CHAPTER-1

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 INTRODUCTION TO ONLINE TRADING

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

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

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

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also foregoes proper investment advice and financial planning, perhaps among the most
valuable services provided by traditional brokers.

There are, of course, additional risks relative to performing transactions over the
Internet especially on a shared computer. Those people whom investors have provided
their account number and password can freely trade that account while the investor will
have little, if any, resource against the brokerage firm for the breach of security.

The online trading is simply defined as “dealing securities on net”. In online

trading system, from a single location anywhere, can service investors across the country.

NEED FOR THE STUDY:

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

TRADING at INDIA INFOLINE., as the exchange has changed it’s trading from it

and there is need to assess the performance of the capital market.

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 INDIA INFOLINE through various departments.

• To know the online screen based trading system adopted by INDIA

INFOLINE and about its communication facilities. The appropriate

configuration to set the network, which would link the INDIA INFOLINE to

individual / members.

• To know about the latest and future development in the stock exchange

trading system.

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 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 India infoline 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 India infoline Securities limited.
 The data collected from the magazines of the NSE, economic times, etc.
 Various books relating to the investments, capital market and other related topics.

LIMITATIONS OF THE STUDY:

The study confines to the past 2-3 years and present system of the trading procedure in theand
the Indiainfoline study is confined to the coverage of all the related issues in brief. The data is
collected from the primary and secondary sources and thus is subject to slight variation than
what the study includes in reality.

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.

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CHAPTER-2

5
 REVIEW OF LITERATURE

ONLINE TRADING

Before getting in to the online trading we should know some things about the internet,
e-commerce and etc.

1. 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 cost. Internet can
change the nature and capacity of stock broking business in India.

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 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.

PC’s 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.

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.

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 • 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 stockbroker’s website through your internet enabled PC and
place orders through the broker’s 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.
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 broker’s site.
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,

• Provide management information system,

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

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 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:

1. Installation of a computer with required specification

2. Installation of a modem
3. Telephone connection
4. Registration for on-line trading with broker
5. A bank account
6. Depository account
7. 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 manager’s signature along with bank’s seal, manager registration code on
photograph.

For stock brokers:

1. Permission from stock exchange for net trading
2. Net worth of Rs. 50 lac
3. Adequate back-up system
4. Secured and reliable software system
5. Adequate, experienced and trained staff
6. Communication of order (trade confirmation to investor by e-mail)
7. Use of authentication technologies
8. Issue of contract notes within 24 hours of the trade execution
9. 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 of 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:
(a) First by entering the symbol and series of stock and other parameters like
quantity and price of the scrip on the place order window.
(b) Second, fill in the symbol, series and the default quantity.
Step 4: It is the process of review. Thus, the investor has to review the order placed
by clicking the review option. He may also re-set to clear the values.
Step 5: After the review has been satisfactory, the order has to be 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.
The time gap has narrowed in every stage of operation. Confirmation and execution

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 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.

ONLINE TRADING HAS LED 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.

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 • 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.
INVESTORS REASONS TO TRADE ONLINE:

• They have control over their accounts, can make their own decisions and don’t

have to give reasons for their actions. They are independent.

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 • 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.

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,

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 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.

STOCK EXCHANGES 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.

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  Bonds

History of Stock Exchanges:

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

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Various Stock Exchanges in India:

At present there are 23 stock exchanges recognized under the securities contracts
(regulation), Act, 1956. Those are:

Ahmedabad Stock Exchange Association Ltd.

Bangalore Stock Exchange

Bhubaneshwar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchange Ltd.

Coimbatore Stock Exchange

Delhi Stock Exchange Association

Guwahati Stock Exchange Ltd

Hyderabad Stock Exchange Ltd.(Presently not working)

Jaipur Stock Exchange Ltd

Kanara Stock Exchange Ltd

Ludhiana Stock Exchange Association Ltd

Madras Stock Exchange

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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.

Out of these major stock exchanges were:

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 (FI’s)
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

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 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.

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

19
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 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

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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.

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.

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 • 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.

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”.
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.

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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.
Share groups: The scrips 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 scrips are of the blacklisted companies. The ‘C’
group covers the odd lot securities in ‘A’, ‘B1’&’B2’ groups.

ROLLING SETTLEMENT SYSTEM:

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

23
advantages of the system. Generally longer settlement periods are shortened
gradually.
SEBI made RS compulsory for trading in 10 securities selected on the basis of the
criteria that they were in compulsory demat list and had daily turnover of about 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.
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 broker’s terminals late by 1.30 p.m on T+1. Depository
participants accept the instructions for pay in securities by investors in physical form
upto 4 p.m and in electronic form upto 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 a.m 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.

