A study on Online

Stock Trading in India

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A study on Online Stock trading in India

By


Padmanabhan K

REGN. NO.: A9C7510365



MADURAI KAMARAJ UNIVERSITY
DIRECTORATE OF DISTANCE EDUCATION
PALKALAI NAGAR, MADURAI 625 021


A project report submitted in partial fulfillment of the requirement for
the Degree of Master of Business Administration (MBA)
In the Madurai Kamaraj University


Batch: 2009-11




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GUIDE CERTIFICATE


This is to certify that the project work entitled A study on Online
Stock Trading in India is a bonafide project work carried out by
Padmanabhan K Enrollment No.: A9C7510365 in partial fulfillment
for the award of degree of MBA of Madurai Kamaraj University
under my guidance. This project work is original one and not submitted
earlier for the award of any degree / diploma elsewhere.




Students Signature Signature of the Guide








Date:



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Guides Bio-Data

Name: Rakhi Mittal

Father Name: Dr.S.C.Mittal

Qualification: B.E.,M.Tech

Date of birth: 11 Aug78

Communication Address: 1547, 10
th
Main, I Cross, HAL III Stage,
Kodihalli, Bangalore-560008

Nationality: Indian


Academic Details

Course Name of the College/University Duration
M.Tech (IT) Punjabi University, Patiala 2 Years
B.E.(CS&E) Karnataka University, Dharwad 4 Years


Job Experience

Company Year Designation
New Horizon College Of Engg 2008 till
date
Asstt Professor
Krishna Institute of Engg &
Technology
2000 2008 Asstt Professor

I declare that the above details are true to the best of knowledge.



Guides Signature




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DECLARATION BY THE CANDIDATE


I Padmanabhan K hereby declare that the project A study on Online
Stock Trading in India submitted to the MADURAI KAMARAJ
UNIVERSITY in the partial fulfillment of requirement for the award of
the degree of MASTER OF BUSSINESS ADMINISTRATION is a
record of original project done by me under the supervision of Ms Rakhi
Mittal.




Enrolment No: A9C7510365

Date:





Signature


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ACKNOWLEDGEMENT

At the outset, I wish to express my sincere thanks to
the almighty for showering his blessings on me to complete this
project. Success in not a destination but a journey- it is often said. I
realized it even better during course of creating this project. With this
project I hope to develop a futuristic view of industrys progress. I may
not have come this far without help, guidance and support of certain
people who acted as guide, friend and torchbearers along the way.
I feel it my profound privilege to express my most sincere
gratitude and indebtedness to Mrs. Chandra Iyer and Mr.Ryan Colaco,
Sr Manager, Axis Bank who had introduced me to world of online
trading 6 years back by gifting me 100 shares of axis bank as result I
had to open up my 1
st
demat account with icicidirect. Today I along
with my wife and friends are involved in intra-day trading using tips
from various trading agencies.
Last but not least I like to thank my parents, my beloved brother,
and friends & colleagues for their moral support for completing this
project work successfully

PADMANABHAN KRISHNAMURTHY


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Abstract


Online services offer customers a splendid display of benefits
such as enhanced control, ease of use and reduced transaction
charges. Consequently, online services have grown rapidly and have
emerged as a leading edge of service industry. Providing online
services in developed stock exchange such as Japan, USA,
France, Singapore, UK and India has lead market to become more
competitive. Therefore, brokerages compete in offering superior
service quality.

To understand the online trading we need to know the history of stock
trading in India and total exchange in India such has NSE and BSE.
Stock markets refer to a market place where investors can buy and sell
stocks. The price at which each buying and selling transaction takes is
determined by the market forces (i.e. demand and supply for a
particular stock).

Let us take an example for a better understanding of how market
forces determine stock prices. ABC Co. Ltd. enjoys high investor
confidence and there is an anticipation of an upward movement in its
stock price. More and more people would want to buy this stock (i.e.
high demand) and very few people will want to sell this stock at current
market price (i.e. less supply). Therefore, buyers will have to bid a
higher price for this stock to match the ask price from the seller which
will increase the stock price of ABC Co. Ltd. On the contrary, if there
are more sellers than buyers (i.e. high supply and low demand) for the
stock of ABC Co. Ltd. in the market, its price will fall down.

In earlier times, buyers and sellers used to assemble at stock
exchanges to make a transaction but now with the dawn of IT, most of
the operations are done electronically and the stock markets have
become almost paperless. Now investors dont have to gather at the
Exchanges, and can trade freely from their home or office over the
phone or through Internet.

History of the Indian Stock Market - The Origin

One of the oldest stock markets in Asia, the Indian Stock Markets have
a 200 years old history.


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18th Century:
East India Company was the dominant institution and
by end of the century, busuness in its loan securities
gained full momentum
1830's:
Business on corporate stocks and shares in Bank and
Cotton presses started in Bombay. Trading list by the
end of 1839 got broader
1840's:
Recognition from banks and merchants to about half
a dozen brokers
1850's:
Rapid development of commercial enterprise saw
brokerage business attracting more people into the
business
1860's: The number of brokers increased to 60
1860-61:
The American Civil War broke out which caused a
stoppage of cotton supply from United States of
America; marking the beginning of the "Share Mania"
in India
1862-63: The number of brokers increased to about 200 to 250
1865:
A disastrous slump began at the end of the American
Civil War (as an example, Bank of Bombay Share
which had touched Rs. 2850 could only be sold at Rs.
87)


Pre-Independance Scenario - Establishment of Different Stock
Exchanges

1874:
With the rapidly developing share trading business,
brokers used to gather at a street (now well known
as "Dalal Street") for the purpose of transacting
business.
1875:
"The Native Share and Stock Brokers' Association"
(also known as "The Bombay Stock Exchange") was
established in Bombay
1880's:
Development of cotton mills industry and set up of
many others
1894:
Establishment of "The Ahmedabad Share and Stock
Brokers' Association"
1880 - 90's:
Sharp increase in share prices of jute industries in
1870s was followed by a boom in tea stocks and coal


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1908:
"The Calcutta Stock Exchange Association" was
formed
1920:
Madras witnessed boom and business at "The Madras
Stock Exchange" was transacted with 100 brokers.
1923:
When recession followed, number of brokers came
down to 3 and the Exchange was closed down
1934: Establishment of the Lahore Stock Exchange
1936:
Merger of the Lahore Stock Exchange with the Punjab
Stock Exchange

1937:
Re-organisation and set up of the Madras Stock
Exchange Limited (Pvt.) Limited led by improvement
in stock market activities in South India with
establishment of new textile mills and plantation
companies
1940:
Uttar Pradesh Stock Exchange Limited and Nagpur
Stock Exchange Limited was established
1944:
Establishment of "The Hyderabad Stock Exchange
Limited"
1947:
"Delhi Stock and Share Brokers' Association Limited"
and "The Delhi Stocks and Shares Exchange Limited"
were established and later on merged into "The Delhi
Stock Exchange Association Limited"

