protocols and

standardization of interfaces has since been submitted and incorporated
in the report. The committee would like to place on record its sincere
thanks to Dr. D.B.

Phatak, Ms. D.N. Raval and their team members. The global
financial market is undergoing a transformation due to rapid
technological developments. It thus becomes imperative that for
developing in effective regulatory framework developments in other
parts of the world should be studies and analyzed. With nearly who
million on-line investors, Internet trading in the United States is
growing by leaps and bounds. Internet trading is being facilitated by
large brokerage houses, thus changing the total concept of
securities trading. A team comprising of members from stock
exchanges and SEBI visited the United States to these development
and had interactions with brokerages houses, Internet service
providers and other agencies involved in facilitating Internet
trading.

The team also discussed the developments in the emerging

regulatory and supervisory framework in United States with the
Securities and Exchange Commission officials. They were also
tripped of the various initiatives taken by SEC in this regard. These
inputs have been utilized while drafting this report.
LIMITED

RECOMMENDATIONS OF THE COMMITTEE

Application for Permission by Brokers

SEBI registered Stock Brokers interested in providing Internet based

trading services will be required to apply to the respective stock
exchange for a formal permission. The stock exchange should grant
approval or reject the application as the case may be, and
communicate its decisions to the number within 30 calendar days of
the date of completed application submitted to the exchange. The
stock Exchange, before giving permission to brokers to start Internet
based services shall ensure the fulfillment of the following minimum
conditions.

Net worth Requirement

The broker must have a minimum net worth of Rs. 50 lacs if the
broker is providing the Internet based facility on his own. However,
if some brokers collectively approach a service provider for
providing the interest trading facility, net worth, criteria as
stipulated by the stock exchange will apply. The net worth will be
computed as per the SEBI circular no FITTC/DC/CIR-1/98 dated June
16, 1998.s

Operational and System Requirements:

Operational Integrity:

The stock Exchange must ensure that the system used by the
broker has provision for security, reliability and confidentiality of
data through use of encryption technology. This stock exchange
must also ensure that records encryption technology. The stock
Exchange must also ensure the records maintained in electronic
from by the broker are not susceptible to manipulation.
LIMITED

System Capacity

The stock Exchange must ensure that the brokers maintain

adequate backup systems and data storage capacity. The stock
Exchange must also ensure that the workers have adequate system
capacity for handling data transfer, and arranged for alternative
means of communications in case of Internet link failure.

Qualified Personnel:

The stock Exchange must lay down the minimum qualification fro
personnel to ensure that the broker has suitably qualified and
adequate personnel to handle communication including instructions
as well as other back office work which is likely to increase because
of higher volumes.

Written Procedures:

Stock Exchange must develop uniform written procedures to handle

contingency Tuitions and for review of incoming and outgoing
electronic correspondence.

Signature Verification/ Authentication:

It is desirable that participants use authentication technologies. For

this purpose is should be mandatory for participants to use
certification agencies as and when notified by Government/SEBI.
They should also clearly specify when manual signatures would be
required.
Client Broker Relationship

Know Your Client:

The stock Exchange must ensure that brokers have sufficient, verifiable
information about clients, which would facilitate risk evaluation of
clients.
LIMITED

Broker- Client Agreement:

Brokers must enter into an agreement with clients spelling out all obligations and
rights. This agreement should also inter alia, the minimum service standards to be
maintained by the broker for such service specified by SEBI/Exchange for the
internet based trading from time to time. Exchange will prepare a model
agreement for this purpose. The broker agreement with clients should not have

Investor Information:

The broker web site providing the internet based trading facility should contain
information meant for investor protection such as rules and regulations affecting
client broker relationship arbitration rules, investor protection rules etc.

The broker web site providing the Internet based trading facility should also
provide and display prominently, hyper link to the web site/page on the web
site of the

relevant stock exchange (s) displaying rules/ regulations/ circulars.

Ticker/quote/order book displayed on the web-site of the broker should
display the

time stamp as well as source of such information against the given

information.

Order/ Trade Confirmation:

Order/Trade confirmation should also be sent to the investor through email at

clients discretion at the time specified by the client in addition to the other
made of display of such confirmation of real time basis on the broker web site.
The investor should be allowed to specify the time interval on the web site
itself with in which he would like to receive this information through email.
Facility for reconfirmation of orders which are larger than that specified by the
member's risk management system should be provided on the internet based
system.

Handling Complaints by Investors:

Exchanges should monitor complaints from investors regarding service provided

by brokers to ensure a minimum level of service. Exchange should have separate
cell specifically to handle Internet trading related complaints. It is desirable
LIMITED

that exchanges should also have facility for on-line registration of

complaints on their web site.

Risk Management:

Exchanges must ensure that brokers have a system-based control on the

trading limits of clients, and exposures taken by clients. Brokers must
set predefined limits on the exposure and turnover of each client. The
broker systems should be capable of assessing the risk of the client as
soon as the order comes in. The client should be informed of
acceptance/rejection of the order within a reasonable period.

In case system based control rejects an order because of client

having exceeded limits etc., the broker system may have a review
and release facility to allow the order to pass through.

Contract Notes:

Contract notes must be issued to clients as per existing regulations,

within 24 hours of the trade execution.

Cross Trades:

As a matter of abundant precaution, the committee seeks to

reiterate that as III the case of existing system, brokers using
Internet based systems for routing client orders will also not be
allowed to cross trades of their clients with each other. All orders
must be offered to the market for matching.
It is emphasized that in addition to the requirements mentioned
above, all existing obligations of the broker as per current regulation
will continue without changes. Exchanges may also like to specify
more stringent standards as they may deem fit for allowing Internet
based trading facilities to their brokers.
LIMITED

Enforcement:

A separate working group has been set to look into the

surveillance and enforcement related issues arising due to Internet
based securities trading. However, general anti-fraud provisions
(SEBI Fraudulent and Unfair Trade Practices Regulations, 1995)
would apply to all transactions involving securities or financial
services, regardless of the medium.
LIMITED
CHAPTER-4

DEFINITIONS AND
EXPLANATIONS
LIMITED

CHAPTER-4

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 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 forms other than cash.
LIMITED

This is what investment is all about, deployment 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, commercial properties, gold, jewelry, works of
art, fixed deposits in banks and companies, shares, bonds, infact,
anything whose value is likely to either remain constant or appreciate
with time. Investment also refers to using one's savings with the
intention of earning an income.

3. 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 the details of this sale
and purchasing are in demat account. This account contents the
name of the shares and also the number of shares held

Or sold and also the rate of the share with this 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 are 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 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 a

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.
LIMITED

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

Upper limit

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 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.

For ex. Customer wants to sell a share which is of Rs10 and its upper
limit is fixed at 10% so in this case the person will have to sell it at
Rs11 or the rate which ever he wants but the person cannot sell it
beyond this Rs 11 because by addition of upper limit to the rate of
share the maximum amount of the shares is Rs 11 only and not
above.
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
LIMITED

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 percentage is 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:-

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 sensex

value. 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. With the sensex

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
particular group by the Stock exchange according to its demand in
the market. There are mainly 7 groups.
LIMITED

The scripts traded on the BSE have been classified into

A,B1,B2,C,F and Z groups. The A group represents those, which
are in the carry forward system. The

F group represents the debt market segment (fixed income

securities). The Z group scripts are of the blacklisted companies. The
C group covers the odd lot securities in A, B1&B2 groups.

10. TYPES OF ORDERS:

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. E.g. buy Reliance Petroleum at

Rs.50.Here, the order 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.
LIMITED

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 authorized to sell the shares
to prevent further loss. E.g. Sell BRC limited at Rs.24, stop loss at
Rs.22.

11. BUYING AND SELLING SHARES:

To buy and sell the shares the investor has to locate register broker
or sub broker who render prompt and efficient service to him. The
order to buy or sell specifying the number of shares of the company
of investors choice is placed with the broker. The order may be of
any 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 then 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 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.
LIMITED

12. ROLLING SETTLEMENT

SYSTEM:

SETTLEMENT CYCLE
SCHEDULE

OF
ACTIVITY
SR. NO. TRADE

DAY Trading
Day

1
PAY IN BY
T 10.30 am.
PAY OUT
T +2 BY 2 pm.

T +2

Auction of
shortage
T +3 in
deliveries
Auction
pay-in by
T +5
10.30 (1
am/ pay

Out by 2
DESCRI
pm.)
PTION
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 demats list and
had daily turnover of about
Rs.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 1st April
2003.
LIMITED

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.

Activities on T+2:

The depository permits the download of the paying in files of

securities and funds till 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 basis settlement is allowed. The
buy and sale positions in the same scrip can be settled and net
quantity has to be settled.
LIMITED
CHAPTER-5

OUTCRY SYSTEM AND

ONLINE
TRADING SYSTEM
LIMITED

CHAPTER-5

OUTCRY SYSTEM

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 dealer as well as the broker
makes a brief note 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 is more.

