A REPORT ON ONLINE TRADING AT BONANZA PORTFOLIO LIMITED Project
report Submitted in the Partial fulfillment for the award of MASTER
OF BUSINESS ADMINISTRATION By HIMANSHU SHARMA GOVT. ENGEENERING
COLLEGE JHALAWAR( RAJ.) ( RAJASTHAN TECHNICAL UNIVERSITY, KOTA)
CONTENTSCHAPTER-1 INTRODUCTION OF STUDY CHAPTER-2
PAGE NO.SY 1 6
LITERATURE REVIEW
42
CHAPTER-3
COMPANY PROFILE
46
CHAPTER-4
DATA & INTERPRETATION ANALYSIS 60
CHAPTER-5
OBSERVATIONS CONCLUSIONS SUGGESTIONS
CHAPTER-6
BIBLIOGRAPHY
64
CHAPTER 1
INTRODUCTION
TO STUDY
DEMATERIALIZATION:Dematerialization is the process of converting
the physical form of shares into electronic form. Prior to
dematerialization the Indian stock markets have faced several
problems like delay in the transfer of certificates, forgery of
certificates etc. Dematerialization helps to overcome these
problems as well as reduces the transaction time as compared to the
physical segment. The article discusses the procedures, advantages
and problems of dematerialization. The Indian Stock markets have
seen a major change with the introduction of depository system and
scrip less trading mechanism. There were various problems like
inordinate delays in the transfer of share certificates, delay in
receipt of securities and inadequate infrastructure in banking and
postal segments to handle a large volume of application and storage
of share certificates .To overcome these problems physical dealing
in securities should be eliminated . The Indian stock market
introduced the system of dematerialization recognizing the need for
scrip less trading. According to the Depositories Act, 1996, an
investor has the option to hold shares either in physical or
electronic form .The process of converting the physical form of
shares into electronic form is called dematerialization or in short
demats. The converted electronic data is stored with the depository
from where they can be traded. It is similar to a bank where an
investor opens an account with any of the depository participants.
Depository participant is a representative of the depository .The
DP maintains the investors securities account balances and
intimates him about the status of holdings.
ONLINE TRADING Online Trading is an easy way to buy and sell
shares from the comfort of ones place instead of trading through
individual stockbroker and broking firms, the customer can transact
with the help of mouse click and his visits to the neighborhood
broker will become a thing of the past. Even the older generation
is adapting the online trading route. Find the right depository to
provide with an online trading account can be difficult, but many
banks and companies offer excellent services for online trading.
Our needs will determine which online broker is best for us. Online
trading brings in total transparency between broker an investor in
case of secondary market operation. Whether we are buying a mutual
fund, investing in commodities market or any other transaction can
be performed with minimal fuss. In India presently online trading
can take place through order routing system, which will route
client orders to exchanges trading system for execution of trade on
stock exchange (NSE and BSE). One of the measure attractions of
online trading is the wealth of free commentary and analysis about
stock market and global economy. Any investor with an ounce of
market saviness can extract all the data needed to make trading
decisions and complete the trades. An important catalyst behind the
emergence of thriving online brokerage system has been the buoyant
stock market. One can trade online with e-brokerage such as ICICI
Direct, HDFC Securities, India Bulls, Kotakstreet and India Info
lines 5paisa.com.
NEED OF STUDY:With the emergence of the internet in everyday
business, the significance of the online stock market trading
broker has gone up. It can be done from home at any desired fixed
hours of the investor.
The processing of the order is executed at proper timings as the
servers of the online trading portal are linked to the selected
banks and stock exchanges though out twenty four hours.
The investments made are safe and secured and profit is earned
at proper time without any dispute.
Online trading updates are also provided to the investors and
also about the present grade of their orders either through the
interface or e-mail.
The investors increase shares and make development to the
company..
OBJECTIVES OF STUDY:
To Study & understood the concept of Online trading. To know
the time information & importance & the role played by the
stock exchanges in the process of online trading. To know the
reasons for the introduction of online trading and their Benefits.
To review the changes that Online trading brought when compared
with the previous systems. RESEARCH METHODOLOGY OF THE STUDY:
DATA COLLECTION METHODSThe data collection methods include both
the primary and secondary collection methods
Primary collection methods: This method includes the data
collection from
the personal discussion with the authorized clerks and members
of the Net worth. Secondary collection methods: The secondary
collection methods includes the lectures of the superintend of the
department of market operations and so on. Also the data collected
from the news, magazines of the Net worth and different books
issues of this study. SCOPE OF STUDY: The study is limited to Demat
and Online Trading. And since the year 2000, a big boom has been
witnessed in the Indian stock Market when the market showed the
coming up of Online Trading System. Many Online stock trading
companies came but initially due to lack of Online Trading some
Companies Vanished and some survived. The Companies which are
survived are getting the handsome returns also attracting the
foreign Investment Companies. Now a days this sector is facing
cut-throat Competition. And also provides huge growth
prospects.
LIMITATIONS OF STUDY: A good report tells us the results of the
study. But every project has its own Limitations. These Limitations
can be in terms of: There is lack awareness among people about
investing in stock market. So people who are aware of such things
were found in specific areas for survey purposes. Most people are
comfortable with traditional system in small towns and like to
trade from their respective brokers, hence not providing their true
opinions. Most of people are not using technology and Internet is
growing still it is not at the required level. Some of the
respondents who did not do Online trading were able to respond only
to some questions. Limitations towards Demat and online trading
confined to keep the study in manageable limits.
REVIEW OF LITERATURE
INTRODUCTIONIndia Financial Market the India Financial market
comprise of talks about the primary market, FDIs, alternative
investment options, banking and insurance and the pension sectors,
asset management segment as well. With all these elements in the
India Financial market, it happens to be one of the oldest across
the globe and is definitely the fastest growing and best among all
the financial markets of the emerging economies. The history of
Indian capital markets spans back 200 years, around the end of the
18th century. It was at this time that India was under the rule of
the East India Company. The capital market of India initially
developed around Mumbai; with around 200 to 250 securities brokers
participating in active trade during the second half of the 19th
century.
Scope of the India Financial Market The financial market in
India atpresent is more advanced than many other sectors as it
became organized as early as the 19th century with the securities
exchanges in Mumbai, Ahmedabad and Kolkata. In the early 1960s, the
number of securities exchanges in India became eight including
Mumbai, Ahmedabad and Kolkata. Apart from these three exchanges,
there was the Madras, Kanpur, Delhi, Bangalore and Pune exchanges
as well. Today there are 23 regional securities exchanges in
India.
The financial market used to give financial services to the
Industries The NSE provides exposure to investors into two types of
financial Markets: 1. Capital market.
2. Money market.
Capital market: Refers to all the facilities and Institutional
arrangements for borrowing and lending of term funds. It does not
deal in capital goods but is concerned with the raising of money
capital. It consists of term lending institutions and investing
Institutions which mainly provide long term funds. Capital market
has its growth includes: 1) Gilt-edged Securities Market 2)
Industrial Securities Market 3) Development Banks and 4) Financial
Services. Industrial Securities Market has been further divided
into two markets they are: A. Primary Market. B.Secondary Market.
Primary Market: Refers to the raising of new capital in the form of
shares and debentures, while Secondary Market deals with securities
already issued by companies. Both the markets are important, but
the new issues market is much more important from the point of view
of economic growth. Secondary Market: The market where securities
are traded after they areinitially offered in the primary market.
Most trading is done in the secondary market. To explain further,
it is trading in previously issued financial instruments. An
organized market for used securities. Bombay Stock Exchange (BSE),
National Stock Exchange NSE, bond markets, over-thecounter markets,
residential mortgage loans, governmental guaranteed loans etc
Secondary Market refers to a market where securities are traded
after being initially offered to the public in the primary market
and/or listed on the Stock Exchange. Majority of the trading is
done in the secondary market. Secondary market comprises of equity
markets and the debt markets. For the general investor, the
secondary market provides an efficient platform for trading of his
securities. For the management of the company, Secondary equity
markets serve as a monitoring and control conduitby facilitating
value-enhancing control activities, enabling implementation of
incentivebased management contracts, and aggregating information
(via price discovery) that guides management decisions.