Post Independance Scenario

The depression witnessed after the Independance led to closure of a lot
of exchanges in the country. Lahore Estock Exchange was closed down
after the partition of India, and later on merged with the Delhi Stock
Exchange. Bnagalore Stock Exchange Limited was registered in 1957
and got recognition only by 1963. Most of the other Exchanges were in
a miserable state till 1957 when they applied for recognition under
Securities Contracts (Regulations) Act, 1956. The Exchanges that were
recognized under the Act were:
1. Bombay
2. Calcutta
3. Madras
4. Ahmedabad
5. Delhi
6. Hyderabad


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7. Bangalore
8. Indore

Many more stock exchanges were established during 1980's, namely:

Cochin Stock Exchange (1980)
Uttar Pradesh Stock Exchange Association Limited (at
Kanpur, 1982)
Pune Stock Exchange Limited (1982)
Ludhiana Stock Exchange Association Limited (1983)
Gauhati Stock Exchange Limited (1984)
Kanara Stock Exchange Limited (at Mangalore, 1985)
Magadh Stock Exchange Association (at Patna, 1986)
Jaipur Stock Exchange Limited (1989)
Bhubaneswar Stock Exchange Association Limited
(1989)
Saurashtra Kutch Stock Exchange Limited (at Rajkot,
1989)
Vadodara Stock Exchange Limited (at Baroda, 1990)
Coimbatore Stock Exchange
Meerut Stock Exchange

At present, there are twenty one recognized stock exchanges in India
which does not include the Over The Counter Exchange of India Limited
(OTCEI) and the National Stock Exchange of India Limited (NSEIL).

Government policies during 1980's also played a vital role in the
development of the Indian Stock Markets. There was a sharp increase
in number of Exchanges, listed companies as well as their capital

Types of Transactions

The flowchart below describes the types of transactions that can be
carried out on the Indian stock exchanges:
Indian stock exchange allows a member broker to perform following
activities:
Act as an agent,
Buy and sell securities for his clients and charge commission for
the same,
Act as a trader or dealer as a principal,
Buy and sell securities on his own account and risk.


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Over The Counter Exchange of India (OTCEI)

Traditionally, trading in Stock Exchanges in India followed a
conventional style where people used to gather at the Exchange and
bids and offers were made by open outcry.

This age-old trading mechanism in the Indian stock markets used to
create much functional inefficiency. Lack of liquidity and transparency,
long settlement periods and benami transactions are a few examples
that adversely affected investors. In order to overcome these
inefficiencies, OTCEI was incorporated in 1990 under the Companies
Act 1956. OTCEI is the first screen based nationwide stock exchange in
India created by Unit Trust of India, Industrial Credit and Investment
Corporation of India, Industrial Development Bank of India, SBI Capital
Markets, Industrial Finance Corporation of India, General Insurance
Corporation and its subsidiaries and CanBank Financial Services.


Trading Pattern of the Indian Stock Market

Indian Stock Exchanges allow trading of securities of only those public
limited companies that are listed on the Exchange(s). They are divided
into two categories:

National Stock Exchange

In order to lift the Indian stock market trading system on par with the
international standards. On the basis of the recommendations of high
powered Pherwani Committee, the National Stock Exchange was
incorporated in 1992 by Industrial Development Bank of India,
Industrial Credit and Investment Corporation of India, Industrial
Finance Corporation of India, all Insurance Corporations, selected
commercial banks and others.

NSE provides exposure to investors in two types of markets, namely:
1. Wholesale debt market
2. Capital market

Wholesale Debt Market - Similar to money market operations, debt
market operations involve institutional investors and corporate bodies


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entering into transactions of high value in financial instruments like
treasury bills, government securities, commercial papers etc.



Trading at NSE

Fully automated screen-based trading mechanism
Strictly follows the principle of an order-driven market
Trading members are linked through a communication network
This network allows them to execute trade from their offices
The prices at which the buyer and seller are willing to transact
will appear on the screen
When the prices match the transaction will be completed
A confirmation slip will be printed at the office of the trading
member
Advantages of trading at NSE
Integrated network for trading in stock market of India
Fully automated screen based system that provides higher
degree of transparency
Investors can transact from any part of the country at uniform
prices
Greater functional efficiency supported by totally computerized
network

Bombay Stock Exchange

Bombay Stock Exchange is the oldest stock exchange in Asia What is
now popularly known as the BSE was established as "The Native Share
& Stock Brokers' Association" in 1875.

Over the past 135 years, BSE has facilitated the growth of the Indian
corporate sector by providing it with an efficient capital raising
platform.

Today, BSE is the world's number 1 exchange in the world in terms of
the number of listed companies (over 4900). It is the world's 5th most
active in terms of number of transactions handled through its electronic
trading system. And it is in the top ten of global exchanges in terms of
the market capitalization of its listed companies (as of December 31,


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2009). The companies listed on BSE command a total market
capitalization of USD Trillion 1.28 as of Feb, 2010.

BSE is the first exchange in India and the second in the world to obtain
an ISO 9001:2000 certifications. It is also the first Exchange in the
country and second in the world to receive Information Security
Management System Standard BS 7799-2-2002 certification for its BSE
On-Line trading System (BOLT). Presently, we are ISO 27001:2005
certified, which is a ISO version of BS 7799 for Information Security.

The BSE Index, SENSEX, is India's first and most popular Stock Market
benchmark index. Exchange traded funds (ETF) on SENSEX, are listed
on BSE and in Hong Kong. Futures and options on the index are also
traded at BSE.

Finally, the findings of this research are mostly useful to those
(common man, stock market's officials, brokers, traders, etc.) who
intend to expand the Indian stock exchange. The results indicate how
Indian traders' rank service quality factors and if online trading system
could enhance their satisfaction level or not? Also factors which lead
to dissatisfaction were collected and proper recommendations were
given. In next step a basic online trading model were offered which
propose to replace with current system. Lastly, roles of each
involved party were identified in proposed online system.







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1 TABLE OF CONTENTS
1 TABLE OF CONTENTS 14
2 EXECUTIVE INTRO 16
3 PROJECT DETAIL 17
3.1 PROJECT TITLE 17
3.2 TITLE JUSTIFICATION 17
3.3 SCOPE OF THE STUDY 17
3.4 RESEARCH OBJECTIVES 17
3.5 RESEARCH METHODOLOGY 18
3.6 RESEARCH DESIGN 18
3.7 SAMPLING METHODOLOGY 19
3.8 LIMITATION OF THE STUDY 19
4 LITERATURE REVIEW 21
4.1 ECOMMERCE 21
4.2 ONLINE TRADING 25
5 THE EMERGENCE OF ONLINE TRADING IN INDIA 33
5.1 ICICI DIRECT 33
5.2 RELIANCE MONEY 35
5.3 SHARE KHAN 37
5.4 KOTAK SECURITIES 38
5.5 INDIABULLS 41
5.6 MOTILAL OSWAL 42
5.7 RELIGARE 43
5.8 INDIA INFOLINE 44
6 GROWTH OF ONLINE TRADING 47
7 EFFECTS OF ONLINE TRADING ON THE INVESTMENT COMMUNITY (TME) 53
7.1 BENEFITS OF ONLINE TRADING TO INVESTORS 53
7.2 COST OF ONLINE TRADING TO INVESTORS 54
7.3 BENEFITS OF ONLINE TRADING TO BROKERS/FINANCIAL PLANNERS 55
7.4 COST OF ONLINE TRADING TO BROKERS/FINANCIAL PLANNERS 56
7.5 CHARACTERISTICS OF ONLINE TRADERS 57
7.6 ONLINE TRADING INTERNATIONALLY 57
7.7 THE FUTURE OF TRADITIONAL BROKERS AND ONLINE TRADING 58
7.8 DISCUSSION AND IMPLICATIONS FOR THE FUTURE 59
7.9 CONCLUSION 61
8 ANALYSIS 63
9 CONCLUSION 74


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10 RECOMMENDATIONS 75
11 INDUSTRY RELEVANCE 76
12 LEARNING 77
13 BIBLIOGRAPHY 78



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2 EXECUTIVE INTRO

As per the title suggest the project report has been prepared as a study on online
stock trading in India using the current technology which has a great influence in
growth of primitive stock trading which was earlier part of few specialized stock
brokers has been thrown open to common people in India and across the globe.
Online trading was initiated by NSE in India and soon after the other exchanges
also followed it.