24
CHAPTER-3

25
 INDUSTRY PROFILE
Following diagram gives the structure of Indian financial system:

26
 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.

CAPITAL MARKET:
Capital market is a place where we can raise long-term capital.

27
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.

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, 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:
1. Merchant banker/book building lead manager
2. Registrar and transfer agent
3. Underwriter/broker to the issue
4. Adviser to the issue
5. Banker to the issue
6. Depository
7. Depository participant

28
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
 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 scrip’s are traded”. It is a
market place which provides liquidity to the scrip’s 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
scrip’s provides liquidity and offers an opportunity to the investors to buy or sell the
scrip’s.
The following are the intermediaries in the secondary market:
1. Broker/member of stock exchange – buyers broker and sellers broker
2. Portfolio Manager
3. Investment advisor
4. Share transfer agent
5. Depository

29
 6. Depository participants.

COMPANY PROFILE

About Us

Management Team

Nirmal Jain R Venkataraman Nilesh Vikamsey Sat Pal Khattar

Chairman, Executive Director, Independent , Non Executive ,
Managing Director Director Director

History

We were founded in 1995 by Mr. Nirmal Jain (Chairman and Managing Director) as an
independent business research and information provider. We gradually evolved into a
one-stop financial services solutions provider. Our strong management team comprises
competent and dedicated professionals

We are a pan-India financial services organization across 1,361 business locations and a
presence in 428 cities. Our global footprint extends across geographies with offices in
New York, Singapore and Dubai. We are listed on the Bombay Stock Exchange (BSE)
and the National Stock Exchange (NSE).

We offer a wide range of services and products comprising broking (retail and
institutional equities and commodities), wealth management, credit and finance,
insurance, asset management and investment banking.

30
We are registered with the BSE and the NSE for securities trading, MCX, NCDEX and
DGCX for commodities trading, CDSL and NSDL as depository participants. We are
registered as a Category I merchant banker and are a SEBI registered portfolio manager.
We also received the FII license in IIFL Inc. IIFL Securities Pte Ltd received approval
from the Monetary Authority of Singapore to carry out corporate advisory and dealing in
securities operations. Two subsidiaries – India Infoline Investment Services and
Moneyline Credit Limited – are registered with RBI as non-deposit taking non-banking
financial services companies. India infoline Housing Finance Ltd, the housing finance
arm, is registered with the National Housing Bank.

Milestones
1995
Incorporated as an equity research and consulting firm with a client base that included
leading FIIs, banks, consulting firms and corporates.
1999
Restructured the business model to embrace the internet; launched
archives.indiainfoline.com mobilised capital from reputed private equity investors.
2000
Commenced the distribution of personal financial products; launched online equity
trading; entered life insurance distribution as a corporate agent. Acknowledged by Forbes
as ‘Best of the Web’ and ‘...must read for investors’.
2004
Acquired commodities broking license; launched Portfolio Management Service.
2005
Listed on the Indian stock markets.
2006
Acquired membership of DGCX; launched investment banking services.

2007
Launched a proprietary trading platform; inducted an institutional equities team; formed a
Singapore subsidiary; raised over USD 300 mn in the group; launched consumer finance

31
business under the ‘Moneyline’ brand.
2008
Launched wealth management services under the ‘IIFL Wealth’ brand; set up India
Infoline Private Equity fund; received the Insurance broking license from IRDA; received
the venture capital license; received inprinciple approval to sponsor a mutual fund;
received ‘Best broker- India’ award from FinanceAsia; ‘Most Improved Brokerage-
India’ award from Asiamoney.
2009
Received registration for a housing finance company from the National Housing Bank;
received ‘Fastest growing Equity Broking House - Large firms’ in India by Dun &
Bradstreet.

Company Structure

India Infoline Limited is listed on both the leading stock exchanges in India, viz. the
Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a
member of both the exchanges. It is engaged in the businesses of Equities broking,
Wealth Advisory Services and Portfolio Management Services. It offers broking services
in the Cash and Derivatives segments of the NSE as well as the Cash segment of the
BSE. It is registered with NSDL as well as CDSL as a depository participant, providing a
one-stop solution for clients trading in the equities market. It has recently launched its
Investment banking and Institutional Broking business.