18 00 18 50 18 60 18 75 18 94
Trading of shares of east India company in Kolkata And Mumbai
Joint stock company came into existence Speculation and feverish
dealing in securities Formulation of stock exchange of Mumbai
Formulation of Ahmadabad stock exchange
Money market: Money Market is a market for short-term funds,
which can be used for overnights to one year duration. It also
deals with the financial assets that constitute near money which
means that the assets can be converted into cash quickly with
minimum transaction cost and without a loss in value. It consists
of commercial banks, co-operative banks and other agencies which
supply only short term funds. It consists of
Organized Money Markets. And Un Organized money markets The Call
Money Market, Treasury Bill Market, Collateral Money market,
Commercial paper and Certificate of deposits.
INDIAN CAPITAL MARKET AT GLANCE
20th century 19 08 19 39 19 40 19 56 19 57 19 88 19 91 19 92 19
93 19 95 19 95 19 97 19 98 Formulation of Calcutta stock exchange
Formulation of Lahore and madras stock exchange Formulation of U.P
and Delhi stock exchange Securities contract and regulation act
enacted Scam of Haridas Mundhra Securities and exchange board of
India set up Scam of MS Shoes SEBI given power Under SEBI act,1992
Formation of National stock exchange HARSHAD MEHTA Scam SESA GOA
Scam CRB scam BPL And Videocon Scam
21 st century 200 0 200 1 200 2 200 2 200 3 200 5 200 6 200 7
200 8 200 8 200 8 200 9 Depositories came into (electronic form of
shares) Ketan Parekh scam Start of rolling settlement and banning
of Badla trading Introduction of T+3 settlement in April
Introduction of T+2 settlement in April BSE Sensex touches all time
high 6954 in January BSE Sensex touches all time high 12500,the
highest intraday fall of 1100 BSE reaches the level of BSE touches
all time high in January 2008 Sensex saw its highest ever loss of
1,408 points at the end of the session. Sexsex saw its 15 month
low,from its all time high Sexsex saw its down trend & highest
ever loss because of Satyam case. existence
STOCK MARKETS IN INDIA:A stock market is a marketplace where
organized exchange (buying and selling) of stocks or equities takes
place. Indian stock markets are one of the most dynamic and
efficient stock markets in Asia. In terms of the make up and
overall dynamics, the Indian stock markets are at par with
international standards. The two national
exchanges operating in India are the National Stock Exchange
(NSE) and the Bombay Stock Exchange (BSE). These exchanges are well
equipped with electronic trading platforms and handle large volume
of transactions on a daily basis.
DEFINATION OF STOCK EXCHANGE:
Stock exchange is an organized market place where securities are
traded. These securities are issued by the government,
semi-government bodies, public sector undertakings and companies
for borrowing funds and raising resources. Securities are defined
as any monetary claims (promissory notes or I.O.U) and also include
shares, debentures, bonds and etc., if these securities are
marketable as in the case of the government stock, they are
transferable by endorsement and alike movable property. They are
tradable on the stock exchange. So are the case shares of
companies. Under the Securities Contract Regulation Act of 1956,
securities trading is regulated by the Central Government and such
trading can take place only in stock exchanges recognized by the
government under this Act. As referred to earlier there are at
present 23 such recognized stock exchanges in India. Of these,
major stock exchanges, like Bombay Stock Exchange National Stock
Exchange,Inter-Connected Stock Exchange, Calcutta, Delhi, Chennai,
Hyderabad and Bangalore etc. are permanently recognized while a few
are temporarily recognized. The above act has also laid down that
trading in approved contract should be done through registered
members of the exchange. As per the rules made under the above act,
trading in securities permitted to be traded would be in the normal
trading hours (09:15 A.M to 3.30 P.M) on working days in the
trading ring, as specified for trading purpose. Contracts approved
to be traded are the following: A. Spot delivery deals are for
deliveries of shares on the same day or the next day as the payment
is made. B. Hand deliveries deals for delivering shares within a
period of 7 to 14 days from the date of contract. C. Delivery
through clearing for delivering shares with in a period of two
months from the date of the contract, which is now reduce to 15
days.(Reduced to 2 days in demat trading) D. Special Delivery deals
for delivering of shares for specified longer periods as may be
approved by the governing board of the stock exchange.
Except in those deals meant for delivery on spot basis, all the
rest are to be put through by the registered brokers of a stock
exchange. The securities contracts (Regulation) rules of 1957 laid
down the condition for such trading, the trading hours, rules of
trading, settlement of disputes, etc. as between the members and of
the members with reference to their clients.
HISTORY OF STOCK EXCHANGE IN INDIA The origin of the Stock
Exchanges in India can be traced back to the later half of 19th
century. After the American Civil War (1860-61) due to the share
mania of the public, the number of brokers dealing in shares
increased. The brokers organized an informal association in Mumbai
named The Native Stock and Share Brokers Association in 1875.later
evolved as Bombay stock exchange.
Increased activity in trade and commerce during the First World
War and Second World War resulted in an increase in the stock
trading. The Growth of Stock Exchanges suffered a set after the end
of World War. World wide depression affected them most of the Stock
Exchanges in the early stages had a speculative nature of working
without technical strength. After independence, government took
keen interest to regulate the speculative nature of stock exchange
working. In that direction, securities and Contract Regulation Act
1956 was passed, this gave powers to Central Government to regulate
the stock exchanges. Further to develop secondary markets in the
country, stock exchanges established at Mumbai, Chennai, Delhi,
Hyderabad, Ahmedabad and Indore. The Bangalore Stock Exchange was
recognized in 1963. At present there are 23 Stock Exchanges.Till
recent past, floor trading took place in all Stock Exchanges. In
the floor
trading system, the trade takes place through open outcry system
during the official trading hours. Trading posts are assigned for
different securities where by and sell activities of securities
took place. This system needs a face to face contact among the
traders and restricts the trading volume. The speed of the new
information reflected on the prices was rather than the
investors.The Setting up of NSE and OTCEI (Over the counter
exchange of India with the
screen based trading facility resulted in more and more Sock
exchanges turning towards the computer based trading. BSE
introduced the screen based trading system in 1995, which known as
BOLT (Bombay on line Trading. System).
FUNCTIONS OF STOCK EXCHANGE Maintain Active Trading: Shares are
traded on the stock exchanges, enabling the investors to buy and
sell securities. The prices may vary from transaction to
transaction. A continuous trading increases the liquidity or
marketability of the shares traded on the stock exchanges. Fixation
of Prices: Price is determined by the transactions that flow from
investors demand and the suppliers preferences. Usually the traded
prices are made known to the public. This helps the investors to
make the better decision. Ensures safe and fair dealings: The
rules, regulations and bylaws of the Stock Exchanges provide a
measure of safety to the investors. Transactions are conducted
under competitive conditions enabling the investors to get a fair
deal. Aids in financing the Industry: A continuous market for
shares provides a favourable climate for raising capital. The
negotiability and transferability of the securities, investors are
willing to subscribe to the initial public offering (IPO). This
stimulates the capital formation. Dissemination of Information:
Stock Exchanges provide information through their various
publications. They publish the share prices traded on their basis
along with the volume traded. Directory of Corporate Information is
useful for the investors assessment regarding the corporate.
Handouts, handbooks and pamphlets provide information regarding the
functioning of the Stock Exchanges. Performance Inducer: The prices
of stocks reflect the performance of the traded companies. This
makes the corporate more concerned with its public image and tries
to maintain good performance. Self-regulating organization: The
Stock Exchanges monitor the integrity of the members, brokers,
listed companies and clients. Continuous internal audit
safeguards
the investors against unfair trade practices. It settles the
disputes between member brokers, investors and brokers.
REGULATORY FRAME WORK This Securities Contract Regulation Act,
1956 and Securities and Exchange board of India (SEB1) Act, 1992,
provides a comprehensive legal framework. A 3-tier regulatory
structure comprising the ministry of finance, SEB1 and the
Governing Boards of the Stock Exchanges regulates the functioning
of Stock Exchanges. Ministry of finance: The Stock Exchange
division of the Ministry of Finance has powers related to the
application of the provision of the SCR Act and licensing of
dealers in the other area. According to SEBI Act, The Ministry of
Finance has the appellate and the supervisory power over the SEBI.