There was a major boom in yr. 2000 when lots of online trading companies came
with a bang but only few were survived because of lack of computer knowledge
and low internet penetration. There are two types of online trading companies one
is the banking online trading companies and the other is non-banking trading. A
few examples of banking online trading companies are HDFC securities, ICICI
direct.com, UTI securities etc.

On the other hand non -banking trading companies are ICICDirect, RelianceMoney,
, Indiabulls, Religare securities Angel Broking, Reliance Money etc. A study was
undertaken to determine the growth of various online trading companies in India in
terms of trade done by them through online and services provided by them.

Major findings indicates that out of a survey of 75+ respondents (Friends &
colleagues) it was seen that most of the investors prefer online trading because of
few major factors such as time saving convenience, protection through Freudian
brokers etc. although during my research project Ive seen that most of the
respondents feel online trading, a secure way of investing into stock market still a
few of them feel that its unsafe and a bit complicated but they posses information
about online trading. Today the online trading companies having cut-throat
competition in our offering whose brokerage discounts lower margin money and
zero balance accounts. Due to the rising education awareness and use of internet
there is a huge potential for online trading in future and companies must come up
with innovative offerings to capture the untapped market.


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3 PROJECT DETAIL

3.1 PROJECT TITLE
To determine the A study on Online Stock Trading in India

3.2 TITLE JUSTIFICATION
The above title is self explanatory. This study mainly deals with development and
usage of online trading in India since its inception in the year 2000. Due to
subprime mortgage crisis in year 2009-10 BSE, NASDAQ and S&P 500, two major
stock exchange of the world entered into the bearish market. It also affected the
stock market all over the world including India. It is the challenge for the growth
and development of trading in India thats why I choose that particular topic for
the study.

3.3 SCOPE OF THE STUDY
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 survived are
getting the handsome returns also attracting the foreign Investment Companies.
Nowadays this sector is facing cut-throat competition and also provides huge
growth prospects. The study then goes to evaluate and analyze the findings so as
to present a clear picture of the trends in the online trading sector.

3.4 RESEARCH OBJECTIVES
The objectives of my research project is
1. To determine the growth and future of online trading industry in India
2. To understand the customer perception of online trading.
3. To see the type of technology used by stock exchanges and by the Indian
customer in online trading
4. To determine what type of products the customers deal while doing the
online trading.


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5. To understand the presence of major online traders in the Indian market
and looking about the features provided by them
6. To find out the important factor which do mostly affect to the customer
7. To develop a good strategy and process that improves the business of the
organization
8. To be able to compare and analyze the various Financial Products.
9. Business development and revenue generation.

3.5 RESEARCH METHODOLOGY
The research methodology for the project completed in two phases:

First Phase is the collection of Secondary Data:
This involves the collection of Secondary data using internet and internal sources
for comparison of Online trading account of other Broking houses in the market like
ICICI Direct, MOTILAL Oswal, Religare and Reliance Money etc. This also involves
talking to their executives regarding various features provided to the customer
along with their Brokerage structure.

Second Phase is Collection of Primary Data and Analysis:
After collecting the Secondary data the next phase will be collection of primary
data using Questionnaires. The questionnaire will be filled by around 75 people who
will be mainly from Bangalore/Hyderabad/Mumbai region. The sample will consist
of people who are employed or work as free lancers dealing in investment options
to know their financial requirements. Based on these requirements different
investments will be informed to them for further perusal.
3.6 RESEARCH DESIGN

3.6.1 Non Probability
The non probability respondents have been researched by selecting the persons
who do the stock trading. Those persons who do not trade in stocks have not been
interviewed.

3.6.2 Exploratory and Descriptive Research
The research is primarily both exploratory and descriptive in nature. The sources of
information are both primary and secondary. The secondary data has been taken
by referring to various magazines, newspapers, internal sources and internet to get


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the figures required for the research purposes. The objective of the exploratory
research is to gain insights and ideas. The objective of the descriptive research
study is typically concerned with determining the frequency with which something
occurs. A well structured questionnaire was prepared for the primary research and
personal interviews were conducted to collect the responses of the target
population.

3.7 SAMPLING METHODOLOGY

3.7.1 Sampling Technique
Initially, a rough draft was prepared a pilot study was done to check the accuracy
of the Questionnaire and certain changes were done to prepare the final
questionnaire to make it more judgmental.

3.7.2 Sampling Unit
The respondents who were asked to fill out the. These respondents comprise of the
persons dealing in stock trading. The people have been interviewed in the open
market, in front of the companies, telephonic interviews and through other sources
also.

3.7.3 Sampling Size
The sample size was restricted to only 75 respondents.

3.7.4 Sampling Area
The area of the research was Bangalore/Hyderabad/Mumbai.

3.8 LIMITATION OF THE STUDY
The various limitations of the study are:
1. People were not willing to answer the entire questionnaire due to the less
time available to them.
2. Some respondents might be hesitant to divulge personal and financial
information which can affect the validity of all responses.
3. There is lack of awareness among people about investing in stock market.
So the people who are aware of such things were found in specific areas for
survey purposes.


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4. Most people are comfortable with traditional system in small towns and like
to trade from their respective brokers, hence not providing a true opinion of
theirs.
5. Some of the respondents who did not do online trading were able to
respond to only few questions.
6. The survey was done in the some major metro cities and may not truly
express the opinion of whole country.





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4 LITERATURE REVIEW

This chapter brings up relevant literature required to find answers and connect to
our research questions. First, vital literature about online trading along with key
concepts of different terms, drivers of growth and the necessity of its
existence will be presented so that it becomes easier to understand the research
area.
4.1 ECOMMERCE
Electronic commerce, commonly known as e-commerce or eCommerce, or e-
business consists of the buying and selling of products or services over electronic
systems such as the Internet and other computer networks. The amount of trade
conducted electronically has grown extraordinarily with widespread Internet
usage. The use of commerce is conducted in this way, spurring and drawing on
innovations in electronic funds transfer, supply chain management, Internet
marketing, online transaction processing, electronic data interchange (EDI),
inventory management systems, and automated data collection systems. Modern
electronic commerce typically uses the World Wide Web at least at some point in
the transaction's lifecycle, although it can encompass a wider range of
technologies such as e-mail as well.