32
A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients.
These services are offered to clients as different schemes, which are based on differing
investment strategies made to reflect the varied risk-return preferences of clients.
India Infoline Media and Research Services Limited.
The content services represent a strong support that drives the broking, commodities,
mutual fund and portfolio management services businesses. Revenue generation is
through the sale of content to financial and media houses, Indian as well as global.
It undertakes equities research which is acknowledged by none other than Forbes as 'Best
of the Web' and '…a must read for investors in Asia'. India Infoline's research is available
not just over the internet but also on international wire services like Bloomberg (Code:
IILL), Thomson First Call and Internet Securities where India Infoline is amongst the
most read Indian brokers.
India Infoline Commodities Limited.
India Infoline Commodities Pvt Limited is engaged in the business of commodities
broking. Our experience in securities broking empowered us with the requisite skills and
technologies to allow us offer commodities broking as a contra-cyclical alternative to
equities broking. We enjoy memberships with the MCX and NCDEX, two leading Indian
commodities exchanges, and recently acquired membership of DGCX. We have a multi-
channel delivery model, making it among the select few to offer online as well as offline

33
trading facilities.
India Infoline Marketing & Services
India Infoline Marketing and Services Limited is the holding company of India Infoline
Insurance Services Limited and India Infoline Insurance Brokers Limited.
(a) India Infoline Insurance Services Limited is a registered Corporate Agent with the
Insurance Regulatory and Development Authority (IRDA). It is the largest Corporate
Agent for ICICI Prudential Life Insurance Co Limited, which is India's largest private
Life Insurance Company. India Infoline was the first corporate agent to get licensed by
IRDA in early 2001.
(b) India Infoline Insurance Brokers Limited is a newly formed subsidiary which will
carry out the business of Insurance broking. We have applied to IRDA for the insurance
broking licence and the clearance for the same is awaited. Post the grant of license, we
propose to also commence the general insurance distribution business.
India Infoline Investment Services Limited
Consolidated shareholdings of all the subsidiary companies engaged in loans and
financing activities under one subsidiary. Recently, Orient Global, a Singapore-based
investment institution invested USD 76.7 million for a 22.5% stake in India Infoline
Investment Services. This will help focused expansion and capital raising in the said
subsidiaries for various lending businesses like loans against securities, SME financing,
distribution of retail loan products, consumer finance business and housing finance
business. India Infoline Investment Services Private Limited consists of the following
step-down subsidiaries.
(a) India Infoline Distribution Company Limited (distribution of retail loan products)
(b) Moneyline Credit Limited (consumer finance)
(c) India Infoline Housing Finance Limited (housing finance)
IIFL (Asia) Pte Limited
IIFL (Asia) Pte Limited is wholly owned subsidiary which has been incorporated in
Singapore to pursue financial sector activities in other Asian markets. Further to
obtaining the necessary regulatory approvals, the company has been initially capitalized
at 1 million Singapore dollars.

34
Overview

We are a one-stop financial services shop, most respected for quality of its advice,
personalised service and cutting-edge technology.

Equities
Indiainfoline provided the prospect of researched investing to its clients, which was
hitherto restricted only to the institutions. Research for the retail investor did not exist
prior to Indiainfoline. Indiainfoline leveraged technology to bring the convenience of
trading to the investor’s location of preference (residence or office) through computerized
access. Indiainfoline made it possible for clients to view transaction costs and ledger
updates in real time.

APPLY IN IPOs
You could also invest in Initial Public Offers (IPO’s) online without going through the
hassles of filling ANY application form/ paperwork.

PMS
Our Portfolio Management Service is a product wherein an equity investment portfolio is
created to suit the investment objectives of a client. We at Indiainfoline invest your
resources into stocks from different sectors, depending on your risk-return profile. This
service is particularly advisable for investors who cannot afford to give time or don't have
that expertise for day-to-day management of their equity portfolio.

Research
Sound investment decisions depend upon reliable fundamental data and stock selection
techniques. Indiainfoline Equity Research is proud of its reputation for, and we want you
to find the facts that you need. Equity investment professionals routinely use our research
and models as integral tools in their work.
They choose Ford Equity Research when they can clear your doubts.

35
Commodities
Indiainfoline’s extension into commodities trading reconciles its strategic intent to
emerge as a one-stop solutions financial intermediary. Its experience in securities broking
has empowered it with requisite skills and technologies. The Company’s commodities
business provides a contra-cyclical alternative to equities broking. The Company was
among the first to offer the facility of commodities trading in India’s young commodities
market (the MCX commenced operations only in 2003). Average monthly turnover on
the commodity exchanges increased from Rs 0.34 bn to Rs 20.02 bn. The commodities
market has several products with different and non-correlated cycles. On the whole, the
business is fairly insulated against cyclical gyrations in the business.