Signal were more important in the outcry system any member who
could not interpret the buy/sell signal correctly often landed himself
in disaster 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 29th 1997.
LIMITED

MANUAL TRADING

Trading procedure before introduction of online trading

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 an 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:

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 prospective investor who wants to buy

shares or the investors, who wants to place 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 one of the forms such as At Best Orders, Limit
Order, Immediate or Cancel Order, Limited Discretionary Order,
and Open Order, Stop Loss Order.
LIMITED

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 sauda 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 sauda block books. From the sauda 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:

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 dematerialize the certificates, 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.
LIMITED

Most of the active scrips in the market including all the scrips of S&P
CNX

NIFTY 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:
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.

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 loans against physical shares.

There is no lost in transit, thus the overheads of getting a duplicate

copy in such circumstances is reduced.
LIMITED

RBI has also reduced the minimum margin to 25% for loans against
dematerialized securities as against 50% for loans against physical
securities.

ONLINE TRADING

Before getting in to the online trading we should know some things

about the internet, e-commerce and etc.

1. What is Internet?

Internet is a worldwide, self-governed network connecting several

other smaller networks and millions of computers and persons, to
mega sources of information. This technology shrinks vast
distances, accelerating the pace of business reforms and
revolutionizing the way companies are managed. It allows direct,
ubiquitous links to anyone anywhere and anytime to build up
interactive relationships.

A combination of time and space, called the Internet promises to bring

unprecedented changes in our lives and business. Internet or net is an
inter-connection of computer communication networks spanning the
entire globe, crossing all geographical boundaries. It has re-defined the
methods of communication, work study, education, business, leisure,
health, trade, banking, commerce and what not it is virtually changing
every thing and we are living in dot.com age. Net being an interactive
two way medium, through various websites, enables participation by
individuals in business to business and business to consumer
commerce, visit to shopping arcades, games, etc. in cyber space even
the information can be copied, downloaded and retransmitted.

The use of Internet has grown 2000 percent in last decade and is
currently growing at 10 percent per month. In India, growth of Internet
is of recent times. It is expected to bring changes in every functional
area of business activity including management and financial services.
It offers stock trading at a lower
LIMITED

cost. Internet can change the nature and capacity of stock

broking business in

India.

2. E-commerce

Electronic commerce is associated with buying and selling over

computer communication networks. It helps conduct traditional
commerce through new way of transferring and processing of
information. Information is electronically transferred from
computer to computer in an automated way. E-commerce refers
to the paperless exchange of business information using
electronic data inter change, electronic technologies. It not only
reduces manual processes and paper transactions but also helps
organization move to a fully electronic environment and change
the way they operated.

PCs and networking attempts to introduce banks of the tools and

technologies required for electronic commerce. The computers
are either workstations of individual office works or serves where
large databases and information reside. Network connects both
categories of computers; the various operating systems are the
most basis program within a computer. It manages the resources
of the computer system in a fair and efficient manner.

Now we can enter in to the concept known as online trading.

In the past, investors had no option but to contact their broker to
get real time access to market data. The net brings data to the
investor on-line and net broking enables him to trade on a click
of mouse. Now information has become easily accessible to both
retail as well as big investor.
LIMITED

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 a 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.

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.
LIMITED

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.

WHY ONLINE TRADING ENTERED LATE IN INDIA?

The Indian exchanges and brokering houses have been very slow in moving
their transactions online and the major reason has been the lot government
regulations. The initial delay was due to laying down the specifications for
creating Closed User Groups

(CUGs). This issue was resolved between the Department of

Telecommunications (DoT) and the Finance Ministry around 1998 and
after that soon came the online trading portals like IL&FS invests mart,
ICICIDirect.com, motilaloswal.com, sharekhan.com etc. Connectivity
related issue was perhaps the most important technological factor.RBI
made regulation that it is mandatory for company to store at least 7 year
financial and transactional data.

In the non-stop, 24 hours a day, seven days a week world of investing, we

are able to

Obtain investment news around the clock

Check quotes on exchanges all over the world day or night

Easily compare one investment to another via numerous ratios, charts,

graphs, and tables
Screen for the best investments to fit our individual goals and
requirements

Trade stocks as easily and quickly as professional traders

Calculate retirement needs based on various scenarios

Regularly monitor portfolios and make necessary changes quickly and almost
effortlessly

Control the routing of individual trades for the best possible price and
execution

Even many years after the launch of the first online brokerage firm, there
remain a large contingent of individual investors who still pick up the
phone
LIMITED

and call their stock broker to buy and sell investments. However,
every year a growing number of investors are placing their trades
using online brokers.

EVOLUTION OF BROKING IN INDIA:

The evolution of a broking in India can be categorized in three

phases - Stockbrokers will offer on their sites features such as live
portfolio manager, live quotes, market research and news, etc. to
attract more investors.

Brokers will offer online broking and relationship management by

providing and offering analysis and information to investors during
broking and non-broking hours based on their profile and needs, i.e.
customized services.

Brokers (now e-brokers) will offer value management or services like

initial public offering online, on-line asset allocation, portfolio
management, financial planning, tax planning, insurance services, etc.
and enables the investors to take better and well considered decisions.

The actual definition of Online Trading is as explained below:

Online trading is a service offered on the internet for purchase and

sale of shares. In the real world you place orders on your stockbroker
either verbally (personally or telephonically) or in a written form
(fax). In online trading, you will access a stockbrokers website
through your internet enabled PC and place orders through the
brokers internet based trading engine. These orders are routed to
the stock exchange without manual intervention and executed
thereon in a matter of a few seconds.

The net is used as a mode of trading in internet trading. Orders are

communicated to the stock exchange through website.
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In India:

Internet trading started in India on 1st April 2000 with 79 members

seeking permission for online trading. The SEBI committees on
internet based securities trading services has allowed the net to be
used as an Order Routing System (ORS) through registered stock
brokers on behalf of their clients for execution of transaction. Under
the ORS the client enters his requirements (security, quantity, price
buy/sell) on brokers site.

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 scripts
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 (Badla). The 'F' group represents the debt
market (fixed income securities) segment. The 'Z' group scripts are
the blacklisted companies.

The 'C' group covers the odd lot securities in 'A', 'B1' & 'B2' groups
and Rights renunciation
Objectives:

Internet trading is expected to

Increase transparency in the markets,

Enhance market quality through improved liquidity, by increasing

quote

continuity and market depth,

Reduce settlement risks due to open trades, by elimination of

mismatches,
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Provide management information system,

Introduce flexibility in system, so as to handle growing volumes easily

and

to support nationwide expansion of market activity.

Besides, through internet trading three fundamental objectives of

securities

regulation can be easily achieved, these are:

Investor protection

Creation of a fair and efficient market, and

Reduction of the systematic risks.

Some of the brokers offering net trading include ICICI direct,

kotakstreet, etc.
REQUIREMENTS FOR NET TRADING:

For investors:

Installation of a computer with required specification

Installation of a modem

Telephone connection

Registration for on-line trading with broker

A bank account

Depository account

Compliance with SEBI guidelines for net trading

The following should be produced to get a demat account and

online trading account:

As identity proof & address proof any one of the following:

Voter ID card

Driving license

PAN card( in case of to trade more than 50000)

Ration card

Bank pass book

Telephone bill
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Other requirements, which are necessary

First page of the bank pass book and last 6 months statement.

Bank managers signature along with banks seal, manager

registration code on photograph.

For stock brokers:

Permission from stock exchange for net trading

Net worth of Rs. 50 lac

Adequate back-up system

Secured and reliable software system

Adequate, experienced and trained staff

Communication of order (trade confirmation to investor by e-mail)

Use of authentication technologies

Issue of contract notes within 24 hours of the trade execution

Setting up a website.

The net is used as a medium of trading in internet trading. Orders

are communicated to the stock exchange through website. Internet
trading started in India on 1st April 2000 with 79 members seeking
permission for online trading.

The SEBI committees on internet based securities trading services has

allowed the net to be used as an Order Routing System (ORS) through
registered stock brokers on behalf of their clients for execution of
transaction.

Under the Order Routing System the client enters his requirements
(security, quantity, price, and buy/sell) in broker's site. They are
checked electronically against the clients account and routed
electronically to the appropriate exchange for execution by the
broker. The client receives a confirmation on execution of the order.
The customer's portfolio and ledger accounts get updated to reflect
the transaction. The user should have the user id and password to
enter into the electronic ring. He should also have demat account
and bank account. The system permits only a registered client to log
in using user id and password. Order can be placed using place order
window o f the website.
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PROCEDURE FOR NET TRADING

Step 1: Those investors, who are interested in doing the trading

over internet system i.e. NEAT-IXS, should approach the brokers and
get them self registered with the Stock Broker.

Step 2: After registration, the broker will provide to them a Login

name,

Password and personal identification number (PIN).

Step 3: Actual placement of an order. An order can then be placed

by using the place order window as under:

First by entering the symbol and series of stock and other

parameters like quantity and price of the scrip on the place order
window.

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
sent by clicking on 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 10 seconds is there in executing the
trade.

Step 8: It is regarding charging payment, for which there are

different mode. Some brokers will take some advance payment from
the investor and will fix their trading limits. When the trade is
executed, the broker will ask the investor for transfer of funds to his
account.