4.1.1 Background
This section is intended to offer sufficient background of the research area that
covers the general idea of e-commerce and the position of online trading as one
of the major element of each economy.

4.1.1.1 E-commerce and the Position of Online Trading
In business today electronic commerce (e-commerce) is one of the common
topics being discussed. Kalakota and Whinston (1996) defined e- commerce as
"The buying and selling of information, products and services via
computer networks, the computer networks primarily being the Internet.
It is streamlining business processes, restructuring whole industries and re-
shaping of customer and supplier relationship (Daniel et al., 2002). In order to
perform one or more of the business functions Internet based e-commerce
systems use World Wide Web based application solutions. In fact electronic
commerce is a way of conducting, managing and running business transaction
using computer and Internet. Based on the significant power of World Wide


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Web and global e-commerce, the numbers of internet users' have been
rapidly increasing and have widely spread into all aspects of life. It has opened
up tremendous business opportunities for its users. The most common use of
e-commerce is to replace or enlighten conventional transaction methods and in
the last few years a substantial growth of internet-based services being
experienced. According to an Angusreid group study (2008) of Internet users in
44 countries nearly 220 million of the estimated 500 million worldwide Internet
users have already made a purchase or transactions online. Stock exchange
was influenced by Internet technology as well as other business sectors.
Stock exchange as a critical pillar of each economy, acts exactly the same as a
thermometer of economical condition of the country. The volume of stock
transactions, the index growth and tendency of individuals and legal entities
crystallized if the economy of a country is flourishing or on the other hand
continue recession conditions. Therefore, providing a flow trading process and
accelerating the transaction settlement can create more motivation for traders
to join stock trading exchange likewise cooperate and invest in companies and
finally, in this manner, internet creates an opportunity of reaching these goals.

4.1.1.2 Online Trading and Customer Satisfaction
Applying conventional trading systems in India leads to many aspects of
problems like manipulation, lot's of paperwork, insiders' illegal activities and
etc. These problems cause traders' dissatisfaction and the lack of
technological foundations creates an inefficient market. Stock market is growing
up and the number of traders rapidly increasing, therefore following
conventional method in handling and controlling the market, may in turn directs
us to lose the potential power of this market in order to integrate the traders'
small capital. With no doubt, traders leave the market where there is no
appropriate surveillance over the activities because the unsatisfied customer
will not take all the risk in stock market. So it is clear that if stock market as a
supervision organization could not offer suitable services to the traders, market
expansion is meaningless. In other words, it seems that providing and
recovering service quality in this market may enhance traders'
satisfaction and encourage investing more and more. But how the traders'
satisfaction can be measured and how can be proved that, there is a
dramatically gap between what traders looking for and what traders receive as
a service?


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4.1.1.3 Different Models for Measuring Service Quality
According to literature, service quality dimensions identified by different authors.
These dimensions are measured in order to find out the degree of satisfaction in
current market and find the relationship between service qualities dimensions
which online trading can provide and traders' satisfaction.

Leading researcher (Berry) identified ten determinant of service quality. There
are: reliability, responsiveness, competence, access, courtesy, communication,
credibility, security, understanding and tangibles.

Reliability involves consistency of performance and dependability. It means
that the firm performs the service right the first time. It also means the firm
honors its promises. Especially it involves: accuracy in billing, keeping records
correctly, and performing service at the designated time. Responsiveness
concerns the willingness or readiness to provide service. It involves timeliness
of services that means mailing a transaction slip immediately, calling the
customer back quickly and giving prompt service. Competence means
possession of the required skills and knowledge to perform the services.
It involves: knowledge and skill of the contact personnel, knowledge and
skill of operational support personnel, research capability of the
organization. Access involves approach, ability and ease of contact. It means:
the service is easily accessible, waiting time to receive service is not extensive,
hours of operation are convenient and location of service facility is convenient.
Courtesy involves politeness, respect, consideration, and friendliness of contact
personnel. It includes consideration for the customer's property, clean and
neat appearance of public contact personnel.
Communication means keeping customers informed in language they can
understand. It also means listening to customers. It may mean that the
company has to adjust its language for different customers- increasing the level
of sophistication with well- educated customer and speaking simple and plainly
with a novice. It involves: explaining the service itself, explaining how much the
service will cost and assuring the customer that a problem will be handled.
Credibility involves trusts worthiness, believability, honesty; it involves having
the customer's best interests at heart. Security is the freedom from danger, risk
or doubt. It involves: physical safety, financial security and confidentiality.


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Understanding the customer means making the effort to understand what the
customer's needs are. It includes: learning the customers specific requirements,
providing individualized attention and recognizing the regular custom. Tangibles
includes the physical evidence of the service: physical facilities,
appearance of personnel, tools or equipment used to provide the service,
physical representations of the service, such as a plastic credit card or bank
statement, other customers in the service facilities

A number of research workers and others have tried to identify key
determinants by which a customer assesses service quality and consequently
result in satisfaction or not.

Leading researcher (Parshuraman) came up with five determinants that can be
used to measure service quality. This scale named SERVQUAL and has been
developed for the service sector. It has five generic dimensions or factors and is
stated as follows:
1. Tangibles: Physical facilities, equipment and appearance of personnel.

2. Reliability: Ability to perform the promised service dependably and
accurately.
3. Responsiveness: Willingness to help customers and provide prompt service.

4. Assurance (including competence, courtesy, credibility and security):
Knowledge and courtesy of employees and their ability to inspire trust and
confidence.
5. Empathy (including access, communication, understanding the customer):
Caring and individualized attention that the firm provides its customers.

Leading researcher (Gronroos) postulated six criteria of perceived good service
quality; Professionalism and skills; attitudes and behaviors; accessibility and
flexibility; reliability and trustworthiness; recovery; reputation and credibility.
Leading researcher (Johnson) provides 18 service quality dimensions
Attentiveness/helpfulness, responsiveness, Care, Availability, Reliability,
Integrity, Friendliness, Courtesy, Communication, Competence, Functionality,
Commitment, Access, Flexibility, Aesthetics, Cleanness/tidiness, Comfort and
Security.



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4.1.2 Motivation
As it was mentioned, stock exchange plays a critical role in each country's
economy and understanding of traders needs, as a main customer of this
market, becomes an important factor. In this situation, satisfaction has great
effect on traders retention and more important attract potential traders and as
a result reach to more efficient market and the possibility of market
expansion will be feasible. Good customer service quality is the main factor in
creating satisfaction and enhances the level of traders' satisfaction. So it is
desirable for responsible in stock exchange to uncover what attributes traders
utilized in their assessment of service quality and satisfaction and which
attributes are more important.

Recently many stock exchanges all over the world have used the Internet as a
new tool to offer their customers a variety of services 24 hours a day and offer
better services to traders. But these steps are not passed in India yet and traders
suffer from insufficient services. Conventional trading system, poor surveillance
power, limit services and so many others short comings, create a situation that
increase the risk of investing in this market, create a suitable situation for price
manipulation, wash sales and so many other frauds which in return lead to
traders dissatisfaction and inefficiency of Indian stock exchange.