It has powered to grant recognition to the Stock Exchange and
regulation of their operations. Ministry of Finance has the power
to approve the appointments of executives chiefs and the
nominations of the public representatives in the government Boards
of the Stock Exchanges. It has the responsibility of preventing
undesirable speculation.
The Securities and Exchange Board of India
The Securities and Exchange Board of India even though
established in the year 1988. Received statutory powers only on
30th January 1992. Under the SEBI Act, a wide variety of powers are
vested in the hands of SEBI. SEBI has the powers to regulate the
business of Stock Exchanges, other security and mutual funds.
Registration and regulation of market intermediaries are also
carried out by SEBI. It has responsibility to prohibit the
fraudulent unfair trade practices and insider dealings. Takeovers
are also monitored by the SEBI has the multi pronged duty to
promote the healthy growth of the capital market and protect the
investors.The Governing Board of stockexchanges: The Governing
Board of the Stock Exchange consists of elected members of
directors, government nominees and public representatives. Rules,
by laws and regulations of the Stock Exchange substantial powers to
the executive director for maintaining efficient and smooth day-to
day functioning of Stock Exchange. The Governing Board has the
responsibility to maintain and orderly and well-regulated market.
The Governing body of the Stock Exchange consists of 13 members of
which A. B. C. D. E. Six members of the Stock Exchange are elected
by the members of the Stock Central Government nominates not more
than three members. The board nominates three public
representatives. SEBI nominates persona not exceeding three and The
Stock Exchange appoints one Executive Director. One third of the
elected members retire at annual general meeting (AGM). The retired
member can offer himself for election if he is not elected for two
consecutive years. If a member serves in the governing body for two
years consecutively, he should refrain offering himself for another
two years. Exchange.
The members of the governing body elect the president and
vice-president. It needs to approval from the Central Government or
the Board. The office tenure for the president and vice-president
is on year. They can offer themselves for re-election, if they have
not held for two consecutive years. In that case they can offer
themselves for re-election after a gap of one-year period.
VARIOUS STOCK EXCHANGES IN INDA:List of Stock Exchanges in India
Bombay Stock Exchange National Stock Exchange Regional Stock
Exchanges Ahmedabad Bangalore Bhubaneshwar Calcutta Cochin
Coimbatore Delhi Guwahati Hyderabad Jaipur Ludhiana Madhya Pradesh
Madras Magadh Mangalore Meerut OTC Exchange Of India Pune
Saurashtra Kutch UttarPradesh Vadodara
AMONG THESE STOCK EXCHANGES THERE ARE TWO IMPORTANT, THEY
ARE:
1) NSE 2) BSE
NATIONAL STOCK EXCHANGEThe National Stock Exchange of India
(NSE) situated in Mumbai - is the largest and most advanced
exchange with 1016 companies listed and 726 trading members.
Capital market reforms in India and the launch of the Securities
and Exchange Board of India (SEBI) accelerated the incorporation of
the second Indian stock exchange called the National Stock Exchange
(NSE) in 1992. After a few years of operations, the NSE has become
the largest stock exchange in India. Three segments of the NSE
trading platform were established one after another. The Wholesale
Debt Market (WDM) commenced operations in June 1994 and the Capital
Market (CM) segment was opened at the end of 1994. Finally, the
Futures and Options segment began operating in 2000. Today the NSE
takes the 14th position in the top 40 futures exchanges in the
world. In 1996, the National Stock Exchange of India launched
S&P CNX Nifty and CNX Junior Indices that make up 100 most
liquid stocks in India. CNX Nifty is a diversified index of 50
stocks from 25 different economy sectors. The Indices are owned and
managed by India Index Services and Products Ltd (IISL) that has a
consulting and licensing agreement with Standard & Poor's. In
1998, the National Stock Exchange of India launched its web-site
and was the first exchange in India that started trading stock on
the Internet in 2000. The NSE has also proved its leadership in the
Indian financial market by gaining many awards such as 'Best IT
Usage Award' by Computer Society in India (in 1996 and 1997) and
CHIP Web Award by CHIP magazine (1999). The NSE is owned by the
group of leading financial institutions such as Indian Bank or Life
Insurance Corporation of India. However, in the totally
de-mutualized Exchange, the ownership as well as the management
does not have a right to trade on the Exchange. Only qualified
traders can be involved in the securities trading. The NSE is one
of the few exchanges in the world trading all types of securities
on a single platform, which is divided into three segments:
Wholesale Debt Market (WDM), Capital Market (CM), and Futures &
Options (F&O) Market.
The main objectives of NSE are as follows 1). To establish a
nation wide trading facility for equities, debt and hybrid
instruments 2). To ensure equal access investors all over the
country through communication network. 3). To provide a fair,
efficient and transparent securities market to investors using an
electronic communication network. 4). To enable shorter settlement
cycle and book entry settlement system. 5). To meet current
international standards of securities market. Promoters of NSE:
IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda. Canara Bank,
Corporation Bank, Indian Bank, Oriental Bank of Commerce. Union
Bank of India, Punjab National Bank, Infrastructure Leasing and
Financial Services, Stock Holding Corporation fo India and SBE
capital market are the promoters of NSE. appropriate
NSE Nifty: The S&P CNX Nifty (nicknamed Nifty 50 or simply
Nifty), is the leading index for large companies on the National
Stock Exchange of India. S&P CNX Nifty is a well diversified 50
stock index accounting for 22 sectors of the economy. It is used
for a variety of purposes such as benchmarking fund portfolios,
index based derivatives and index funds. Nifty was developed by the
economists Ajay Shah and Susan Thomas, then at IGIDR. Later on, it
came to be owned and managed by India Index Services and Products
Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL
is India's first specialized company focused upon the index as a
core product. IISL have a consulting and licensing agreement with
Standard & Poor's (S&P), who are world leaders in index
services. CNX stands for CRISIL NSE Indices. CNX ensures common
branding of indices, to reflect the identities of both the
promoters, i.e. NSE and CRISIL. Thus, 'C' stands for CRISIL, 'N'
stands for NSE and X stands for Exchange or Index. The S&P
prefix belongs to the US-based Standard & Poor's Financial
Information Services. NSE other indices:
S&P CNX Nifty CNX Nifty Junior CNX 100 S&P CNX 500
CNX Midcap S&P CNX Defty CNX Midcap 200
BOMBAY STOCK EXCHANGE:The Bombay Stock Exchange Limited
(formerly, The Stock Exchange, Mumbai; popularly called The Bombay
Stock Exchange, or BSE) is the oldest stock exchange in Asia. It is
located at Dalal Street, Mumbai, India. Bombay Stock Exchange was
established in 1875. There are around 5,600 Indian companies listed
with the stock exchange, and has a significant trading volume. As
of October2006, the market capitalization of the BSE was about Rs.
33.4 trillion (US $ 730 billion). The BSE SENSEX (Sensitive index),
also called the BSE 30, is a widely used market index in India and
Asia. As of 2005, it is among the 5 biggest stock exchanges in the
world in terms of transactions volume. History: An informal group
of 22 stockbrokers began trading under a banyan tree opposite the
Town Hall of Bombay from the mid-1850s, 1875, was formally
organized as the Bombay Stock Exchange (BSE).In January 1899, the
stock exchange moved into the Brokers Hall after it was inaugurated
by James M MacLean. After the First World War, the BSE was shifted
to an old building near the Town Hall. In 1956, the Government of
India recognized the Bombay Stock Exchange as the first stock
exchange in the country under the Securities Contracts (Regulation)
Act.1995, when it was replaced by an electronic (eTrading) system
named BOLT,or the BSE Online Trading system. In 2005, the status of
the exchange changed from an Association of Persons (AoP) to a full
fledged corporation under the BSE (Corporatization and
Demutualization) Scheme , 2005 (and its name was changed to The
Bombay Stock Exchange Limited). BSE Sensex: The BSE SENSEX (also
known as the BSE 30) is a value-weighted index composed of 30
scrips, with the base April 1979= 100. The set of companies which
make up the index has been changed only a few times in the last 20
years. These companies account for around one-fifth of the market
capitalization of the BSE. SENSEX, first compiled in 1986 was
calculated on a "Market Capitalization-Weighted" methodology of 30
component stocks representing a sample of large, well-established
and financially sound companies. The base year of SENSEX is
1978-79. The index is widely reported in both domestic and
international markets through print as well as electronic media.