Mortgages
During the year under review, Indiainfoline acquired a 75% stake in Moneytree
Consultancy Services to mark its foray into the business of mortgages and other loan
products distribution. The business is still in the investing phase and at the time of the
acquisition was present only in the cities of Mumbai and Pune. The Company brings on
board expertise in the loans business coupled with existing relationships across a number
of principals in the mortgage and personal loans businesses. Indiainfoline now has plans
to roll the business out across its pan-Indian network to provide it with a truly national
scale in operations.

Home Loans
Personal Loans
Get expert advice that suits your needs
Freedom to choose from 4 flexible options

Loan against residential and commercial to repay

property
Expert recommendations
Expert recommendations
Easy documentation
Easy documentation
Quick processing and disbursal
Quick processing and disbursal
No guarantor requirement
No guarantor requirement

Contact Us

36
Email : reach@moneylineindia.com
Number : +91-22-40609174

Invest Online
Indiainfoline has made investing in Mutual funds and primary market so effortless. All
you have to do is register with us and that’s all. No paperwork no queues and No
registration charges.

INVEST IN MF
Indiainfoline offers you a host of mutual fund choices under one roof, backed by in-depth
research and advice from research house and tools configured as investor friendly.

Contact Us

Email : online@indiainfoline.com
Number : +91-22-40609161

SMS
Stay connected to the market
The trader of today, you are constantly on the move. But how do you stay connected to
the market while on the move? Simple, subscribe to Indiainfoline's Stock Messaging
Service and get Market on your Mobile!

There are three products under SMS Service:

• Market on the move.

• Best of the lot.

• VAS (Value Added Service )

Insurance
An entry into this segment helped complete the client’s product basket; concurrently, it
graduated the Company into a one-stop retail financial solutions provider. To ensure
maximum reach to customers across India, we have employed a multi pronged approach
and reach out to customers via our Network, Direct and Affiliate channels. Following the
opening of the sector in 1999-2000, a number of private sector insurance service

37
providers commenced operations aggressively and helped grow the market.

The Company’s entry into the insurance sector derisked the Company from a
predominant dependence on broking and equity-linked revenues. The annuity based
income generated from insurance intermediation result in solid core revenues across the
tenure of the policy.

Wealth Management Service

Imagine a financial firm with the heart and soul of a two-person organization. A world-
leading wealth management company that sits down with you to understand your needs
and goals. We offer you a dedicated group for giving you the most personal attention at
every level.

Newsletters
The Daily Market Strategy is your morning dose on the health of the markets. Five intra-
day ideas, unless the markets are really choppy coupled with a brief on the global markets
and any other cues, which could impact the market. Occasionally an investment idea
from the research team and a crisp round up of the previous day's top stories. That's not
all. As a subscriber to the Daily Market Strategy, you even get research reports of
Indiainfoline research team on a priority basis.

The Indiainfoline Weekly Newsletter is your flashback for the week gone by. A weekly
outlook coupled with the best of the web stories from Indiainfoline and links to important
investment ideas, Leader Speak and features is delivered in your inbox every Friday
evening.

38
39
 CHAPTER-4

DATA ANALYSIS&INTERPRETATION

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

40
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 INDIA INFOLINE has
shifted from outcry system to online trading from February 29th 1997.

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

41
 executing a transaction at a stock exchange .The steps involved in this method of
trading have given below:

Choice of broker:
The prospective investor who wants to buy shares or the investors, who wants to sell
shares and transact business, have to act through member brokers only. They can also
appoint their bankers for this purpose as per the present regulations.

Placement of order:
The next step is the placing order for the purchase or sale of securities with a broker.
The order is usually placed by telegram, telephone, letter, fax etc or in person. To avoid
delay, it is placed generally over the phone. The orders may take any one of the forms
such as At Best Orders, Limit Order, Immediate or Cancel Order, Limited Discretionary
Order, and Open Order, Stop Loss Order.

Execution of order or contract:

Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30
P.M on all working days Monday to Friday, and a special one-hour session on Saturday.
The members or the authorized assistants have to wear a badge given by the exchange to
enter into the trading ring. They carry a 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

42
 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.
Most of the active scrip’s in the market including all the scrip’s 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. Investor’s 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:

43
 • 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.
• RBI has also reduced the minimum margin to 25% for loans against
dematerialized securities as against 50% for loans against physical securities.

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

44
 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.
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 9:55 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 BBO’s, the last traded price, the day‘s opening price,
previous day’s closing price, highest and lowest prices, the weighted average price
and total trade value will be available continuously, as the BBO for each scrip.

45
 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 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.

46
 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.
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.

47
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.