Internet trading provides total transparency between a broker and

an investor in the secondary market. In the open outcry system,
only the broker knew the actually transacted price. Screen based
trading provides more transparency. With online trading investors
can see themselves the price at which the deal takes place.
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The time gap has narrowed in every stage of operation. Confirmation

and execution of trade reaches the investor within the least possible
time, mostly within 30 seconds. Instant feedback is available about
the execution. Some of the websites also offer;

News and research report

BSE and NSE movements

Stock analysis

IPO and mutual fund centers

STEP BY STEP PROCEDURE IN ONLINE TRADING:

Following steps explain the step by step approach to on-line trading:

Log on to the stock broker's website

Register as client/investor

Fill the application form and client broker agreement form on the
requisite value stamp paper
Obtain user ID and pass word

Log on to the broker's site using secure user ID and password

Market watch page will show real time on-line market data

Trade shares directly by entering the symbol or number of the

security Brokers server will check your limit in the on-line account
and demat account for the number of shares and execute the trade

Order is executed instantly (10-30 seconds) and confirmation can be

obtained.

Confirmation is e-mailed to investor by broker Contract note is

printed and mailed in 24 hours

Settlement will take place automatically on the settlement day

Demat account and the bank account will get debited and credited
by electronic means.
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ONLINE TRADING HAS LEAD TO ADDITIONAL FEATURES SUCH

AS:

Limit / stop orders: orders that can be go unfilled, but there is an

extra Charge for this leeway facility since one need to hold a price.

Market orders: orders can be filled at unexpected prices, but this

type is much more risky, since you have to buy stock at the given
price.

Cash account: where funds have to be available prior to placing the

order. Margin account: where orders can be placed against stocks, to
increase Purchasing power.

ADVANTAGES OF ONLINE TRADING:

Online trading has made it possible for anyone to have easy and
efficient access to more reports and charts than it was previously
possible if one went to any brokers' office. Thus we have access to a
lot more information online. Online trading has let room for smaller
organizations to compete with multinational organizations since it is
no longer a leg it issue. Being online does not identify the size of any
particular organization, therefore, this additional power to the
underdogs.

Online trading has allowed companies to locate themselves where

they want as physical location is not an issue anymore. Companies
can establish themselves according to their gains and losses, for
instance where tax (sales and value added taxes) is best suited to
them.
Online trading gives control to individuals and they can exercise it
over accounts thus comprehend what is going on when they trade. It
is like going back to school and re-educating oneself on how to trade
online. Individuals benefit by saving comparatively a lot more when
trading online as the cost per trade is less.

Individuals can invest in a variety of products, unlike earlier when

people bought bonds, mutual funds, and stock for long-term basis
and sat on them.

Now they can invest in stocks, stock and index options mutual
funds, government, and even insurance.
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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 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

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.

At the most basic level, an online trading account gives you more
agility in buying and selling stocks. This is through sophisticated
information streams, dedicated trading platforms and sophisticated
tools for accessing the markets.

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
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information relating to the specific stocks and company

profiles, you will be able to get the best quote for your orders.

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.

Online trading integrates your bank account, your trading

account and your demat accounts, which leads to easy and
paperless trading for you.

You as an Investment online customer will be able to execute

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

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.

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

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 d
iscovered when it is too late.
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Your Bank, Depository and online account are integrated for your
convenience. Various broking houses provide access to many of the
popular banks.

INVESTORS REASONS TO TRADE ONLINE:

They have control over their accounts, can make their own decisions
and dont have to give reasons for their actions. They are
independent.

They have a reason to participate in the market and learn about it.

It is interesting, cheap, easy, fast, and convenient.

A lot of information is online so they can keep up-to-date with what

is happening in the trading world.

It will give investors a greater choice and better realization.

The immediate impact will be competition and benefits will accrue

to the investors.
It will lead to brokerage commissions going down and brokers
striving to increase business afloat.

Investors will now go to place, which have better trading conditions

and also members to offer them better facilities.

They have access to numerous tools to invest, and can create their
own portfolio.
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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 hithelio 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 24 hours a day. No paperwork means more time
at ones 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
ones money becoming available to him whenever he like from his
trading account. Conversely in
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case he spots 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 ones account the money from the
stocks he sold or the stock bought from the money in his account is
in his account only.

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
LIMITED

hence increase in the bargaining power of the investors. The entire

communication between the investor, broker and exchange would take
place within milliseconds.

HERE ARE THE POSSIBLE DISADVANTAGES:

When network crashes, there will be problems and delays due to a

large influx of rapid online trading criteria.

Individuals are restricted to first-hand financial guidance. This simply

means that the individual is himself / herself alone to.

A tax (sales tax and value added tax) evaluation becomes an issue,
especially when you are trading internationally.

One has no idea with whom he is dealing with on the other end.

According to a study conducted by Mary Rowland, careful investor: is

online trading bad for your portfolio, the more one trades the less
returns one gets, meaning that an addicted trader gets, carried
away online and begins to trade for too much which causes losses
for him / her.

Individuals think that they are trading with the market directly and
know what they are doing, but the truth is that even though
technology has taken over; the basic rules of trading are the same. It
seems that the middleman has been removed, but that is not so.
When the individuals click on the mouse, his trade goes through a
broker. The commissions online pertain to the intermediary.

There is a need for more effective communication links over the

Internet and the ability of the server to deal with a large volume of
visitors.
LIMITED
CHAPTER 6

COMPANY PROFILE
LIMITED

CHAPTER 6

COMPANY PROFILE

SHAREKHAN

Sharekhan, Indias leading stock broker is the retail arm of SSKI, an

organization with over eighty years of experience in the stock
market with more than 280 share shops in 120 cities and big towns,
and premier online trading destination www.sharekhan.com. Share
khan offers the trade execution facilities for cash as well as
derivatives, on BSE and NSE, depository services, commodities
trading on the MCX(Multi Commodity Exchange of India Ltd) and
NCDEX (National Commodity and Derivative Exchange) and most
importantly, investment advice tempered by eighty years of broking
experience.

Share khan provides the facility to trade in commodities through

Sharekhan Commodities Pvt.Ltd-a wholly owned subsidiary of its
parent SSKI. Sharekhan is the member of two major commodity
exchanges MCX and NCDEX.

SSKI
Apart from Sharekhan, the SSKI group also comprises of institutional
broking and corporate finance. The institutional broking division
caters to domestic and foreign institutional investors, while the
corporate finance division focuses on niche areas such as
infrastructure, telecom and media. SSKI owns 56% in Sharekhan and
the balance ownership is HSBC, First Caryl and Intel Pacific. SSKI has
been voted as the top domestic brokerage house in the research
category, twice by Euro money survey and four times by Asia
money survey.

Share khan, Indias leading stockbrokers the real arm of SSKI, an

organization with over eight decades of stock market experience.
With more than 175 share shops in over 80 cities, and a presence on
internet through
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www.sharekhan.com, Indias premier online trading destination,

we reach out to customers like no one else.

Share khan offers you trade execution facilities on the BSE and
the NSE, for cash as well as derivatives, depositary services and
most importantly, investment advice tempered by 80 years of
research and broking experience. To ensure that your trading
experience with share khan is fast, secure and hassle free. We
offer a suite of products and services, providing you with a multi-
channel access to the stock markets.

SSKI group also comprises institutional broking and corporate

finance.

While the institutional broking division caters to the largest

domestic and foreign institutional investors. The corporate
finance division focuses on niche areas such as infrastructure.
Telecom and media. SSKI holds a sizeable portion of the market in
each of these segments.

As the forerunner of investment research in the India market, we

provide the best research coverage amongst broking houses in
India. Our research team is rated as one of the best in the
country. Voted four times as the top domestic brokerage house by
Asia money survey. SSKI is consistently ranked almagest the top
domestic brokerage houses in India.

Dematerialization in short called as Demat is the process by

which an investor can get physical certificates converted into
electronic form, Rs 20 per scrip per day (the brokerage per scrip
will be charged for the trades resulting in delivery on actual or Rs.
20 whichever is more).
(For e.g. If a customer buys 100 shares of sail, total delivery value
=2200. Brokerage @ 0.5% = rs 11, but the min chargeable amt
per scrip per day = rs 20), so additional rs 9 will be charged as
min delivery handling charges)
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COMPANY BACKGROUND:

Share khan is the retail broking arm of SSKI, securities pvt ltd. SSKI
owns 56% in share khan, balance ownership is HSBC, first caryle, and
Intel pacific

Into broking since 80 years

Focused on providing equity solutions to every segment

Largest ground network of 210 branded share shops in 90 cities

ONLINE ACCOUNT TYPES

Commercial Terms and Conditions to open online trading account

Account Opening Fees:

CLASSIC ACCOUNT:750/-(Life Time opening charges)

SPEED TRADE: 1,000/-up with 9 top international banks.

(City Bank, HDFC, IDBI, Oriental Bank of Commerce, UTI, Indus Ind
Bank, UBI, Yes Bank& ICICI)
Brokerage:

0.10 %( Each leg) + Turnover Tax +Stamp Duty+ Service Tax For each leg
of Intra-day trades.