SENSEX is not only scientifically designed but also based on
globally accepted construction and review methodology. From
September 2003, the SENSEX is calculated on a free-float market
capitalization methodology. The "free-float Market
Capitalization-Weighted" methodology is a widely followed index
construction methodology on which majority of global equity
benchmarks are based.
The growth of equity markets in India has been phenomenal in the
decade gone by. Right from early nineties the stock market
witnessed heightened activity in terms of various bull and bear
runs. More recently, the bourses in India witnessed a similar
frenzy in the 'TMT' sectors. The SENSEX captured all these
happenings in the most judicial manner. One can identify the booms
and bust of the Indian equity market through SENSEX. The values of
all BSE indices are updated every 15 seconds during the market
hours and displayed through the BOLT system, BSE website and news
wire agencies. SENSEX calculation: SENSEX is calculated using a
"Market Capitalization-Weighted" methodology. As per this
methodology, the level of index at any point of time reflects the
total market value of 30 component stocks relative to a base
period. (The market capitalization of a company is determined by
multiplying the price of its stock by the number of shares issued
by the company). An index of a set of combined variables (such as
price and number of shares) is commonly referred as a 'Composite
Index' by statisticians. A single indexed number is used to
represent the results of this calculation in order to make the
value easier to work with and track over time. It is much easier to
graph a chart based on indexed values than one based on actual
values. . BSE - other Indices: Apart from BSE SENSEX, which is the
most popular stock index in India, BSE uses other stock indices as
well:
BSE BSE BSE BSE BSE
500 PSU MIDCAP SMLCAP BANK
The Securities and Exchange Board of India The Securities and
Exchange Board of India even though established in the
year 1988. Received statutory powers only on 30th January 1992.
Under the SEBI Act, a wide variety of powers are vested in the
hands of SEBI. SEBI has the powers to regulate the business of
Stock Exchanges, other security and mutual funds. Registration and
regulation of market intermediaries are also carried out by SEBI.
It has responsibility to prohibit the fraudulent unfair trade
practices and insider dealings. Takeovers are also monitored by the
SEBI has the multi pronged duty to promote the healthy growth of
the capital market and protect the investors.The Governing Board of
stock exchanges:
The Governing Board of the Stock Exchange consists of elected
members of directors, government nominees and public
representatives. Rules, by laws and regulations of the Stock
Exchange substantial powers to the executive director for
maintaining efficient and smooth day-to day functioning of Stock
Exchange. The Governing Board has the responsibility to maintain
and orderly and well-regulated market The Governing body of the
Stock Exchange consists of 13 members of which Six members of the
Stock Exchange are elected by the members of the Stock
Exchange.
F. G. H. I.
Central Government nominates not more than three members. The
board nominates three public representatives. SEBI nominates
persona not exceeding three and The Stock Exchange appoints one
Executive Director. One third of the elected members retire at
annual general meeting (AGM).
The retired member can offer himself for election if he is not
elected for two consecutive years. If a member serves in the
governing body for two years consecutively, he should refrain
offering himself for another two years. The members of the
governing body elect the president and vice-president. It needs to
approval from the Central Government or the Board. The office
tenure for the president and vice-president is on year. They can
offer themselves for re-election, if they have not held for two
consecutive years. In that case they can offer themselves for
re-election after a gap of one-year period.SEBI GUIDELINES TO
SECONDARY MARKETS:
The Securities and Exchange Board of India even though
established in the year 1988. Received statutory powers only on
30th January 1992. Under the SEBI Act, a wide variety of powers are
vested in the hands of SEBI. SEBI has the powers to regulate the
business of Stock Exchanges, other security and mutual funds.
Registration and regulation of market
intermediaries are also carried out by SEBI. It has
responsibility to prohibit the fraudulent unfair trade practices
and insider dealings. Takeovers are also monitored by the SEBI has
the multi pronged duty to promote the healthy growth of the capital
market and protect the investors
MANUAL MODE OF TRADING:TRADING PROCEDURE BEFORE ONLINE THE
TRADING RING:
Trading on stock exchanges is officially done in the ring for a
few hours from 11.00 A.M to 2.30P.M. Trading before or after
official hour is called KERB TRADING. In the trading ring space is
provided for specified and non-specified sections. The members of
their authorized assistants have to wear a badge or carry with them
identify cards given by the exchange to enter the trading ring.
They carry a Sauda book or confirmation memos duly authorized by
exchange. The stock exchanges operations at floor level are highly
technical in nature. Non-members are not permitted to enter into
stock market. Hence, various stages have to be completed in
executing a transaction at a stock exchange. The steps involved in
the methods of trading have been given below: A.CHOICE OF BROKER:
The prospective investor who wants to buy shares or the investor
who wants to sell his shares cannot enter into hall of the exchange
and transact business. They have to act through only member
brokers. They can also appoint their bankers for this purpose.
Since, bankers can become members of stock exchange as per the
present regulations. So, the first task in transacting business on
stock exchanges is to choose a broker of repute or banker. Such
peoples can ensure prompt and quick execution of a transaction at
the possible price. At present there are 4500 authorized brokers in
ISE. PLACEMENT OF ORDER: The next step in planning of order for the
purchase or sale of Securities with the broker. The order is
usually 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 order, limit order,
immediate or cancel order, discretionary order, limited
discretionary order, open order and stop loss order. ENTRY OF ORDER
INTO THE BOOKS:
After receiving the order, the member enters them in his books
and the purchase and sale orders are distributed among his
assistants to handle them separately in non-specified and odd-lots.
EXECUTION OF ORDER: Big brokers transact their business through
their authorized clerk. Small ones out their business personally.
Orders are executed in the trading ring of the ISE.Thisworks from
12:00 noon to 2:00 p.m discretionary order on all working days from
Monday to Friday and a special hour session on Saturday. The floor
of the stock exchange is divided into number of markets (pits)
according to the nature of security deal in. The authorized
clerk/broker goes to the pit and jobbers offer two way quotes for
the scrips they deal in. they act as market makers and provide
liquidity to the market. The system has been designed to get the
bet lids and offers from the jobbers book as well as the best buy
and sell orders from the book. If the quotation is not acceptable
to the brokers, he may make a counter bid/offer. Ultimately the
bargains may be closed at a price mutually acceptable to both the
parties. In case the quotation is not acceptable to him, the broker
may go to another dealer and make a bargain. All bargains on the
stock exchanges are settled by word of mouth and there is no
written contract signed immediately by the parties concerned. Once
the transaction is finalized, the deals are recorded in a Chaupri
Rough notebook or transaction note or confirmation memos. Soudha
block books or confirmation memos are provided by the stock
exchange. The details are recorded in these books also. The prices
at which different scrips are traded on a particular day published
on the next day in the newspapers. An authorized representative of
the stock exchange is also present in the hall to supervise the
trading. PREPARATION OF CONTRACT NOTES
Usually, the authorized clerks enter the particulars of the
business transacted during a particular day in Kacha Sauda Book
they are transferred to Pucca Sauda Book, which are maintained
separately for the ready delivery contracts. Then the
broker/authorized clerk prepares a contract note. A contract note
is a written agreement between the broker and his client for the
transaction executed. It contains the details of the contract made
for the purchase/sale of Securities, the brokerage chargeable, name
of the company, number of shares bought/sold, net rate, etc., it is
prepared in a prescribed from and a copy of it is also sent to the
client. PLACING ORDER WITH THE BROKER: The next step is placing an
order for the purchase/sale of securities with the broker. The
order is usually placed over telephone, fax. It can also take the
form of telegram or letter or in person. The order placed may be
any of the following varieties (largely classified on the basis of
price limits that it imposes.). AT BEST ORDER (OR) BEST RATE ORDER:
Buy 1000 XYZ ltd., it does not specify any price. It means buy XYZ
Ltd. Securities at the prevailing market price. These are executed
very fast as there is no price limits.