The given flow chart clearly explains the process of online trading:

48
 L o g i n

B u y t r a n s c a t i o S n e l l t r a n s c a t i o
T h e s y s t e m w i l l
T h e s y s t e m w i l l c h e c dk p b ua cy ci n o g u n t q u a
l i m i t s

O r d e r s a c c e p t e d R e j e c t e d o r d e r s o w r do ue l r d s b ae c
c o m m u n i c a t e d a l o n g w i t h r e

y o u r o r d e r i s t r a n s m i t t e d t o

p e n d i n g b u y o rn d ee xr s e c u t i o p n e n d i n g s e l l
w o u l d b e d i s op fl a y y oe du r o r d w e r o s u l d b e d i s
o n y o u r s c r e e n o n y o u r s c r

y o u m a y y e o d u i t m y a o y u dr e l e t e y o u m a y e d i t y o u y r o u m a y d
p e n d i n g y oo ur d r e p r e n d i n g o r d p e er n d i n g o r d e r p e n d i n g

f l a s h e d o n cy oo nu fr o r m a t i o c no c n o t rua lc t n o t e
s c r e e n i m m ed d b i a e t e s l ey n d t o b ey o s ue nr t t o b y
o n e x e c u t i oe -n m a i l a n d m o or b h i al e n d d e l i v

COMPARATIVE ANALYSIS

THE MAJOR PLAYERS IN ONLINE TRADING

49
 • INDIA INFOLINE
• 5PAISA
• KOTAKSTREET
• INDIABULLS
• ICICIDIRECT
• HDFCSEC.

SHARE KHAN

Company Background

• India infoline is the retail broking arm of SSKI Securities Pvt Ltd. SSKI owns
56% in India infoline, 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

PRICING FOR HNI CLIENTS

Speed Trade
• Account Opening : Rs 1000 ( Refundable against brokerage in Month + 1)

50
• 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
• Demat 1st Yr : NIL
• Initial Margin : NIL
• Min Margin Retainable : NIL
• Brokerage:

Trading 0.10% each side + All Taxes

Delivery 0.50% each side + All Taxes

India infoline online Trading Interfaces

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

51
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 India infoline
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

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

52
 • 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 Broker’s 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

5PAISE

Company Background

53
 • 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 / HNI’s

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

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

54
• 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

KOTAK STREET

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 DP’s, Limit against shares

• 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 FastLane / 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.

55
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 Cr0.05% 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

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.

INDIABULLS

56
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.

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

ICICI DIRECT

57
• 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 DP’s without 1st yr AMC. Only Rs 100 as linking charges per DP

• Initial Margin : Nil

• Brokerage: ICICI’s 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.

• Delivery Vol per QTR Brokerage Square Vol P.M. Brokerage

< 10 lakhs 0.75% < 50 lakhs .10% Both Sides

10 – 25 lakhs 0.70% 50 lakhs – 2 Cr .08% Both Sides

25 – 50 lakhs 0.55% 2Cr-5Cr .05% Both Sides

50 lakhs - 1 Cr 0.45% 5Cr- 10 Cr .04% Both Sides

1 Cr – 2 Cr 0.35% 10Cr -20 Cr .035% Both Sides

2 Cr – 5 Cr 0.30% > 20 Cr .03% Both Sides

> 5 Cr 0.25% ---- --------

HDFC SECURITIES

58
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

SWOT ANALYSIS

59
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

company’s performance accurately is enhancing the profitability of the clientele.

Weaknesses

• Limited customer appeal as the company product line does not include mutual

funds which is increasingly becoming a preferred customer investment option.

• Inadequate product awareness among the retail investors.

• Limited customer appeal as the company does not have access to the BSE online

space.

• Brand awareness is low in the financial market.

• Promotional activities conducted by the company are not at par with the other

firms.

Opportunities

60
 • 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 creates new market.

Threats

• Availability of Unit Linked Insurance Policies (ULIP’s) 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.

61
CHAPTER-5

62
 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.

• 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 geojit.

• The Bombay stock exchange sensex zoomed past the 7700 barrier for the first
time in history to achieve new all time high of 7800 intra day trade and ended
at a historic close of 7732 points.

63
 CONCLUSION

• Things have changed for the better with the INDIA INFOLINE 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 Broker’s 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 INDIA INFOLINE
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 broker’s has a greater scope than compared to the earlier times because of
invention of online trading.
• 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.

64
 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.

65
 BIBLIOGRAPHY

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

66
MARKET WATCH WINDOWS:

BLUE COLOUR INDICATE SHARE VALUE INCREASE

RED COLOUR INDICATE SHARE VALUE DECREASE

NSE Scrip’s

NSE & BSE Scrip’s

67
(BUY Order Form)

(Sell Order Form)

68
(Market Depth)

(Order Book)

69
Client Margin

Trade Book

70
Client Activity Report

Exercise Report

71