5paise (Each leg) +Turnover Tax +Stamp Duty+ Service Tax For each leg of
Intra-day trades.

(Minimum brokerage for shares below Rs.50,)

0.50 %( Each leg) + Turnover Tax +Stamp Duty+ Service Tax for trades
resulting in delivery.

10paise (Each leg) +Turnover Tax +Stamp Duty+ Service Tax For each leg
of Intra-day trades.

(Minimum brokerage for shares below Rs.20).

A minimum brokerage Rs.18 for delivery trades.

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Exposure:

You will be given a Trading account with 25% margin i.e. 4 Times
your margin

With SHARE KHAN.

CLASSIC PREPAID A/C:

Account opening Charges 750/-

5000/- Advance Brokerage cheque. Brokerage: Delivery

0.50% Intraday 0.10%

SPEED TRADE PREPAID A/C:

Account Opening Charges: 2000/-

Brokerage: Delivery - 0.25%

Intraday 0.05%
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CLASSIC / WEBSITE FEATURES

Facility to integrate choice of 4 banks / DP / trading

account

Instant credit for shares sold from DP

Automatic pick-up of shares from linked DP for pay-in

Automatic deposit of shares into linked DP after pay-out

4 times leverage on margin trades

Margin trading available for entire market session

Slab wise brokerage structure for delivery and margin
trades, shortly

Free calls for order placement on toll-free

Trusted, professional advice of tele-brokers

Facility to enter after market orders online & via phone

Daily research newsletter (investor eye) via e-mail

Access to new IPO without any paperwork

Advanced portfolio monitoring tools

Integrated DP account with trading account

Option of linking additional 4 DP accounts to trading

account

Choice of linking 4 banks to trading A/C for online

payments

Cash and derivatives trading in a single account

E-mail confirmations for all transactions

Choice of electronic/ physical contracts

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SPEEDTRADE EXE FEATURES:

All the features of classic

Trade execution in 2-3 seconds

Instant order / trade confirmations in the same window

Hot keys similar to a brokers terminal

Multiple tic-by-tic intra-day charts \ with multiple indicators

Availability of 2 ISP & 6 Servers ensuring maximum uptime

Customized alerts based on multiple parameters

Cancel all / square off all facility Window for top gainers, top
losers, and most active updated live.
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CHAPTER-7

ON-LINE TRADING AT

SHAREKHAN
LIMITED

Places an
order on
CHAPTER-7
Accepts the

ON-LINE TRADING AT
the net on the
SHAREKHAN
order, Checks

THE MECHANICS OF ONLINE

TRADING brokers
website

the clients

through the

Identity and
CLIENT BROKER
 Though his

distinctive I.D.

places the order The client is

owns account

code

with the stock

and receives it

exchange intimated
about the

The settlement of

from the client

the deal (buy/sell

execution of
the

order) gets

reflected in his account.

Pays the

deal by e-mail.

Demat account.

Exchange

Pays the
broker
pending physical

delivery.

Accepts the
order after
checking the
scrip limit of
the broker for
the day

Executes the
order

Receives the
money and
completes the
settlement

STOCK EXCHANGE
LIMITED

TRADING AND SETTLEMENT AT SHARE KHAN

The NSE first introduced online trading in India. The Online trading
system imparted a greater level of transparency and investors
preferred exchanges that offered Online trading because of the
following factors:

The ease of operation from the view of the both members and the
investors. Increase in the confidence of the investors because of
higher level of transparency.

Facilities better monitoring of the market by the exchange.

The best price achieved in buying and selling.

All these resulted in ever-increasing volumes on the exchanges

offering the online trading.

TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING

Share Khan deals in buying and selling equity shares and

debentures on the National Stock Exchange (NSE), the Bombay
Stock Exchange (BSE) and the Over-The-Counter Exchange of
India (OTCEI).
Share Khan is provided with a computer and required software
from their registered stock exchanges. These centers are called
Broker Work Stations. These computers are connected to the
server at the stock exchanges through cable.

The member or broker sitting in his office can send the

quotations, orders, negotiations, deals, in-house deals, auction
orders etc., through the computer. The

Central trading system (CTS) will accept these orders and send it
for match. If there is any mistake in the order, CTS will reject the
orders and send respective error message to the member
concern. All these operations are in built. The main objective of
CTS is to monitor the Stock Exchanges operations.
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Order placed by the broker will be sent for a match and if the
match is found suitable, the transaction will be executed.
Otherwise, the order will be deleted automatically after
completion of trading time. The carry forward transactions (Good
Till cancellation) are forwarded to the next day. Even if the match
is not found with in the prescribed period, the order will not
cancel.

TRADING SESSION

Trading timings are from 9:00 A.M. to 3:30 P.M. on all 5 days of
the trading period. Monday to Friday is the trading period in all
the stock exchanges. SEBI has stipulated that all the stock
exchanges in India must have same trading period.

BROKER WORK STATION:

At the broker workstation the BBOs, the last traded price, the
days opening price, previous days closing price, highest and
lowest prices, the weighted average price and total trade value
will be available continuously, as the BBO for each scrip.

Other information will be available on query from the BWS. These

include top gainers /losers of the day. Trader-wise, scrip wise net
position, client wise net position, top scrip by the volume/value,
market summary etc.

Brokers are also provided with information relating to the

companies in the matter of Book closure, Dividend declarations,
resolutions in board meeting, information about liquidated
companies, company report etc.

ORDERS:

Orders can be done one at a time or in a batch mode. The

submitted order will be accepted at the CTS, after validation if it
finds any invalid reason the order is return back to the BWS, with
the appropriate error message. If
LIMITED

Accepted at the CTS it will be added to the local pending order

book.

The order will then be taken up for matching, if it is a buy order

the system tries to find a sell order, which fits the requirement of
the buy order, when such match is found a trade gets executed.
Each trade involves two brokers and respective traders who sent
the order. Both these traders are informed of the trade being
executed at their respective BWS.

At the BWS the trade is added to the local trade book. Orders
sent by the brokers are two types:

Good for the day (GFD)

Good till cancellation(GTC)

GOOD FOR THE DAY:

This is also called as market order. For an order if the member

selects the deal as good for the day, the order is treated as
market order. If a best bid founds match with best order then
the transaction gets executed. If the match is not found then
after trade time the order gets cancelled that day. Next day he
has to place a new order.
For example if a member wants to purchase 1000 shares of
satyam info @ 400 each through Good for Day order. If the
correct match is not found, order gets cancelled automatically
and new quotation has to be placed the next day.

GOOD TILL CANCELLATION:

This order is forwarded to the last trading day of that settlement

period. This is also called as carry forward order like GFD; broker
has to select the option of GTC for the order. If the order finds
match with in the trading settlement period, the order is
executed. If no match is found, the order is cancelled on the last
day of settlement period. This order is not carried forward to the
next settlement period.
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For example, if a member a place purchase order of 500 shares

of SBI @ 690 per share and selects the order as GTC and place
an order. If the match is not found on that day it will be
forwarded to the next day until trading settlement period day.

SETTLEMENT OF TRANSACTIONS:

Clearing of transaction in the form of shares and cash is called

settlement. Buyers will take the delivery of shares through the
depository participants like

SHARE KHAN and others.

Finally, the settlement is made by means of delivering the share

certificates along with the transfer deeds. The transferor (or the
seller) duly signed transfer deed. It bears a stamp of the selling
broker. The buyer then fills up the certificates fills up the
particulars in the transfer deed. Settlement can be done in the
following way.

Spot settlement: under this method, the delivery of securities

and payment for them are affected on the day of the contract
itself.

Rolling settlement: Under this rolling settlement the trading is

on T+2,basis i.e. if Monday is trading day then Wednesday is
the paying day . In case on non-delivery, the securities will go for
auction.
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DETAILS OF PROCEDURES:

Delivery in : The members who are in pay-out position delivers

share certificates in to clearing house within the settlement period
along with the delivery Chelan filled in with the details of share
certificates which has folio numbers or distinctive numbers etc.

Delivery out: The buyer of shares who made pay in position will
take delivery of shares from the clearing house.

Pay-in: The member who is in paying position shall pay for value of
shares with in the trading settlement period (T+2).

Payout: The cheques paid in the clearinghouse will be paid to

members who are in paying position.