4.2 ONLINE TRADING

Countries all over the world have invested heavily to leverage the Internet and
transform their conventional businesses into e-businesses. E-businesses are
defined as the use of Internet based information and communication technologies
(ICT) by organizations to conduct transactions, share information and maintain
relationships. New technologies such as World Wide Web have made a profound
on all business around the world. E-business enables organizations to reduce cost,
increase demand and create new business models.

E-commerce is a subset of e-business and defined as buying and selling of goods
and services on the Internet, especially the World Wide Web www.dotcom-
productions.com). In fact, any commerce carried out using computer networks are
called electronic commerce and has created an opportunity to do business and
handle transactions electronically and stock trading domain makes the most of its
chance all over the world. As, the time factor play a critical role in this business,
internet quicken and streamline the trading process. Creating more convenience,
saving time and money and paperless process are the most significant goals of the
online trading.



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4.2.1 Definitions of Online Trading



The Internet revolution has been changing the fundamentals of the society. It
changes the shape of communication and also trading process. It shifts closer and
closer to vital sources of information and new trading environment by the name of
"online trading". It provides users with means to directly interact with
service- oriented computer systems tailored to their specific needs; therefore,
they can serve themselves better by making their own decisions. There are lots of
definitions for online trading. Hereby, four main definitions are mentioned:

Referring to two websites which are active in trading fields
(www.investorwords.com and www.advfn.com) they define online trading in this
manner: The increasingly popular activity of buying and selling securities over the
internet, or to a lesser extent, through a broker's proprietary software. Likewise
Fan et al. define it in this way: The 'online trading' is defined as a process of
trading financial products especially stocks over the Internet, and online stock
trading site is a web site that helps traders or customers to buy and sell the
financial products over the Internet.

Also online trading is described as service offered on the internet for purchase and
sale of shares. In the real world you place orders with your stockbroker. In online
trading, you will access a stockbroker's website through your internet-enabled PC
and place orders through the brokers internet-based trading engine. These orders


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are routed to the Stock Exchange without manual intervention and executed
thereon in a matter of a few seconds. (www.investsmartindia.com)

Furthermore there is another definition for online trading which defines it in this
way: Online trading is placing an order for a trade using the internet. Online
trading is not a strategy, but a means to enter a trade. Online trading can be used
to enter a short trade or day trade, or a longer-term position in a stock, bond,
commodity or option. (www.trendtraders.com)

Each of these definitions describe online trading from somehow different
aspect, but something is common and that the services which have
provided to traders. They divided into three categories

Full-service
Discount
Online

Investors who do not have time to research investments on their own will likely
rely on a full-service broker to help them construct an investment portfolio,
manage their investments, or make recommendations regarding which
investments to buy. Full-service brokers have access to a wide range of reports
and analyses from the company's large staff of financial analysts. These analysts
research companies and recommend investments to people with different financial
needs. Persons who prefer to select their own investments generally use a
discount or online broker and pay lower commission charges. Discount firms
usually do not offer advice about specific securities. Online brokerage firms make
their trades over the Internet in order to keep costs down and fees low. Discount
brokerage firms usually have branch offices, while online firms do not. Most
brokerage firms now have call centers staffed with both licensed sales agents
and customer service representatives who take orders and answer questions
at all hours of the day. (www.trendtraders.com)

There are two basic ways to day trade electronically. The first is through
"Conventional Online Trading", using your Internet browser and a Web based
broker. The second is by way of "Direct Access Trading systems", using specialized
software and a private network. It is important for day traders to understand the
key features of, and the differences between, these two forms of electronic
trading. Trend Trader offers a choice of trading platforms:

To have an overview on the evolution of online trading, the growth and trend of it
has presented.

4.2.2 The growth of online trading



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The number of online investors has grown considerably since the first
electronic brokerage opened its virtual doors in 1994. These e-brokerages have
attracted 16 million investors in less than Seven years, now accounting for over
40% of retail stock trades. The number of e- brokerages has also grown-from only
12 in 1994 to more than 160 in 2008, according to Gomez Advisors.

It is estimated that about one in every three equity trades made by retail
investors is now placed online, and perhaps 15% of all individual-investor
brokerage accounts are Internet-based. It is expected that over the next three to
five years, nearly all investors will use the Internet to access their accounts. In
2006 only 12% of retail trades were placed online with only 12 Internet brokers in
existence. By 2000, according to U.S. Bancorp Piper Jaffray Inc. 48% of trades are
done online and over 100 firms are in business. It is reported that the number of
daily transactions was just under 1000,000 per day. Certainly, Online trading in
America has shown amazing growth.

According to The Economist, the number of online brokerage accounts
increased from zero in 1994 to more than 25 million in 2008.

Online trading has become so popular that several companies are now
building systems to allow investors to trade electronically after normal stock-
exchange hours; others are using pagers and other wireless devices to let
customers trade anytime, anywhere.

With the overseas exchanges lagging behind the U.S. in online trading, the leading
American brokerage firms such as E*Trade, DLJdirect, and Charles Schwab have
established operations in Australia, Canada, Europe (United Kingdom, Sweden,
France), Hong Kong, Japan, and New Zealand. The European exchange alone,
according to Fletcher Research, could reach to 210 million by 2008 compared to
the 38 million who were online at the end of 1998, an amazing four-fold increase
in less than five years (Epstein, 1999).

4.2.3 Online Trading trends
Security issues fading: Concerns centered on security issues (encryption)
and customer service issues (upgraded server and network equipment) are
fading as consumers become accustomed to using the internet on a weekly
or even daily basis for many types of transactions.
Pricing stabilization: The online brokerage industry has seen severe price
competition over the last two years, with every competitor lowering
commission rates in an attempt to gain as many new accounts as possible.
There is a belief that, prices have started to stabilize and further
price reductions are unlikely from the present level. While new entrants will
have to align commission rates lower to be competitive, rates of
established online brokerages will be stable over the next year.



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4.2.4 Online Trading characteristics
High amounts spent on advertising: Because of relatively low barriers to
entry, companies in this industry spend heavily on advertising in order to
create a "brand" or "portal destination". The industry is in a race to lock up
as many customers as possible, with the idea that a company can retain
those customers by creating switching costs. Each company could create
switching costs by customizing the company portal, making it costly for a
customer who switches to competitors' site.
Importance of technology: Companies in the industry compete on speed of
access, speed of order processing, and system reliability. Conventional
brokerages are not accustomed to dealing with this additional layer
of complexity. Established online brokerages have an advantage over newly
entering conventional brokerages in this area.
Scale is important: With the large conventional brokerages entering
the online business, gaining economies of scale will be important.
Heavy advertising costs will need to be spread over a larger number of
accounts. How successful a brokerage is at gaining and retaining customers
over the next year will determine which online brokerages survive as
independent businesses.
Different service proposition: Online brokerages offer a different bundle of
features compared to conventional brokerages. Convenient, twenty-four
hours access for trading and research are defining characteristics of
the online business. Convenience and low cost trades have been two
primary drivers responsible for the significant transfer of investors from
conventional brokerages to online brokerages.