LIMIT ORDER: Buy 100 XYZ Ltd. At Rs 100, it is an order for the
purchase of shares at a specified price by the client.(Rs 100)
LIMITED DISCRETIONARY ORDER: Buy 1000 XYZ Ltd., around Rs.100.
it gives discretion to the broker. The price can be a little above
Rs 100. How much discretion is implied depends on how the broker
and client define around. OPEN ORDER: It is an order to buy or sell
without fixing any time or price limit on the execution of the
order. STOP LOSS ORDER: Buy 100 XYZ Ltd. @ Rs 12 to stop Rs 10. It
means buy 100 XYZ Ltd securities at the market rate of Rs. 12 but
if on the same day the price falls to Rs. 10 immediately sell of
the securities /shares. Thus an attempt is made to limit the loss
of sudden unfavorable shift in the market. NET RATE ORDER: Buy 1000
XYZ Ltd. @Rs.30 net would mean that the client is willing to buy
1000 XYZ Ltd. For no more than Rs.30 per security inclusive of
brokerage payable to the broker. Net rate is purchase or sale rate
minus brokerage. MARKET RATE ORDER: Market rate is net rate plus
brokerage for purchase and net minus brokerage for sale. So, Buy
1000 XYZ Ltd. @Rs.30 market would mean that the client is willing
to pay Rs.30 plus brokerage for each security of XYZ Ltd.
DISADVANTAGES OF MANUAL TRADING:1) Manual records are very
difficult to be maintained safe 2) Manual records are subject to
greater human error 3) Business can see itself in fines and
penalties if records are lost
4) Manual records are easier to be falsified, modified, altered
or vanished, as compared to computerized records which become very
safe when using passwords, firewalls, and back-ups. DEPOSITORY
SYSTEM: A "Depository" is a facility for holding securities, which
enables securities transactions to be processed by book entry. To
achieve this purpose, the depository may immobilize the securities
or dematerialise them (so that they exist only as electronic
records).India has chosen the dematerialisation route. In India, a
depository is an organisation, which holds the beneficial owner's
securities in electronic form, through a registered Depository
Participant (DP). A depository functions somewhat similar to a
commercial bank. To avail of the services offered by a depository,
the investor has to open an account with a registered DP.
BENEFITS OF DEPOSITORY SYSTEM:In the depository system, the
ownership and transfer of Securities takes place by means of
electronic book entries. At the outset, this system rids the
capital market of the danger related to handling of paper. NSDL
provides numerous direct and indirect benefits, like:
Elimination of bad deliveries-in the depository environment,
once holding of
an investor are Dematerialized, the question of bad delivery
does not arise i.e. they cannot be hold under objection.
Elimination of all risks associated with physical
certificates-dealing in physical Securities have associates
security risks of stocks, mutilation of certificates, loss of
certificates during movements through and from the registrars, thus
exposing the investor to the cost of obtaining duplicate
certificates and advertisement, etc.., This problem does not arise
in the depository environment. SERVICES AVAILABLE IN DEPOSITORY
SYSTEM: NSE AND BSE.
NSDL: NATIONAL SECURITY DEPOSITORY LIMITED Although India had a
vibrant capital market which is more than a century old, the
paper-based settlement of trades caused substantial problems like
bad delivery and delayed transfer of title till recently. The
enactment of Depositories Act in August 1996 paved the way for
establishment of NSDL, the first depository in India. This
depository promoted by institutions of national stature responsible
for economic development of the country has since established a
national infrastructure of international standards that handles
most of the securities held and settled in dematerialized form in
the Indian capital market. Using innovative and flexible technology
systems, NSDL works to support the investors and brokers in the
capital market of the country. NSDL aims at ensuring the safety and
soundness of Indian marketplaces by developing settlement solutions
that increase efficiency, minimize risk and reduce costs. At NSDL,
we play a quiet but central role in developing products and
services that will continue to nurture the growing needs of the
financial services industry. In the depository system, securities
are held in depository accounts, which is more or less similar to
holding funds in bank accounts. Transfer of ownership of securities
is done through simple account transfers. This method does away
with all the risks and hassles normally associated with paperwork.
Consequently, the cost of transacting in a depository environment
is considerably lower as compared to transacting in
certificates.
Promoters / ShareholdersNSDL is promoted by Industrial
Development Bank of India Limited (IDBI) - the largest development
bank of India, Unit Trust of India (UTI) - the largest mutual fund
in India and National Stock Exchange of India Limited (NSE) - the
largest stock exchange in India. Some of the prominent banks in the
country have taken a stake in NSDL. Promoters
Industrial Development Bank of India Limited (Now, IDBI Bank
Limited) Unit Trust of India (Now, Adminstrator of the Specified
Undertaking of the Unit Trust of India) National Stock Exchange of
India Limited
Other Shareholders
State Bank of India Oriental Bank of Commerce Citibank NA
Standard Chartered Bank HDFC Bank Limited The Honkong and Shanghai
Banking Corporation Limited Deutsche Bank Dena Bank Canara Bank
Union Bank of India
CDSL: CENTRAL DEPOSITORY SERVICES LIMITED: A Depository
facilitates holding of securities in the electronic form and
enables securities transactions to be processed by book entry by a
Depository Participant (DP), who as an agent of the depository,
offers depository services to investors. According to SEBI
guidelines, financial institutions, banks, custodians,
stockbrokers, etc. are eligible to act as DPs. The investor who is
known as beneficial owner (BO) has to open a demat account through
any DP for dematerialization of his holdings and transferring
securities. The balances in the investors account recorded and
maintained with CDSL can be obtained through the DP. The DP is
required to provide the investor, at regular intervals, a statement
of account which gives the details of the securities holdings and
transactions. The depository system has effectively eliminated
paper-based certificates which were prone to be fake, forged,
counterfeit resulting in bad deliveries. CDSL offers an efficient
and instantaneous transfer of securities.CDSL was promoted by
Bombay Stock Exchange Limited (BSE) jointly with leading banks such
as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank,
Standard Chartered Bank, Union Bank of India and Centurion
Bank.
Promoters &shareholders CDSL was promoted by Bombay Stock
Exchange Limited (BSE) in association with Bank of India, Bank of
Baroda, State Bank of India and HDFC Bank. BSE has been involved
with this venture right from the inception and has contributed
overwhelmingly to the fruition of the project. The initial capital
of the company is Rs.104.50 crores. The list of shareholders with
effect from 11th December, 2008 is as under.
Sr. No.
Name of shareholders
Value of holding (in Rupees Lacs) 3,825.46 1,000.00 1,000.00
1,000.00 1,500.00 750.00 674.46 200.00 200.00 200.00 100.00 0.08
10,450.00
% terms to total equity 36.61 9.57 9.57 9.57 14.36 7.18 6.45
1.91 1.91 1.91 0.96 -100.00
1 Bombay Stock Exchange Limited 2 Bank of India 3 Bank of Baroda
4 State Bank of India 5 HDFC Bank Limited 6 Standard Chartered Bank
7 Canara Bank 8 Union Bank of India 9 Bank of Maharashtra 10 The
Jammu and Kashmir Bank Limited 11 The Calcutta Stock Exchange
Association Limited 12 Others TOTAL
DEMATERIALIZATION
Dematerialization is a process by which physical shares of
investors are converted to an equivalent number of Securities in
electronic form and credited in the investors account with his
Depository Participant. Dematerialized trading is now compulsory
for all investors. Beginning of first week of January 1999,
investor can trade in specific scripts in the Demoralization form.