All disputes arising between members regarding non-deliveries, non-

payments, good and bad deliveries pertaining to the settlement will
be settled by the settlement committee of the exchange.
LIMITED

The given flow chart clearly explains the process of online

trading:

Login

Buy trans cation Sell trans cation

The syste m will check your dp

acco unt quantity
The syste m will check
buying limits

Orde rs accepted

Rejec ted order s w ould be

orde rs accepted

c ommunic ated along w ith r eas

ons

your order is transmitted to exchange for

execution

pending buy orders

on execution

pending sell orders

would be displayed

of your orders

would be displayed

on your s creen

on your s creen

you may edit yo ur you may d

elete pending order you r p e nd you may ed it you r

ing o rd er
you may delete your p e nd ing o rd er

pending order

contract note would

be sent to by mail
flashed on your conformationcoul or hand delivery
d be send to your
e-mail and mo bile
s creen
immediately on
execution
LIMITED

SCREEN SHOTS:

BUYING AND SELLING OF SHARES ONLINE BY USING TRADE

TIGER SOFTWARE
CHECKING SCRIPTS
LIMITED
VIEWING SELECTED
SCRIPTS
LIMITED
SELECTING SCRIPTS BY TYPING
KEY WORDS
LIMITED
BUYING OF SHARES
LIMITED
BUYING THROUGH
SELECTING PRICES
LIMITED
SELLING OF STOCKS
LIMITED
LIMITED
MODIFYING ORDERS
LIMITED
CHAPTER 8
COMPARATIVE ANALYSIS
LIMITED

CHAPTER 8

COMPARATIVE ANALYSIS

THE MAJOR PLAYERS IN ONLINE TRADING

SHAREKHAN.COM

5PAISA.COM

KOTAKSTREET.COM

INDIABULLS.COM

ICICIDIRECT.COM

HDFCSEC.COM

HDFC SECURITIES:
Company Background:

HDFC Securities Ltd is promoted by the HDFC Bank, HDFC and

Chase Capital Partners and their associates. Pioneers in setting up
Dial-a-share service with the largest team of Tele-brokers.

Online Account Type:

HDFC Online Trading A/c: Plain Vanilla Account with focus on 3 in

1

advantage.

Pricing of HDFC Account

Account Opening: Rs 750

Demat: NIL, 1st year charges included in Account Opening

Initial Margin : Rs 5000/- for non HDFC Bank Customers (AQB)

Brokerage:

Trading 0.15%* each side + ST Delivery 0.50%** each side + ST

*Rs 25 Min Brokerage per transaction

**Rs 8 Min Brokerage per transaction

LIMITED

ICICI DIRECT:

Account Opening: Rs 750

Schemes: For short periods Rs 750 is refundable against

brokerage generated in a qtr. These schemes are introduced 3-4
times a year.

Demat: NIL, 1st year charges included in Account Opening Plus a

facility to open additional 4 DPs without 1st yr AMC. Only Rs 100 as
linking charges per DP

Initial Margin : Nil

Brokerage: ICICIs brokerage rates are inclusive of Stamp duty

(0.002%) for trading and 0.010% for delivery while service tax
(10.2%) on BROKERAGE land turnover tax is EXTRA.

10 25 lakhs

0.70%

Delivery Vol per QTR 25 50 lakhs

Brokerage 0.55%

< 10 lakhs 50 lakhs - 1 Cr

0.75% 0.45%
1 Cr 2 Cr

0.35% 50 lakhs 2 C .08% Both Sides

2 Cr 5 Cr

0.30% 2Cr-5Cr .05% Both Sides

> 5 Cr

0.25%
5Cr- 10 Cr .04% Both Sides

10Cr -20 Cr .035% Both

Sides
Square Vol P.M.
Brokerage

> 20 Cr .03% Both Sides

< 50 lakhs .10% Both

Sides
---- --------

INDIABULLS:

Company Background:

India Bulls is a retail financial services company present in 70

locations covering 62 cities. It offers a full range of financial
services and products ranging from Equities to Insurance. 450 +
Relationship Managers who act as personal financial advisors.
LIMITED

Online Account Type:

Signature Account: Plain Vanilla Account with focus on Equity

Analysis. The equity analysis is a paid service even for A/c holders.

Power India bulls: Account with sophisticated trading tools, low

commissions and priority access to R.M.

Pricing of IB Accounts:

Signature Account Power India Bulls

* Account Opening: Rs 250 * Account Opening: Rs 750

* Demat: Rs 200 if POA is signed, * Demat: Rs.200 if POA is

signed,

No AMC for this DP No AMC for this DP

* Initial Margin: NIL * Initial Margin: NIL

* Brokerage: Negotiable * Brokerage: Negotiable

PAID Research:

SCHEME FACILITY

WebBased-1-Month-500: View & Print on Website

WebBased-1-Month-6000 View & Print on Website

PrintReport-1-Month-750: View & Print on Website

+ 10 Reports Delivered

PrintReport-1-Month-9000: View & Print on Website

+ 10 Reports Delivered

KOTAKSTREET:

Company Background:

Kotakstreet is the retail arm of Kotak Securities. Kotak Securities

limited is a joint venture between Kotak Mahindra Bank and
Goldman Sachs.

Online Account Type

Twin Advantage / Green Channel : 2 DPs, Limit against shares
LIMITED

Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per transaction High
Trader : 6 Times Exposure Cash & Derivatives, Auto sq off 2:55

Cash Expressway : Spot payment, additional 0.5% charges

For Kotak Fast Lane / Keat Lite / Keat Desktop are trading interfaces. Keat
Desktop with advanced tools comes at a charge of Rs 500 p.m, Non
refundable.

PRICING OF KOTAK

Account Opening : Rs 500 Demat: Rs 22.5 p.m

Initial Margin : Rs 5000(Compulsory) Min Margin Retainable : Rs 1000

Brokerage Slab wise: Higher the volume, lower the brokerage.

Even older customers (on 0.25% & 0.40%) have been moved to the slab
wise structure w.e.f 1/4/2004

Slab structure of Kotak

Delivery Vol p m

Brokerage *

Square Vol P.M.

Brokerage **

< 1 lakhs

0.65%

< 10 lakhs

0.10% Both Sides

1 lakhs 5 lakhs

0.60%

10 lakhs 25 lakhs

0.08% Both Sides

5 lakhs 10 lakhs

0.50%

25 lakhs - 2 Cr

0.05% Both Sides

10 lakhs - 20 lakhs

0.40%

2 Cr - 5 Cr

0.04% Both Sides

20 lakhs 60 lakhs

0.30%

> 5 Cr

0.035% Both Sides

60 lakhs - 2 Cr

0.25%

---do---

0.03% Both Sides

>2

0.20%

----
--------

* Brokerage is inclusive of All Taxes * Brokerage is inclusive of All Taxes

* DP Charges Extra

* Min Brokerage of Rs 0.05 per share * Min Brokerage of Rs 0.01 per

share
LIMITED

Derivatives Vol off p m Brokerage

< 2 Cr 0.07% Both Sides

2 Cr - 5.5 Cr 0.05% Both Sides

5.5 Cr 10 Cr 0.04% Both Sides

> 10 Cr 0.03% Both Sides

* Brokerage is inclusive of All Taxes.

INDIA INFOLINE

Company Background

Indiainfoline was founded in 1995 and was positioned as a research

firm. In 2000 e-broking was started under the brand name of
5paisa.com. Apart from offering online trading in stock market the
company offers mutual funds online. It also acts as a distributor of
various financial services i.e. GOI securities Company Fixed Deposits,
Insurance. Limited ground network, present in 20 cities.
Online Account Types

Investor Terminal : Investors / Students

Trader Terminal : Day Traders / HNIs

PRICING FOR RETAIL CLIENTS

Investor Terminal

Account Opening : Rs 500

Demat 1st Yr : Rs 250

Initial Margin : Rs 2500 (Compulsory)

Min Margin Retainable : Rs 1000

Brokerage :

Trading 0.10% each side + ST

Delivery 0.50% each side + ST

LIMITED

PRICING FOR HNI CLIENTS

Trader Terminal

Account Opening : Rs 500

Demat 1st Yr : Rs 250

Initial Margin : Rs 5000(Compulsory)

Min Margin Retainable : Rs 1000

Brokerage :

Trading 0.10% each side + ST

Delivery 0.50% each side + ST

(Negotiable to 0.05% each side & 0.25%)

Account Access Charges

Monthly Rs 800, adjustable against Brokerage

Yearly Rs 8000, adjustable against brokerage

SHAREKHAN

Company Background

Sharekhan is the retail broking arm of SSKI Securities Pvt Ltd.

SSKI owns 56% in Sharekhan, balance ownership is HSBC, First
Caryle, and Intel Pacific

Into broking since 80 years

Focused on providing equity solutions to every segment Largest

ground network of 210 Branded Share shops in 90 cities

Online Account Types

Classis Account / Applet : Investor in equities

Speed Trade : Trader in equities & derivatives

LIMITED

PRICING FOR HNI CLIENTS

Speed Trade

Account Opening : Rs 1000 ( Refundable against brokerage in

Month + 1)

Demat 1st Yr : Incl in Account Opening

Initial Margin : Nil

Min Margin Retainable : NIL

Brokerage :

Trading 0.10% each side + All Taxes Delivery 0.50% each side +
All Taxes (Negotiable based on volume)

Account Access Charges

Monthly Rs 500, adjustable qtrly against brokerage of Rs

9000/- for qtr.
No access charges for gold customers (Above 1 lac brokerage
p.a)

Pricing for Retail Customers

Classic / Applet

Account Opening : Rs 750

D e mat 1 st Yr:NIL

Initial Margin : NIL

Min Margin Retainable : NIL

Brokerage:

Trading 0.10% each side + All Taxes

Delivery 0.50% each side + All Taxes

LIMITED

Sharekhan online Trading Interfaces

The customer can choose the online trading interface that meets
his requirement based on his trading habits and preferences

CLASSIC / APPLET

The website is meant for customers who Invests in Equities

SPEEDTRADE

The speed trade is meant for customers who trade in Equities

DIAL-N-TRADE Toll Free

The DNT is a value added services meant for all customers who
Want to transact but are not online.