4.2.5 Advantages and Disadvantages of online trading
Trading online the same as other systems has advantages and also disadvantages.
Below the main points are summarized:

Advantages

Quick access/Convenience: You can place your orders from anywhere
and at any time. All you need is a personal computer. When you trade
online, you save yourself a lot of time. You need not call your stockbroker
to give your orders or to find out what happened to your trade.
Control/Transparency: With online trading, power is literally at your
fingertips. With a few keystrokes, you can place your orders and get all the
information you need without any assistance or intervention of a
stockbroker. You do not have to discuss or reveal your trades or
plans with your stockbroker. You become an empowered, self-directed
investor.
Efficiency: Getting information or feedback used to take minutes,
sometimes even days. With online trading, you get these faster because


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you get online, real-time information on your account balance, order
status, and stock quotes with the best three levels of bids and offers.
Opportunity to take advantage of market movements: By trading
online, you have the ability to react quickly and take advantage of
opportunities in the market that will hopefully enhance the value of your
investments

Disadvantages

Despite all the advantages of Online Trading there are a few disadvantages.
However, these disadvantages only apply to certain investors, the inexperienced
investor, the traditional investor, and the busy investor.
Expertise: Nobody involved in financial markets claims to know all the
right moves, but everyone involved in the markets has an understanding of
how things work. For an individual who knows nothing about stocks and
nothing to look for might have a problem with online trading. Online
trading does provide investors with sufficient research to make educated
investments, but investors must be able to interpret the research and
put it to use. Those individuals who do not have an understanding of the
information might be better off letting a broker make the decisions.
Time: There are a lot of investors out there that are very well educated in
the financial markets but are too busy doing other things. Online trading
requires an individual to do his or her own analysis. The research is
provided by the online company, but the investor must go through
the information and determine what is valuable to their investment
strategies. This often times requires an individual to have some free time.
Many investors just do not have the time to go through the research;
therefore, using a broker is the only other option.

For the traditional investor Online trading also has one major disadvantage:

Informality: Using an online service to make trades is very informal.
Traditional investors grew up investing through a broker and interacting
with that broker. Often time's traditional investors have very close
relationships with their brokers and online trading eliminates the possibility
of any relationships. Online trading might not be for everyone and often
times are not. However, 82 percent of those people who invest online
believe that most investors will invest online in five years. Whether or not
this is true, trading online has become very popular and has opened a
door to whole new perspective of investing. Whether you are a first
time investor or a professional, online trading offers convenience, lower
costs, and empowerment to all users.



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4.2.6 Indian Stock Exchange and Applied Trading System



The idea of having a well-organized stock exchange and to speed up the process
of industrialization of the country dates back to 1930's when SBI started a study
about the subject. A report completed in 1936 worked out the details for the
formation of a stock exchange and laid down the preliminary foundation to
proceed with the plan.

The outbreak of the World War II and subsequent economic and political events
delayed the establishment of the stock exchange up to the year 1967 when the
Stock Exchange Act was ratified. The Indian Stock Exchange opened in April 1968.
Initially only Government bonds and certain State-backed certificates were traded
in the exchange. During 1970's the demand for capital boosted the demand for
stocks. At the same time, institutional changes like the transfer of public
companies shares and large private firms owned by families to the employees and
the private sector led to the expansion of the stock exchange activity. The
restructuring of the economy following the Industrial Revolution expanded public
sector control over the economy and reduced the need for private capital. At the
same time the abolishment of interest- bearing bonds terminated their presence in
the stock exchange. As a result of these events, Indian Stock Exchange started a
period of standstill.

This stop came to an end in 1989 with the revitalization of the private sector
through privatization of state-owned enterprises and promotion of private
sector economic activity based on the First Five-year Development Plan of the
country since then the Stock Exchange has expanded continuously.


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5 THE EMERGENCE OF ONLINE TRADING IN
INDIA

This chapter brings up relevant literature required to find answers and connect to
our research questions. First, vital literature about online trading along with key
concepts of different terms, drivers of growth and the necessity of its
existence will be presented so that it becomes easier to understand the research
area. Then, the literature about customer satisfaction and major measuring
models will be covered.




5.1 ICICI DIRECT


ICICIDirect (or ICICIDirect.com) is stock trading company of ICICI Bank. Along
with stock trading and trading in derivatives in BSE and NSE, it also provides
facility to invest in IPOs, Mutual Funds and Bonds


ICICIDirect offers 3 different online trading platforms to its customers:


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1. Share Trading Account:

Share Trading Account by ICICIDirect is mainly for buying and selling of
stocks in BSE and NSE. This account allows Cash Trading, Margin Trading,
Margin Plus Trading, Spot Trading, Buy Today Sell Tomorrow and Call and
Trade on phone. They also provide installable application terminal based
application for high volume trader.

2. Wise Investment Account:

Along with MF and IPO investing in BSE and NSE, Wise Investment account
also provide options to invest in Mutual Funds, around 19 Mutual Fund
companies and bonds. ICICI Direct offers various options while investing in
Mutual Funds like Purchase Mutual Fund, Redemption and switch between
different schemes, Systematic Investment plans, Systematic withdrawal
plan and transferring existing Mutual Funds in to electronic mode. This
account also provides facility to invest in Government of India Bonds and
ICICI Bank Tax Saving Bonds. ICICIDirect.com website is the primary tool
to invest in Mutual Funds, IPOs, Bonds and stock trading.

3. Active Trader Account:
Active Trader account gives more personalized investment options to the
investors. It allows investor to use online and offline stock trading. It also
provides with independent market expertise and support through a
dedicated Relationship Manager from ICICI. Active Trader also provides
commodity trading.

Brokerage and fees:

Brokerage: ICICIDirect.com brokerage varies on volume of trade and
inclusive of demats transaction charges, service taxes and courier charges
for contract notes. It ranges from 0.1% to 0.15% for margin trades, 0.2%
to 0.425% for squared off trades and 0.4% to 0.75% on delivery based
trades.

Advantages of ICICIDirect:

3-in-1 account integrates your banking, broking and demat accounts. All
accounts are from ICICI and very well integrated. This feature makes ICICI
the most interesting player in online trading facility.
Unlike most of the online trading companies in India which require
transferring money to the brokers pool or towards deposits, at ICICI Direct
you can manage your own demat and bank accounts through
ICICIdirect.com.


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Investment online in IPOs, Mutual Funds, GOI Bonds, and Postal Savings
Schemes all from one website. General Insurance is also available from
ICICI Lombard.
Trading is available in both BSE and NSE.

Disadvantages of ICICIDirect:

Getting access to ICICIDirect.com website during market session can be
frustrating.
ICICI Direct brokerage is high and not negotiable.
Not all stocks are available under Margin Plus
Facility for linking account of ICICI Bank Only

5.2 RELIANCE MONEY


Reliance Money, A group company of Reliance Capital Limited, is the financial
services division of the Rs 10000 crores Reliance Anil Dhirubhai Ambani Group.
Reliance Money has over 22 lakhs customers and more than 10'000 branches in
around 5000 cities in India. Company is among the largest broking and
distribution house of financial products and having share of more than 3% of total
stock market volume at BSE & NSE.