They can provide and receive delivery only in a Dematerialized form
and share certificate will not be changed for these scripts. A
depository is an organization where Securities of shareholder are
held in the electronic form at the request of the shareholder
through Depository Participant (DPs). The system is comparable to
that in a bank. If an investor wants services offered by a
depository, he would have to open an account with it through a
DPsimilar to opening an account with any other branches of the bank
in order to avail of its services. Dematerialization is a process
by which physical certificates of an investor are taken back by the
company/registrar and actually destroyed and an equivalent number
of Securities are credited in the depository account of those
investors. A Depository Participant is investors agent in the
system. He maintains investors Securities account and intimates the
status of holdings from time to time to the investor.
FEATURES OF DEMAT:
In case you want to convert your existing shares into Demat
format, you can view securities available for Demat You can view
the details of your transactions including settlement date, pay in
date, pay out date using the View Settlement calendar option
OPENING CLEARING ACCOUNTS FOR SETTLEMENT OF TRADES:
All the trades executed at the exchanges are settled by the
clearing member (CM), as in the case of Securities in the physical
form. To settle trades in Demat segment each CM should open one
clearing account with any of the DP. The procedure for opening
clearing accounts is: Approach a DP. Fill up an account opening
form. Sign on an agreement with the DP. Application is forwarded to
NSDL by DP. NSDL allots a number identified as CM-BP-ID. DP opens
account and an account number is providing along with CM-BP-ID to
the clearing member. After opening an account with the DP the
investor should surrender the physical certificates held in his
name to a depository participant. These certificates will be sent
to the respective companies where they will be cancelled after
dematerialization and will credit the investors account with the
DP. The securities on dematerialisation will appear as balances in
the depository account. These balances can be transferred like the
shares held in physical form. Dematerialised shares are in the
fungible form and do not have any distinctive or certificate
numbers .The securities in the demat can again be converted into
physical form which is called as rematerialisation.
Safety to the investor * Securities Exchange Board of India
(SEBI) has laid down certain rules and regulations for getting
registered as a depository participant. With the recommendation of
the Depository and SEBI's own independent evaluation a DP will be
registered under SEBI. * The investors account will be
credited/debited by the DP only on the basis of valid instruction
from the client. * The system driven mandatory reconciliation is
done between the DP and NSDL. * Periodic inspections of both DP and
R&T agent are conducted by NSDL * The data interchange between
NSDL and its business partners is protected by standard protection
measures such as encryption. * No direct communication links exist
between two business partners and all
communications are routed through NSDL. * A statement of account
is received periodically by the investors. NSDL sends statement of
account to a random sample of investors a s a counter check. * The
investor has the right to approach NSDL if the grievances of the
investors are not resolved by the concerned DP. Advantages of
dematerialization: There is no risk due to loss on account of fire,
theft or mutilation. There is no chance of bad delivery at the time
of selling shares as there is no signature mismatch. Transaction
costs are usually lower than that in the physical segment. The
bonus /rights shares allotted to the investor will be immediately
credited into his account. Share transactions like sale or purchase
and transfer/transmission etc. can be effected in a much simpler
and faster way.
A safe and convenient way to hold securities ; Immediate
transfer of securities; No stamp duty on transfer of securities;
Elimination of risks associated with physical certificates such as
bad delivery, fake securities, delays, thefts etc.; - Reduction in
paperwork involved in transfer of securities; - Reduction in
transaction cost; - No odd lot problem, even one share can be sold;
- Nomination facility; - Change in address recorded with DP gets
registered with all companies in which investor holds securities
electronically eliminating the need to correspond with each of them
separately; - Transmission of securities is done by DP eliminating
correspondence with companies; - Automatic credit into demat
account of shares, arising out of bonus/split/consolidation/merger
etc. - Holding investments in equity and debt instruments in a
single account. Disadvantages of Demat account There is no as such
disadvantage of Demat account. And even if there is any
disadvantage of Demat account than by law, In India we Must have to
use Demat accounts to do share transactions.
A. Procedure for purchasing dematerialized securities
The procedure for purchasing dematerialized securities is also
similar to the procedure for buying physical securities.
1.
Investor instructs DP to receive credits into his account in the
prescribed form. There may be one time standing instruction or
separate instruction each time to receive credits.
2. Investor purchases securities in any of the stock exchanges
linked to depository through a broker. 3. Broker receives payment
from investor and arranges payment to clearing corporation. 4.
Broker receives credit to securities in clearing account on the
payout day. 5. Broker gives instructions to DP to debit clearing
account and credit clients account. Investor receives shares into
his account by way of book entry.
B. Procedure of selling dematerialized securities The procedure
for selling dematerialized securities in stock exchanges is similar
as selling physical securities. The only major difference is that
instead of delivering physical securities to the broker, the
investor instructs his DP to debit his demat account with the
number of securities sold by him and credit the brokers clearing
account. The procedure for selling dematerialized securities is
given below:
1. Investor sells securities in any of the stock exchange linked
to depository through a broker. 2. Investor instructs his DP to
debit his demat account with the number of securities sold and
credit the brokers clearing account. 3. Before the pay-in-day,
broker of the investor transfers the securities to clearing
corporation. 4. The broker receives payment from the stock
exchange. 5. The investor receives payment from the broker for sale
of securities in the same manner as received in case of sale of
physical securities.
The Evolution of Stock Brokers with Online TradingAn online
stock broker is an investors means of buying and selling shares via
the Internet, just like a regular stock broker, wherein an
individual or a brokerage firm acts as ones link to the stock
exchange. Are such services necessary? Is it, after all, not true
that anyone can engage in online trading today, and that it is
possible to invest in stocks with ones own computer?The fact is,
only a registered (SEBI) stock broker can buy and sell shares in
the stock market. Such an individual is registered on one or many
stock exchanges and is authorized to transact on behalf of others.
Apart from that, an online stock broker is very valuable to
investors who are not
technically inclined and have no or little prior knowledge of
stock trading. Such investors can use their own online stock
trading accounts to obtain necessary information and place online
trades at any time of the day. Others, however, still require a
human interface - a real person who will place trades on their
behalf. . INTRODUCTION TO ONLINETRADING The Internet revolution has
been changing the fundamentals of our society. It shapes the way we
communicate and the way we do business. It brings us closer and
closer to vital sources of information. It provides us with means
to directly interact with service-oriented computer systems
tailored to our specific needs; therefore, we can serve ourselves
better by making our own decisions. This prevailing shift of the
business paradigm is reshaping the financial industry and
transforming the way people invest. In the old days, because of the
limitations of communications technology, Wall Street was the
center for most of the Stock Exchange and Brokerage firms. Today,
at this millennial transition, investors can use revolutionary
Internet Client-Server technology to trade stocks nearly anywhere,
anytime, independent of brokers' fees and service
limitations.Definition: Online Trading
The act or practice of buying and selling securities over the
Internet. Generally speaking, online trading occurs when an
investor makes an order to a broker online; the broker then
executes the order through the ordinary means. Online trading
became more common in the 1990s as more brokerages offered their
services online, often for a small fee rather than a commission on
the trade. Online trading should be distinguished from electronic
trading, which occurs on an exchange. See also: Discount brokerage.
Online trading in India is the internet based investment activity
that involves no direct involvement of the broker. There are many
leading online trading portals in India along with the online
trading platforms of the biggest
stock houses like the National stock exchange and the Bombay
stock exchange. The total portion of online share trading India has
been found to have grown from just 3 per cent of the total turnover
in 2003-04 to 16 per cent in 2006-07
Facilities of the online trading in India:The investor has to
register with an online trading portal and get into an agreement
with the firm to trade in different securities following the terms
and conditions listed down on the agreement. The order processing
is done in correct timings as the servers of the online trading
portal are connected to the stock exchanges and designated banks
all round the clock. They can also get updates on the trading and
check the current status of their orders either through e-mail or
through the interface. Brokerage also provides research content on
their websites, such that the clients can take their own decisions
on stocks before investing.
Products and services of the online trading in India:Varieties
of financial products and services of the online trading are
available in India such as: Life insurance Equities, Portfolio
management Mutual funds Loans General insurance Share trading
Commodities trading Financial planning.