DNT TOLL FREE FERTURES

Dedicated Toll Free number for Order placements Automatic fund
transfer with phone banking*

Simple and secure IVR based system for authentication

No wait time, on entry of Phone Id & TPIN, the call is transferred

Trusted, professional advice of Tel-brokers who offer undiluted

Sharekhan Research Inputs

After-hours order placement facility **

Transfer of money using phone banking is available with Citibank

only

** Between 9 a.m to 9.55 am and 3.30p.m to 6 p.m

LIMITED

CLASSIC/WEBSITE FEATURES

Facility to integrate choice of 4 Banks/DP/Trading Account

Instant credit for shares sold from DP

Automatic pick-up of shares from linked DP for pay in

Automatic deposit of shares into linked DP after pay-out 4
Times leverage on Margin Trades

Margin Trading available for entire marker session

Slab wise brokerage structure for delivery and margin

trades, shortly Free calls for order placement on Toll-Free

Trusted, Professional advice of Tele-brokers

Facility to enter After Market Orders online & via Phone

CLASSIC/WEBSITE FEATURES
Daily Research newsletter (Investor Eye) Via e-mail Access
to new IPO without any paperwork

Advanced portfolio monitoring Tools Integrated DP account

with trading account

Option of linking additional 4 DP accounts to trading

account Choice of linking 4 banks to trading a/c for online
payments Cash and Derivatives trading in a single
account

E-mail confirmations for all transactions Choice of

electronic/Physical contracts

SPEEDTRADE EXE FEATURES

ALL THE FEATURES OF CLASSIC

*Real time streaming quotes using 2 Marker Watches

*Trade Execution in 2-3 seconds

* Instant Order/trade confirmations in the same window

*Hot keys similar to a Brokers Terminal

*MULTIPLE Tic-by-Tic Intra-day charts with multiple

indicators
LIMITED

Availability of 2 ISP & 6 Servers ensuring maximum

uptime

Customized alerts based on multiple parameters

Cancel All/Square off All Facility

Window for Top Gainers, Top Losers, and Most Active

updated Live
LIMITED
CHAPTER 9

QUESTIONNAIRES AND
ANALYSIS
LIMITED

CHAPTER 9

QUESTIONNAIRES

Questionnaire 1

Questionnaire

On the customers perception about investment in share market. (Sample size

32)

1. Gender? A) Male B) Female

Analysis:

MALE FEMALE

27 5
MALE

FEMALE

From the sample size of 30, 27 are males and 5 are only females. Interest of

female investors has to be improved.

2. A GE

A) 18-28 B) 29-39 C) 40-49 D)>49

18-28

29-39

40-49

>4 9

18
12

20

15

10

Series1

5
0

18-28 29-39 40-49

>49
LIMITED

From the above data most of them are young and middle aged persons. It
shows that participation of youth is major.

3. MARITAL STATUS?

A) MARRIED B) UNMARRIED

MARRIED UNMARRIED

1814

20

15

10

5 Series1

0
MARRIED UNMARRIED

Married is 60% and unmarried is 46%. This means most of them are having
families.

4. EDUCATIONAL QUALIFICATION?

A) HSC B)10+2 C)GRADUATE D)POST GRADUATE

HSC 10+2 GRADUATE POST GRADUATE Column1

21811

20

15

10

Series1

0
60% are graduates and 36% are post graduates. This means the sample is well
educated.
LIMITED

5) OCCUPATION

A) BUSINESS B)SERVICE C)STUDENT 4)RETIRED

BUSINESS

SERVICE

STUDENT

RETIRED

31

40

30
20

10

Series1

96.8% are in to service. This means most of them are working.

6. INCOME

A) BELOW ONE LAKH B) 1-2 LAKH C) 2-5 LAKH D) >5 LAKHS

<1LAC 1-2 LACS 2-5 LACS>5LACS

31712

20

15

10

Series1

<1LAC

1-2
2-5 >5LACS

LACS

LACS

From the above status 53% are earning in the range of 2-5 lakhs of rupees and
32% earning more than 5 lakhs per annum. That the average income of the
sample is very high.
LIMITED

7. Idea about Trading or investment in shares?

A) YES B) NO

Y ES NO

19 13

20

15

10
Series1

YES NO
60% of the samples have idea about Trading but the rest of 40% say they have
no idea. Hence scope of attracting new investors is high.

8. Are you interested in DEMAT account?

A) YES B) NO

Y ES NO

20 12

20

15

10

5 Series1

YES NO

Out of 60% having idea about trading 62% are interested in taking DEMAT a/c.
The rest 37% are not interested out of 40% who are not having any idea about
trading.
LIMITED

Correlation

Between question7 and question8

Y ES

NO

Y ES

NO

20

12

19

13

CORELATION Column1

POSITIVE CORRELATION

There is a positive correlation between people who have idea about Trading and
willing to Trade as well as people who have no idea about trading and not will to
have a demat a/c.

9(a). Are you trading any where?

A) yes B) NO

Column1

Y ES

NO

Q9 A

14

18

Q9A

20

Q9A

YES NO
56% are not trading any where so there is possibility of getting customers from
this sample. 43% are trading.

9(b). IF YES?

A)INDIA INFOLINE B) RELIGARE C) ANAND RATHI D) STEEL CITY

E)KARVY F) ICICI

G) RELIANCE H) N/A

INDIA

ANAND

STEEL

INFOLINE

RELIGARE RATHI

CITY

KARVY ICICIRELIANCE N/A

20

214118
LIMITED

20

0 Series1

12% in icici direct, 12% in anand rathi, 6% in India infoline, 6% in steel city

securities and 3% in religare and reliance.

10. IF YOU ARE INTERESTED THEN WHERE YOU WOULD

LIKE TO INVEST YOUR

MONEY?
A) EQUITY B) DERIVATIVES C) FOREX TRADING D)
COMMODITY E) N/A

EQUITY

DERIVATIVES

FOREX TRADING

COMMODITY

N/A

17

12

20

15

10

Series1
53% are interested in Equity markets. This shows that derivatives, forex and

commodity Trading is too risky.

LIMITED

11. If you are interested in DEMAT account then what% of

INCOME you would like

to invest in shares?

A) <5% B) (5-10)% C) (10-20)% D) >20 E) N/A

<5 %

(5-10)%

(10-20)% >2 0

N/A

12

12
10

4 Series1

Most of them wanted to invest between (5-20) % of there income in to shares.

This can bring in greater volumes of trade.

12. Do you think investment in shares market is better than

any other investment?

A) YES B) NO

Y ES NO
20 12

20

15

10

Series1

YES

NO
LIMITED

62% believe that share market better than any other investment. 38% believe
they are other sources of investment than share market.

Correlation between Q12 and Q7

Y ES NO

20 12

Y ES NO

19 13

CORELATION

*POSITIVE
CORELATION*

There is a positive correlation that means people who idea about share
markets believe its better than other investments but the rest believe it is not.
LIMITED

QUESTIONNAIRE 2

CUSTOMER AWARENESS ON ONLINE TRADING

(Sample size 50)

1.How long have you been doing online-trading?

(a)1 year(b) 2 year

(c) 3 year(d) 4 year

1year 2years 3years 4years

18 15 7 10
4years

3years

2years

1year

5
10

15

20

From my survey people who are trading since 1year is 36%, since
2years is 30%, since 3years is 14% and since 4years is 20%. This
means the numbers of investors are increasing at a greater
speed during the recent trend.

2.How will you describe your experience with on-line trading till date?

Very easy to operate

Very difficult to operate

Not secure

Any other

(a)

(b)

(c)

(d)

30

7
LIMITED

30

25

20

15

Series1

10
5

(a)

(b)

(c)

(d)

Almost 60% of the sample says Online Trading is easy and 16% of
sample says

Online Trading is not secure. Hence we can say Online Trading is

easy to operate and it should be made more secure.

3. What is your annual income?

(a) Below 100000

(b)

1,00,000 2,00,000

(c) 2,00,000 3,00,000

(d)

3,00,000 4,00,000
A

10

18

12

10

0 5 10 15 20

36% of the sample has moderate income level of 1lakh to 2lakh,

44% of the samples earn an annual income of more than 2lakhs
and 20% percent of the sample is below 1lakh. The above figures
say that per-capita income level is quite high and has good
opportunities for investments.

4. What amount of money do you invest normally?

(a) >50000 (b) 50000 to 150000

(c) 150000 to 2000000 (d) any other amount

<50000

50000-150000

150000-200000

>200000

12

20

10
LIMITED

20

15

<50000

10

50000-150000

150000-200000
>200000

From the above data 40% of the sample says they invest
around 150000-200000.

64% of people invest less than 50000 but 36% invest in more
than 150000 in share market. This trend shows that investors
want to invest in share markets for more returns even though
there is risk.