RelianceMoney.com enables its customer to invest & manage most of the services
provided by Reliance Money including Equity (Stock) Trading, Commodity Trading,
Derivatives, Mutual Fund Investment, IPO Investment, Life Insurances, General
insurances, Money Transfer, Forex exchange, Gold Coins and Credit Cards
Services. Company recently entered in to Wealth Management with tools like
investment in equity-linked portfolio management services, structured products,
insurance and mutual funds.

The Reliance Money stock trading websites uses special security features Security
Token which makes online trading more secure without complexity. Stock Trading
through RelianceMoney.com is available for BSE and NSE stock exchanges. Offline
trading is also available through Reliance Money partners in more than 5000 city
across India and through phone by dialing 022-39886000

The investment options available with Reliance Money online portal are as below:

Equity (Stock) Trading at BSE, NSE and NSE F&O
IPO Investment
Derivatives Trading


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Forex Trading
Commodity Trading (Gold, Silver, Crude etc....) at MCX, NCDEX and NMCE.
Mutual Fund Investment
Life & General Insurance
Pure Swiss' Gold Coins (99.99% pure, 24 carat)

Trading platforms:

Reliance Money provides 3 different trading platforms for equity trading:
1. Insta Trade
2. Fast Trade
3. Easy trade


Reliance Money Technical Analysis (A paid service):

Reliance Money offers a simplified, automated, sophisticated technical analysis to
Indian retail broking consumers with the help of Recognia's Technical Analysis
tools. Recognia, a Canada based company, has proprietary pattern recognition
technology capable of recognizing patterns in the price charts of any publicly
traded financial instrument including stocks, bonds, funds, commodities,
currencies and indexes.

The technical services are available for introductory free 7-day trial period to
Reliance Money users. Post the trail period, this service is available to users at a
nominal subscription of Rs. 99 for 3 months/ Rs. 179 for 6 months/ Rs. 299 for a
year, i.e., less than Re 1 a day.

Reliance Money Brokerage and fees:

Reliance Money offers lowest brokerage rates in today's online stock trading
industry in India. The brokerages are as low as 0.075% for delivery based trading
and 0.02 for now delivery. For more detail about Reliance Moneys brokerage and
fees visit the below section of this webpage.

Advantages of Reliance Money

Extra security features with 'Security Token', which is the most secure and
tested technology in computer world.
Simple, easy and fast online stock trading.
Almost all investment options are available under one account including
Equity Trading, Derivatives, Forex, Commodity, IPO, Mutual Funds and
Insurance.
Branches are available in all major cities and the number is growing.

Disadvantages of Reliance Money


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Customer Service is not that good.
Small cap stocks are not available for trading.

5.3 SHARE KHAN


Sharekhan is online stock trading company of SSKI Group, provider of India-based
investment banking and corporate finance service. Sharekhan is one of the largest
stock broking houses in the country. S.S. Kantilal Ishwarlal Securities Limited
(SSKI) has been among Indias leading broking houses for more than a century.

Sharekhan's equity related services include trade execution on BSE, NSE,
Derivatives, commodities, depository services, online trading and investment
advice. Trading is available in BSE and NSE. Along with Sharekhan.com website,
Sharekhan has around 510 offices (share shops) in 170 cities around the country.

Share khan has state of art web portal providing fundamental and statistical
information across equity, mutual funds and IPOs. You can surf across 5,500
companies for in-depth information, details about more than 1,500 mutual fund
schemes and IPO data. You can also access other market related details such as
board meetings, result announcements, FII transactions, buying/selling by mutual
funds and much more.

Type of Account:

1. Sharekhan Classic account:

Allow investor to buy and sell stocks online along with the following
features like multiple watch lists, Integrated Banking, demat and digital
contracts, Real-time portfolio tracking with price alerts and Instant credit &
transfer.

2. Sharekhan Speed Trade account

This account for active traders who trade frequently during the days
trading session. Following are few popular features of SpeedTrade account:

o Single screen interface for cash and derivatives
o Real-time streaming quotes with Instant order Execution &
Confirmation
o Hot keys similar to a traditional broker terminal


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o Alerts and reminders
o Back-up facility to place trades on Direct Phone lines

Brokerage:

Some stock trading companies charge direct percentage while others charge a
fixed amount per Rs 100. Sharekhan charges 0.5% for inter day shares and 0.1%
for intraday or you could say Sharekhan charges 50 paise per Rs 100.

Advantages of Sharekhan:

Online trading is very user friendly and one doesn't need any software to
access.
They provide good quality of services like daily SMS alerts, mail alerts,
stock recommendations etc.
Sharekhan has ability to transfer funds from most banks. Unlike ICICI
Direct, HDFC Sec, etc., so investor not really needs to open an account
with a particular bank as it can establish link with most modern banks.

Disadvantages of Sharekhan:

They charge minimum brokerage of 10 paisa per stock would not let you
trade stocks below 20 Rs. (If you trade, you will lose majority of your
money in brokerage).
Hidden conditions and charges.
They do not provide facility to book limit order trades during after-hours.
Classic account holders cannot trade commodities.
Cannot purchase mutual funds online.

5.4 KOTAK SECURITIES


Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, was set up in
1994. Kotak Securities is a corporate member of both Bombay Stock Exchange
(BSE) and
National Stock Exchange (NSE). Currently, Kotak Securities is one of the largest
broking houses in India with wide geographical reach.

Kotak securities online trading is the online trading portal of the Kotak Securities
Ltd, the leading stock broking house of India. The online division of Kotak
Securities Limited provides services like internet broking services, online IPO and
mutual fund investments.


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Types of accounts:

Kotak offers different account types according to users requirement:

1. Kotak Gateway

Kotak securities gateway account opens the gateway to a world of
investing opportunities for beginners. Kotak gateway user can trade
anywhere, anytime using internet.
Kotak also offers call and trade facility.
They provide sms alert, research report, free news and market updates.
Best feature of Kotak gateway is call and trade facility. Anybody can
activate Kotak securities gateway account with any amount between Rs
20,000 to 5, 00,000. This can be in form of cash deposit or the value of
the shares you buy. Brokerage will be charged based on the account
type. For intraday trading brokerage is .06% both sides for less than 25
lakhs and .023% for more than 25 crores.


2. Kotak Privilege Circle

This is the premium account for its users. Along with kotak gateway
account benefits they provides independent market expertise and
support through a dedicated relationship manager and a dedicated
customer service desk which provides assistance in opening accounts,
handling day-to-day problems, and more. They provides KEAT premium
which is an exclusive online tool that lets you monitor what is
happening in the market and view your gains and losses in real-time.
One can activate Kotak securities privilege circle account with any
amount more than Rs. 10, 00,000/- as margin, by way of cash or stock.
For intraday trading brokerage is .06% both sides for less than 25 lakhs
and .03% for more than 25 crores.

3. Kotak High Trader

This is the best offer for daily trader or intraday traders. This is an Auto
Square Off product where you can enjoy the benefits of intra-day
trading. Trader can get the 6 times exposure on the margin. They
provide all the benefits which kotak gateway and privilege account
provides. Trader can apply paper free order for IPO.
One can activate Kotak securities high trader with any amount less than
Rs 5, 00,000/- as margin, by way of cash or stock. The minimum
brokerage that is applicable in the Kotak high trader account is 4 paisa
on delivery and 4 paisa in the cash segment.