National stock exchange and Bombay stock exchange: In spite of
many private stockhouses at present involved in online trading in
India, the NSE and BSE are among the largest exchanges. They handle
huge daily trading volumes, supporting large amounts of data
traffic, and possessing a countrywide network. The automated online
systems used for trading by the national stock exchange and the
Bombay stock exchange are the NIBIS or NSE's Internet Based
Information System and NEAT for the national stock exchange and the
BSE Online Trading system or BOLT for the Bombay stock
exchange.
.Online trading is termed as selling products or good services
through Internet. Customers willing to purchase the product should
provide the credit card details and personal contact information
online and once the payment is being made the product is shipped to
the address of the customer as provided earlier generally after two
business days. The product is shipped to the customer from the
retailer only.
Online trading is treated as the most effective process to make
money with the help of Internet by sitting at home only. But is not
easy and simple as it requires constant supervision and once people
attains the appropriate skill can gain profit in huge amount. In
order to make a business successful a plan need to be prepared
first then multiple sources of income policy should be opened so
that the plan at later time should be incorporated in to the
business.
Companies provide Online Trading in India:-
Online Trading in India:: India Stock :: A1 Technology Online
Trading :: Best online trading :: Bonanza Online Trading ::
BullishIndian.com Online Trading :: Express Computer Online Trading
:: Geojit Securities Online :: ICICI Online Trading :: Indiabulls
Online :: India Insurance :: BSEIndia :: JV Financial Online ::
Kotak Securities Online Trading :: Mansukh Securities Online
Trading :: Quote.com Online Trading :: SHCL Online Trading :: STC
Online Trading :: Technical Analysis Trading :: Union Bank of India
Online Trading :: Best Online Trading
FEATURES OF ONLINE TRADING: The Online Trading is having
manyfeatures which make it most suitable for the investors to go
for. Some of these features are as follows: Features 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
Control of your money: One of the great appeals of using an
online trading account is the fact that the account belongs to you,
and is under your direct control. When you want to buy or sell
stock, you no longer need to call your broker on the phone; hope
that he is in the office to place your order; possibly argue with
the broker about the order; and hope that the transaction is
executed instantly.
Access to Market: 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.
Ensures the best price for Investor: Every broker house aims at
providing the investor with the best price available. Also due to
the high level of transparency with regard to display of
information relating to the specific stocks and company profiles,
you will be able to get the best quote for your orders. Offers
grater transperancy: Online trading offers you greater transparency
by providing you with an audit trail. This involves a complete
integrated electronic chain starting from order placement, to
clearing and settlement and finally ending with a credit into your
depository
account. All these stages are subject to inspection, thus
bringing in transparency into the system. Enables hassle free
trading: Online trading integrates your bank account, your trading
account and your demat accounts, which leads to easy and paperless
trading for you.
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
discovered when it is too late.
Your Bank, Depository and online account are integrated for your
convenience. Various broking houses provide access to many of the
popular banks.
Broking houses work hard to keep our account and personal
information secure. From updated security technology to advanced
fraud prevention measures, they have the people and tools in place
to provide a strong defense against electronic scams and fraud.
BENEFITS OF ONLINE 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 case he spot an opportunity in the market he can
immediately allocate money from his savings account to his trading
account and make profits.
6.) Unparalleled Safety:Most sites are secure using 128-bit
algorithms -highest available commercially anywhere in the world.
Moreover even if somebody broke in and tampered with 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 hence increase in
the bargaining power of the investors. The entire communication
between the investor, broker and exchange would take place within
milliseconds.
PROBLEMS OF ONLINE BROKINGThere is a flip side to everything and
online trading is no exception.
Chart
Source:- www.lse.co.in27% Loyality is of traditional broker 23%
people says that online trading is more costly than manual trading.
21% people not prefer online trading because of lack of
knowledge.
So, the main problems of online trading are as follows: 1.)
"Server not found": This may appear on ones screens when he is
desperately trying to get out of an unprofitable position. Some of
the online sites are providing a telephone number for use in case
their sites are overloaded or their server down. 2.) Connectivity
of the Broker with NSE: Recently ICICI Direct had a connectivity
problem with the NSE for two and halfhours during trading hours.
This problem is rare but be alive to its possibility. 3.) Cyber
attack: In the event of a malicious attack on the systems of ones
broker he is protected only if the company is taking proper
precautions against such attacks and if proper backup is regularly
been taken. He may like to choose a brokerage that has a stated
security policy and contingency plan in place. 4.) Non-availability
of a seamless interface: As a client one will access the NSE
through a server of the online brokerage and this may involve
queuing delays. If a number of client access the server the server
takes its own time sending the orders to the NSE server. He must
check out the seamlessness of this interface before selecting an
online brokerage. The faster the orders are processed the more
seamless is the interface. 5.) Non- availability of personalized
advice:
If one like to ask his broker "Aaj kya achcha lag raha hai" he
may not be able to do so. If he want advice on a particular stock
in his portfolio he may not even be able to get that. 6.) Margin:
If Internet trading alone is not fast and furious enough; many
people are trading on margin. That is where the brokerage firm
lends you money by leveraging his account, allowing him to buy a
large amount of securities by putting up only a small amount of
money. He may have forgotten what he read in the small print of his
agreement, but the brokerage firm has the right to change the
maintenance margin requirements without any warning or notice to
him. In fact, the firm has the right to liquidate his securities
holdings (and it can pick and choose which ones) without any notice
to one if he fail to meet the margin call. And there he was
leveraged to the hilt, hoping to hit a home run when he discovered
that he is required to make a large deposit that he cannot make.
The next thing one know, the firm is selling off his securities at
a point in time that is not the best for him. These are the perils
of trading on margin.
7.) Little use of advisory services: The advisory services being
promised by the brokers would be of little use to investors looking
for an insight into the market. Many would not like to rely on
research reports, which are there for all. So, net investors will
have to do their own research and take their own decision, whether
wild or wise. 8.) Increased charges: Some of the brokers are of the
view that they would have to provide advisory services to the
customers. But with increased volumes, they will have to follow the
international practice of charging a little more than the normal
charges from a customer looking for personal advice.
WHY PEOPLE ARE BENDING TOWARDS ONLINE TRADINGSeveral broking
houses now offer online trading facilities. You can trade online
with e-brokerages such as ICICI Direct, Kotakstreet, India bulls,
India info lines 5paisa.com and HDFC securities. If you are already
comfortable trading with your regular broker, here are few reasons
why you may consider switching to trading online, or at least
another avenue of trading. an obvious advantage of online trading
is that your transaction would be virtually paperless. Your trading
account would be linked to your demat and bank account, ensuring a
smooth transaction process. This is especially helpful in the
extent T+2 settlement system, where you have just two days to
settle your transaction. The normal process of issuing of delivery
note, in case of a sale, or arranging for a payment in case of
purchaser of shares, is all taken care of the minute your order is
executed online. The absence of manual intervention ensures that
you are completely in control of all transaction. There is also
little room for error, as your order is always confirmed before it
is executed. You can also make better decision as you have a clear
record of all your previous transaction. When you trade offline, a
demat statement is normally sent to you only on a quarterly basis
.keeping track of your portfolio can be a hassle in such a case.
The inter net can provide a new sense of control over your
financial future. The amount of investment information available
online is truly astounding. Its one of the best aspect of being a
wired investor for the first time in history, any individual with
an internet connection can: Know the price of any stock at any time
Review the price history of any stock in chart format Follow market
events in-depth Receive a wealth of free commentary and analysis
about stock markets and globe economy. Conduct extensive financial
research on any company Talk with other investors around the
world
At investsmart you can get real-time stock quotes, daily
roundups of the stock market, experts commentary, and a deep
community of fellow investors.
Convenience is probably the greatest advantage online trading
offers investors. if dont have time to trade during market hours
,perhaps you are at work, you can log on the web-trading site and
place your order offline, during off market hours. Your order would
join the queue and be expected the next day. You would need to
enjoy a good relationship with your broker, for you to be able to
reach him in the late hours. For non-resident Indians (NRI),
trading online is perhaps their easiest option to invest in the
Indian stock markets. What is more, the time difference, in some
cases, can work to their advantage .Antony, an NRI-based in New
York, places his order in the evening after work, when it is day
time India and the markets are open. We also have access to
considerable information online. By just logging on to ICICI direct
online, for instance, we can get the latest news, market
information and company research. Moreover, if our connection is
maddeningly slow and we want to get your order executed
immediately, most e-brokerages also provide a facility to trade
offline by placing our order via the phone.