5. What percentage of your monthly household income could be

available for investment?

(a) Less than 5%(b) 5% to 10%

(c) 10% to 15%

(d) 15% to 20%

>5 %

(5-10)%

(10-15)%

(15-20)%

20

12

20

15

10

Series1

0
>5% (5-10)% (10-15)% (15-20)%

From the above trend we can say that 40% of the investors
have 5-10% of household income available for investment and
more than 40% say they have 10-20% of income for
investments. The income level trends in the above question
also prove that effective amounts of investments can made.
Only 20% have 5% of income for investment.

6. How often do you trade?

(a)Daily (b) Weekly

(c) Monthly (d) More than one month

LIMITED

DAILY

WEEKLY

MONTHLY

MORE THAN ONE MONTH

20

12

414

20
15

10

Series1

From the above trend 40% of people trade daily, 24% trade
weekly and 36% trade for more than a month or monthly.
This trend shows that there is mixture of investors who
trade daily and also investors who hold for long term. 40%
of the traders are daily traders so Online Trading will be
very helpful to them.

7. Which trading do you prefer?

(a) Online trading (b) offline trading

(c) Both

on-line offline Both

22 12 16

30

20

Series1

10

on-line offline Both

From the above trend we can say that 44% of people say
that they prefer online trading, 24% prefer offline trading
and 32% prefer both. This shows that people are aware of
online trading.
LIMITED

8. According to you, is online trading settled in Indian investor psyche?

(a) Yes (b) No

yes no

16 34

40

30

20

Series1

10

yes

no
From the above trend we can say that 32% say that online
trading has settled in

Indian investor psyche and 68% say that it is not yet settled in
Indian psyche.

10. Which media do you prefer the most as an investor?

(a) T.V (b) Newspaper

(c) Magazines (d) Journals

T.V

NEWS PAPPER

MAGZINES

JOURNALS

18

25

25

20

15
10

Series1

50% of the sample prefer news paper media, 36% prefer T.V media and
rest 14% prefer journals and magazines.

LIMITED 11. Where do you often invest

your money?

(a) Equity

Insurance

Others
EQUITY MUTUAL
FUNDINSURANCE
Mutual fund
1510

Term deposits

15

10

TERM DEPOSITS

10 15

Series1

30% of the sample invests in equity and 30% of the sample says
they invest in Term deposits. 20% in mutual funds and 20% in
insurance. This status says that equity has an equal priority to
Term Deposits.

12. What is the primary objective of your investment?

(a) Capital appreciation(b) Source of income

(c) Retirement planning

(d) Wealth preservation

(e) Education funding /others

(A)

(B)

(c)

(D)

( E)

19

14

20
15

10

Series1

(A) (B) (c) (D) (E)

LIMITED

Out the samples 38% believe investment as a source of income,

28% think its for wealth preservation, 16% think for capital
appreciation and only few percentage think its for other
purposes. This data tells that objective of investment is source of
income as well as for wealth preservation.

13. Online trading is a secure way of trading

( a)Strongly agree(b) Agree

(c)

Cant say

(d) Disagree

STRONGLY

AGREE

AGREE

CANT'T SAY

DISAGREE
18

12

812

20

15

10

Series1

From the above data 36% strongly say online trading is secure
24% agree it is secure and 24% say its not secure. Most of the
people believe Online Trading as safe and secure but there are
few who think it is not. May because Online Trading works with
internet platform.
14. Online trading is an easy and fast way of trading

( a)Strongly agree(b)Agree

(c)

Cant say

(d)

Disagree

STRONGLY AGREEAGREE

CANT'T SAY DISAGREE

16

14

812
LIMITED

20

10

Series1

Series1

Almost 60% believe that Online Trading is faster way of

trading. Hence there is a wide scope of opportunities in
Online trading in this fast moving world.
15. Introduction of online trading helped attract new Investors thus
increasing the trading volumes at Stock Market

( a)

Strongly agree

(b)

Agree

(c)

Cant say

(d)

Disagree

STRONGLY AGREEAGREE

CANT'T

DISAGREE

25
10

510

30

20

10
0

Series1

STRONGLY

AGREE

Series1

CANT'T
AGREE

DISAGREE
Almost 70% of the samples agree that Online Trading has
attracted new investors and increasing trading volumes.
Only 20% disagree with above statement. Hence Online
Trading has brought reforms in to markets.
LIMITED

TESTS:

CROSS TABS:

Between question 2 and 6

Chart Title

18

16
14

Axis Title

12

10
8

2
0

10

Interpretation
Most people who think online trading is easy to operate are
very frequent Traders. People who think online trading
difficult are not frequent traders. Few people who think
online trading is not secure hold for long term. Only very
few have other reasons for not choosing online trading. The
interpretation of the data says that online trading is easy to
operate and good for daily trading.

CORRELATION:

Between questions 1 and 4

Value=0.603806

It is a positive correlation.

Interpretation

Longer the trading more the amount invested in the

markets.
LIMITED

CHI-SQUARE TEST:

Between question 2 and 7

H0= the type of trading does not depends upon the experience the
person has in online trading.

H1= the type of trading depends upon the experience the person has
in online trading.

Chi-Square Tests

Asymp. Sig. (2-

Value

df

sided)

Pearson Chi-Square
 a
6.548

.365

Likelihood Ratio

6.927

.328

N of Valid Cases

51

a. 9 cells (75.0%) have expected count less than 5. The minimum expected count is 1.27.

Chi-square value is greater than 0.05 so we reject H0.

Interpretation

Therefore the type of trading depends upon the experience the

person has in

online trading.

Interpretation from Questionnaire2:

The numbers of investors are increasing at a greater speed

during the recent trend.

Online Trading is easy to operate and it should be made more

secure.
Per-capita income level is quite high and has good opportunities
for investments. Investors want to invest in share markets for
more returns even though there is risk.

Trend shows that there is mixture of investors who trade daily

and also investors who hold for long term. 40% of the traders are
daily traders so Online Trading will be very helpful to them.

People are aware of online trading but 68% say that it is not yet
settled in Indian psyche.
LIMITED

50% prefer news paper media, 36% prefer T.V media and
rest 14% prefer journals and magazines. Hence most of
them follow television broadcasting.

Equity has an equal priority to Term Deposits. Hence people

can be attracted towards investment in Capital markets.

Objective of investment is source of income as well as for

wealth preservation. Many are making trading as a source
of income hence investments can increase.

Most of the people believe Online trading as safe and secure

but there are few who think it is not. May because Online
Trading works with internet platform.

Hence care should be taken to make internet safer.

Almost 60% believe that Online Trading is faster way of

trading. Hence there is a wide scope of opportunities in
Online trading in this fast moving world.

Online Trading has brought reforms in to markets.

Longer the trading more the amount invested in the

markets.

The type of trading depends upon the experience the person

has in online trading.

Most people who think online trading is easy to operate are

very frequent Traders.
People who think online trading difficult are not frequent
traders. Few people who think online trading is not secure
hold for long term. Only very few have other reasons for not
choosing online trading. The interpretation of the data says
that online trading is easy to operate and good for daily
trading.
LIMITED
CHAPTER-10
CASE STUDY
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CHAPTER-10

CASE STUDY-1

CASE STUDY ON KSE

Capital Markets:

Khambata and Khambata against 16% for the market. The high
dividend payments are probably used by the parent company as
a means of repatriating profits. As of 1986, the market share
price of multinationals reflects the high dividend payments; the
market-to-book value ratio of multinationals was over 4,
compared to less than 2 for the market as a whole. The
fundamental characteristics of the Pakistani stock market and
those of other developed and emerging markets. As of end 1986,
37 public sector companies are listed on the Karachi Stock
Exchange (KSE) with a market capitalization of Rs l0 million or
32% of total market capitalization. The number of shares traded
on the Karachi Stock Exchange has shown a secular increase
from 24.6 million shares in 1977 to 100 million shares in 1986.
Turnover in the 25 most active shares accounted for

48.4% of total market turnover in FY87, while in the case of 58

shares less than 5,000 shares each were traded during the same
period. Interestingly; multinationals (generally regarded as blue
chips) did not figure at all in the 25 most active shares. While
forming 28% of market capitalization, they accounted for only
5.8% of market turnover probably because they are closely held
and there is relatively little float in these shares.

The Companies Ordinance (1984) provides for: (i) declaration of

holdings in companies by directors, principal officers and their
families; and (ii) a submission of information on sales/transfer of
shares and profits if arising in less than six months from date of
purchase. It should be noted that insiders not only include
management but also others associated with the company
having access to sensitive information. However, the prevalence
of transactions in nominee names makes it difficult, if not
impossible, to prove insider trading. There is also
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a growing controversy as to whether members of the Exchange

should be permitted on the boards of directors of companies.

CONCLUSIONS AND RECOMMENDATIONS

The pricing of both equity and debenture capital in Pakistan is

not determined by market forces but is administratively set by
the Government. In the case of equity, all issues of new
companies are priced at par. The initial issue price of closely-held
companies going public is set by CCI and is determined on
historic data with future prospects not being taken into account.
This has resulted in the shares of well-managed companies being
issued at below market-clearing price so that the new
shareholders benefit at the expense of the original shareholders.

Such policies have denied underwriters any useful function in

setting issue prices or in distributing securities. In addition, as
both the issue price and underwriting commission are fixed,
underwriters have almost no role in determining a market price
for the issue nor does the underwriting commission reflect
perceived issue risk.
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CASE STUDY-2

CASE STUDU ON SAXO BANK

Today, Saxo Bank is an undisputed world leader in online trading of

Foreign Exchange (FX), Stocks, Stocks on Margin (CFDs), Futures and
fixed income products. The reputation of Saxo Bank as an award-
winning and technology-driven European Internet-bank is built thanks
to the modern and reliable software systems that support the Saxo
Bank business model.

In the beginning of 2003 Saxo Bank decides to offer online investment

services for a completely new customer segment - private investors,
who would benefit from a full range of investment products. Since the
time-to-market of new banking software products is a real challenge in
the highly competitive financial services market, Saxo Bank decides to
find a software development services company in the near shore zone
that specializes in portal solutions and has expertise in serving the
Financial Services sector.

After strict pre-screening of near shoring locations and companies, Saxo

Bank had turned to Russia's leading software development services
provider - Reksoft that has a software development centre located in the
largest city of Eastern Europe - St. Petersburg, Russia.

The two key concerns for Saxo Bank were the optimal time-to-market
indicator and the highest standards in information security - both in
relation to product and personnel.
Reksoft provides Saxo Bank with a full range of application life-cycle
services - application architecture development, software
development, application testing, support in platform implementation
and continuous maintenance (3rd level application support services).
LIMITED

CONCLUSIONS AND RECOMMENDATIONS

The SaxoBank MiniTrader online platform, enters operations offering

entry-level trading on a popular selection of instruments from the
Saxo Bank product range, including:

Direct trading on live tradable prices through the professional online

trading platform

Low trading costs and spreads

Reputable fully regulated EU bank where the Saxo Bank

multinational staff offer personal service in 18 languages

Wealth of trading recommendations and market predictions from the

Bank's own analysts and major financial institutions

Saxo MiniTrader online trading platform fully meets the needs of the
Bank's clients, combining a highly secure online environment with a
wealth of trading modules. Saxo MiniTrader helps private investors
make successful trading decisions with real-time execution.

Saxo Bank outsourcing to Reksoft has allowed roll-out the

operational system within a very tight time frame. Thanks to that,
Saxo Bank was able to grow its customer base, greatly benefiting
from the launch of this innovative solution for a new market
segment.
LIMITED
CHAPTER-11
ARTICLE
LIMITED

CHAPTER-11

ARTICLE

Sharekhan, one of India's leading brokerage houses, is the retail arm of SSKI. With over

510 share shops in 170 cities, and India's premier online trading portal
www.sharekhan.com, our customers enjoy multi-channel access to the
stock markets. Sharekhan offers you trade execution facility on the BSE
and NSE, for both cash and derivatives market, commodity trading
facility on the MCX and NCDEX, automated IVRS-based trading facility
from your telephone, depository services and most importantly,
investment advice tempered by 80 years of research and broking
experience.

The event titled Empower is an attempt made by Sharekhan to

offer financial education to their clients. They offer their analysis on
the stock market its ups and downs, which shares to hold or to
sell. In short they serve as a common mans guide into the sensex
providing financial tips depending on the present market scenario
and their perspective on what it holds for tomorrow.

This detailed analysis and financial education is possible and made

available to all by using the technology of Live Webcasting with PPT
and Chat Interactivity.

5-6 speakers give presentations on variable topics of financial

interest through the use of PPT.

The presentations are streamed live using the Webcast technology,

enabling interactivity so that the geographically distanced viewers
could post in their queries on the presentation as well and after the
live session the edited version of the same is enabled on the
website thereby enabling the viewers who would have missed out
on the live proceedings to benefit from the

Process through a Video on Demand of the proceedings.

Given the criticality of the situation and the effort that has been put in
there has to be enough redundancy or contingency plan for ensuring a
smooth flow of the

event and so that there no glitches. Prior to the event atleast two
rounds of testing
LIMITED

(internet connectivity) is essential if there is sufficient time at hand,

if not one test

would suffice.

2 Encoders for the purpose of encoding are used 1 main and the
other as back up. The content is then streamed through the internet
connectivity. In Sharekhan the Connectivity available is from two
different service providers namely Tata and Reliance. The bandwidth
available is 1 mbps and 512 kbps respectively.

A separate login page is created. The viewer has to fill up all the
fields in login

page like user name, location, section email ID.

After entering all the information accurately, user will be redirected

to the user.htm where user can ask questions.

The viewers would then post their question/ queries/ comments in

the feedback/chat window provided

The webcast team along with client team members would take a
look at the questions and the ones which were unique and relevant
questions would be passed on to the concerned presenters, the
presenter would thus address the questions

As many questions as possible within the given time frame are

answered. The remaining questions are posted on their website along
with answers for the same.

Hence, for a client like Sharekhan wanting to create awareness about

the current market scenario to its clients, brokers, retailers etc, the
combination of the technology of Webcasting along with Chat
Integration proved to be cost effective, time saving and at the same
time eliminating the monotony of repetitive.
LIMITED
CHAPTER-12

PROJECT ANALYSIS
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CHAPTER-12

PROJECT ANALYSIS

SWOT ANALYSIS

Strengths

Strong credibility among investors because of its heritage. Excellent

reputation among the business society.

Capability of providing superior customer service. Quality research

team.

Easier access to the customer due to largest ground network of 280

branded share shops in 120 cities.

Abundant information about economy and companies.

Ability to attract and retain superior and quality personnel. Highly

sophisticated infrastructure.

Efficient research and analysis team, which by interpreting the

economy and companys performance accurately is enhancing the
profitability of the clientele.
Weaknesses

Inadequate product awareness among the retail investors.

Brokerage is high when compared to its competitors like

Indiainfoline and

Religare.

Brand awareness is low in the financial market.

LIMITED

Promotional activities conducted by the company are not at par with

the other firms.

Opportunities

Hyderabad covers only 2% of investors which gives huge potential

for the market penetration.

Bullish phase of the market attracts investing public.

Access to the BSE online space for the retail investors creates
opportunity to increase clientele base.

Awareness campaigns about online trading create new market.

Threats

Availability of Unit Linked Insurance Policies (ULIPs) and mutual

funds in the market.

Threat of entry is high in this industry as the manpower required is

less and capital requirement is medium.

OBSERVATIONS:
Fluctuations are more in secondary market than any other market.

There are more speculators than investors.

Information plays a vital role in the secondary market.

Previously rolling settlement is T+5 days, now it changed to T+2

days and further it will be changing to T+1 day.
LIMITED

It was also observed that many broking houses offering internet

trading allow clients to use their conventional system as well just
ensure that they do not loose them and this instead of offering e-
broking services they becomes service providers.

The number of players is increasing at a steady rate and today

there are over a dozen of brokerage houses who have opted to
offer net trading to their customers and prominent among them
are SHARE KHAN, India bulls, kotakstreet, ICICI direct and
indiainfoline.

CONCLUSION:

Things have changed for the better with the SHAREKHAN going
on-line coupled with endeavor to stream line the whole trading
system, things have changed dramatically over the last 3 to 4
years. New and advanced technologies have breached
geographical and cultural barriers, and have brought the
countrywide market to doorstep.

In the present scenario to compete with the Brokers would

require sound infrastructure and trading as per international
standards.

The introduction of on-line trading would influence the investors

resulting in an increase in the business of the exchange. It has
helped the brokers handling a vast amount of transactions and
this can be an efficient trading, delivering, settlement system
with adequate protection to investors. The trading of SHAREKHAN
of the first day was Rs. 1.8 crores.

Due to invention of online trading there has been greater benefit

to the investors as they could sell / buy shares as and when
required and that to with online trading.

The brokers has a greater scope than compared to the earlier

times because of invention of online trading.
LIMITED

The concept of business has changed today, this is a service

oriented industry hence the survival would require them to
provide the best possible service to the clients.

RECOMMENDATIONS:

I recommend the exchange authorities to take steps to educate

Investors about their rights and duties. I suggest to the
exchange authorities to increase the investors confidences.

I recommend the exchange authorities to be vigilant to curb

wide fluctuations of prices.

The speculative pressures are responsible for the wide changes

in the price, not attracting the genuine investors to the greater
extent towards the market.

Genuine investors are not at all interested in the speculative

gain as their investment is based on the future profits, therefore
the authorities of the exchange should be more vigilant to curb
the speculation.

Necessary steps should be taken by the exchange to deal with

the situations arising due to break down in online trading.

Effective monitoring of transaction have to be done in avoid

uncertainties. Internet cost have to be reduced in order attract
online trading users. Transparency has to maintain in the Share
Markets.
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CHAPTER-13
BIBILOGRAPHY
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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

WEBSITES:

www.Share Khan.com

www.bseindia.com

www.sebi.com
www.moneycontrol.com

www.economictimes.com

www.nseindia.com