PROCEDURE FOR ON-LINE TRADING:
An Investor interesting in trading through Internet shall such
as filling the account opening form of -broker, copies of identity
proof have to, firstly
register himself with an Internet brokerage firm. Some
formalities, copy of residence proof are made to register himself
with the e-trader. Secondly, the investor would be required to open
a bank account with a scheduled bank and sufficient balance should
be kept in the account. Thirdly he would be required to open
account with a depository participant because only dematerialized
shares can be traded on Internet.
The client places order via the net by logging on to his Brokers
site. The broker accepts and executes the order and places it with
the exchange
The exchange accepts the order after checking the share limit
for the day.
The broker makes the payment either directly via the client bank
account or pays through its own account and recovers it later from
the client. The exchange receives money and completes the
settlement. The client is intimated about the settlement either
through the demat or via e-mail.
So, generally following steps are followed while doing the
trading through the Internet:
Step-I: Those investors interested in doing the trading over
Internet system, that is,NEAT - ISX (NSE), should approach the
brokers and register with the Stock Broker. Step-2: After
registration, the broker will provide to them a login name,
password and a personal identification number (PIN). Step-3: Actual
placement of an order, Using the place order window as under can
then place an order: (a) First by entering the symbol and series of
stock and other parameters such as quantity and price of the scrip
on the place order window. (b) Second, fill in the symbol, series
and the default quantity. Step-4: It is the process of review.
Thus, the investor has to review the order placed by clicking the
review option. He may also re-set to clear the values. Step-5:
After the review has been satisfactory; the order has to be 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 ten seconds is there in executing the trade. Step-8: It is
regarding charging payment, for which there are different modes.
Some brokers will take some advance payment from the, investors and
will fix their trading limits. When the trade is executed, the
broker will ask the investor for transfer of funds by the investor
to his account.
When was online trading introduced in INDIA?Online trading
started in India in February 2000 when a couple of brokers started
offering an online trading platform for their customers.
THE MECHANICS OF ONLINE TRADINGCLIENT BROKER STOCK EXCHANGE
Places an order on the net on the brokers website through the
distinctive I.D. code The settlement of the deal (buy/sell order)
gets reflected in his Demat account.
Accepts the order, Checks the clients Identity and places the
order with the stock exchange
Accepts the order after checking the scrip limit of the broker
for the day
Executes the order
Pays the Exchange
The client is though his intimated about owns account the
execution of The benefits of investor due to Onlinereceives it and
Investing: the deal by e-mail. from the client Pays the broker
account. pending physical delivery.
Receives the money and completes the settlement
a) Independence and freedom due to enjoyed by an individual
access to the markets: This is conceivably the greatest advantage
of online brokerages. A novice investor with an Internet connection
can know there all time stock quotes, historical stock price
trends, have a handle on market events, access vast amounts of
economic and market analysis, do research on firms, and interact
with other investors via forums or chat rooms. This, in combination
with time, can transform even the most novice investor with an
active interest in investments into a knowledgeable and powerful
investor. b) Elimination of the middle man: Investing online gives
the investor a sense of control over their wealth. Buying and
selling of stock no longer requires another individual to carry it
out. It saves the investor the added worries that come with busy
phone lines; broker not being in, etc. when wanting to do an
important trade. It can be done whenever and wherever by the
Investor themselves. c) Elimination of Losses on account of
Brokers: Most brokers live on commissions, hence the tactics used
by them are in the favor of the broker first, the brokerage house
next and finally the client. Online brokerages pay financial
advisors a fixed salary, thus eliminating the chance for an
investor doing unnecessary trades for the benefit of the brokerage
firm and the broker. d) Inexpensive and affordable commission
charges: Commissions per trade online are much lower than when
compared to that charged by traditional brokerage houses like
Merrill Lynch, etc. This is the fulcrum on which online brokerages
leverage. Cheap transaction costs along with the immense amount
accessible online are the biggest reasons for the clients to move
online. Traditional brokerage houses e) Internet as an
InformationSuperhighway: Information related to stocks, company
Fundamentals, etc., which were once only available to licensed
brokers, are now at the finger tips of anyone and everyone. Online
brokerages are inconstant endeavor to bridge the gap between the
investor and the market. f) Diverse range of investment products
and choices: Online brokerages are offering more Products to the
consumer, so as to give the consumer a wider choice and also to
accommodate consumers that have niche tastes. Investors can invest
in stocks, bonds, mutual funds, mortgages. g) Speed of trade
execution: Keeping time in mind, online trading is much quicker as
far as accessibility and availability to investment information and
execution of trades areconcerned. Online have decreased the time
for total completion of a trade from the regular T+3 days to a
matter of minutes. The costs borne by an Individual Investor from
Online Investing a) Technical Reliability: The greatest
disadvantage of online trading is the inability of a network to be
fail-safe. Computers in spite of the technological advances are by
no means perfect. There are various things that could go wrong like
failure to log on to the network, network blackout due to failure
power, server crash resulting in site failure, traffic overload
thus causing site freeze. Site freeze can happen on extremely
demanding days with large amounts of orders going over the
networks.
b) The investor is alone: Another disadvantage may be the
penalty of a bad investment. The do it yourself attitude that
empowers the investor over his own money, can give a sense of
autonomy previously not experienced when dealing with traditional
brokerages. But it can also spell investment failure.
The Limitations of Online Investing to an individual investor:
Besides advantages and disadvantages, there exists the possibility
of limitations of what online brokerages can do for an individual
investor. Though the Internet has allowed more players into the
investment playing field, some investors like the institutional
investors still have an advantage over the individual investors in
spite of the Internet and all its advantages. It can be assertively
said, Size does matter. Firstly, because of the sheer size of
resources and contacts, institutional investors almost always get
exclusive access to the hottest Initial Public Offering (IPO) deals
before it goes into the markets. Individual investors usually gain
access to these stocks after the initial price gain is already
lost. Online brokerages do offer IPO deals provided the trading
account has between $100,000 to $500,000.
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.
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 any clause that is
less stringent/contrary to the conditions stipulated is the model
agreement.
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 tothe 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 within 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 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.
Enforcement: A separate working group has been set to look into
thesurveillance 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. STOCK MARKET TRADING
ON INTERNET The major events that will take place in the Indian
Capital Market are introduction of index-based futures trading on
internet. Trading on internet means that the investors will
actually buy and sell the stocks on-line through the net. A
committee was setup by SEBI to develop regulatory parameters for
use internet trading. SEBI approved the report on the committee.
SEBI decided that internet trading could take place in India within
the existing legal framework through use of order routing system,
which will route order from client to brokers, for trade execution
on registered stock exchanges. The broad also took note of the
recommended minimum technical standards for ensuring safety and
security of transaction
between clients and brokers, which will be forced by the
respective stock exchanges. Easier transaction processing Profit in
time: Investor can make profits by selling shares when the going is
good. They do not have to instruct their brokers on the cut off
price to sell shares. Ease and transparency: Since the broking,
bank and demat account are all electronically connected, all
transaction get updated, demat account shows the latest
stockholding statement while the bank account shows the balance
amount after buying or selling of shares. Precaution: Check for
hidden costs of brokers age. Beware of net seamstress. Never double
click the mouse during execution of trade avoids cyber cafes and
change password regularly. Less fees: shares traded online require
no human intervention to match buys and sells. This means that
commission costs are cut dramatically for the frequent
investor.
Market timings:
Trading on the derivatives segment takes place on all days of
the week (except Saturdays and Sundays and holidays declared by the
Exchange in advance). The market timings of the derivatives segment
are: Normal Market / Exercise Market Open time Normal market close
15:30 hours Set up cut of time for Position limit/Collateral value
15:30 hrs Trade modification end time / Exercise Market 16:15 hours
: : till : 09:55 hours :
Internet Based Trading through Order Routing SystemsInternet
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