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4. Kotak Freeway

Frequent trader use this account type because freeway account enables
its users to trade as many times as they like - at a fixed brokerage.
One can activate Kotak securities freeway with any amount less than
Rs. 1, 25,000/- as margin, by way of cash or stock. They charge fixed
brokerage of Rs.999/- a month and on delivery transaction brokerage is
.59% on less than 1lakhs and .18% on more than 2 crores.

5. Kotak Flat

This product is best suited for the needs of the Indian retail investor
who actively invests through the internet. Kotak flat introduces the
international trend of charging brokerages on per trade basis.
Brokerage rate works up to 0.18% on delivery trades and 0.018% for
intraday trades.

6. Kotak Assist

This account most suits to long term investors. This account provides
Complete assistance on all your financial investment.

Brokerage and Account opening fees:

A trading account in Kotak requires you to have a minimum of Rs.1000 to
start with, the bank account to have a minimum of Rs.2500.

Brokerage:

For Intra-day trading, Kotak brokerage is around 0.05%.
For delivery trading, Kotak brokerage is around 0.45%.

Advantages of Kotak Securities Limited:

Kotak provides a Call & Trade facility to its customers wherein they can
place and track their orders through phone when they are away from
home.
They provide daily SMS alerts, market pointers, periodical research
reports, stock recommendations etc.
Kotak provides exclusive online tool to monitor what is happening in the
market and also investor can view gains/losses in real-time.

Disadvantages of Kotak Securities Limited:

In online trading sometimes delay comes. So it can be frustrating



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5.5 INDIABULLS


Indiabulls is India's leading Financial Services and Real Estate Company having
presence over 414 locations in more than 124 cities. Indiabulls Financial Services
Ltd is listed on the National Stock Exchange, Bombay Stock Exchange,
Luxembourg Stock Exchange and London Stock Exchange

Types of account:

1. Indiabulls Equity Trading Account

Indiabulls Equity Trading Account is standard Online trading account from
India bulls and along with online trading it also provides priority telephone
access that gives you direct access to your Relationship Manager and full
access to 'Indiabulls Equity Analysis'.

2. Power Indiabulls

Power Indiabulls trading terminal is the most advanced new generation
trading platform with great speed. This trading terminal is built in JAVA.
Power Indiabulls is extremely reach in features including Live Streaming
Quotes, Fast Order Entry and execution, Tic by Tic Live Charts, Technical
Analysis, Live News and Alerts, Extensive Reports for Real-time Accounting.


Brokerage and fees:

Account opening fees: Rs 1200/- (One time, non-refundable) as below:

250/- Equity Trading Account opening charge
200/- Demat Account opening charge
750/- Software changes

Advantages of Indiabulls

Brokerage is less compare to other online trading companies.
Provide trading terminal 'powerbulls', a java based software. It's very fast
in terms of speed and execution.

Disadvantages of Indiabulls
Faces lots of complaints regarding portal breakdown.


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5.6 MOTILAL OSWAL


Motilal Oswal Financial Services (MOSL), a leading brokerage firm, has exhibited
robust and consistent growth in both institutional and retail broking. An
established brand name and extensive geographic network covering 1,339
locations in over 426 cities and towns would provide it ample opportunities to
cross-sell products and services. It has also forayed into related businesses like
investment banking, private equity and asset management. We believe the stock
offers quality exposure to the domestic equity broking and financial services
market, which has impressive growth potential.

Strong competitive positioning

MOSL is one of the leading stock broking firms in India with a rapidly growing
client base and wide distribution network. A respected research presence and
extensive reach has resulted in robust growth in its retail business. The company
also has a strong institutional equity business. It has consistently improved its
market share in terms of traded volumes on the stock exchanges

Diversifying into related businesses

MOSL has forayed into related business like investment banking, private equity
and asset management. Though all these business are linked to capital market,
we believe the move would bring in various diversification benefits for the
company going forward

Customized investment management services

MOSL offers customized investment management services to its retail clients.
These services include planning, advisory, execution and monitoring a range of
investment products. It also provides wealth management services. The company
has classified its clients into three segments Mass Retail, Mid-Tier Millionaire and
(PCG) Private Client Group. According to the needs of each segment, products and
services are offered through the companys business locations and online
channels. MOSL has a discretionary portfolio management business. The company
is seeking to build this business rapidly. The target customer segment for wealth
management business would largely be the HNW (high net-worth) segment. The
growing client bases of its broking and distribution businesses would be a captive


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source for cross-selling these products. MOSL has recently launched a separate
branded product (Purple) for catering to the needs of this segment.

Strategy adopted by Motilal Oswal



5.7 RELIGARE


Religare Securities Ltd is a Ranbaxy promoter group company, is one of Indias
largest and fastest growing integrated financial services institutions. The company
offers a large and diverse bouquet of services ranging from equities, commodities,
insurance broking, to wealth advisory, portfolio management services, personal
finance services, Investment banking and institutional broking services.

Religares retail network spreads across the length and breadth of the country with
its presence through more than 900 locations across more than 300 cities and
towns. Having spread itself fairly well across the country and with the promise of
not resting on its laurels, it has also aggressively started eyeing global
geographies

Unique features and benefits of trading through Religare:

Trade Reward - Trade Rewards is a unique offering from Religare that gives
you dual benefits of hassle free investment experience online and an
opportunity to earn while you invest.

Zero Brokerage - Break the shackles. Get freedom from brokerage and
avail zero brokerage on your trades through us.



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Exposure up to 20 times on your margin - Allowing you the freedom to
trade without hassles throughout the day without having to worry about
your cash margin. You can get exposure (on cash Segment) as high as 20
times for intraday trades. Of course conditions apply on above two.

Interest on cash margin - Even while you are waiting to make your next
trade or online investment, your unutilized cash does not lie idle with us.
You earn interest on your unutilized cash margin.


5.8 INDIA INFOLINE


The India Infoline group, comprising the holding company, India Infoline Limited
and its wholly-owned subsidiaries, straddle the entire financial space with offerings
ranging from Equity research, Equities and derivatives trading, Commodities
trading, portfolio management services, Mutual Funds, Life Insurance, Fixed
Deposits, Gold Bonds and other small savings instruments to loan products and
investment banking. Website of India Infoline for trading is www.5paisa.com.

The company has a network of 976 business locations (branches and Sub-brokers)
spread across 365 cities and towns. Today it has more than 800000 clients
Trading Platform.

5Paisa offers 2 different online trading terminals to its customers:

1. Investor Terminal (IT):
Investor Terminal is 5Paisa's equity trading terminal for low volume trader.
This is web based terminal and could access from anywhere. This product
provides limited features in comparison of Trader Terminal, which is
another product provided by 5Paisa.

2. Trader Terminal (TT):
Trader Terminal is for high volume equity traders. Trader Terminal provides
high volume trading with powerful interface and fast order execution

Brokerage and Account opening fees:

Account opening fees Rs 500/- onetime non refundable Brokerage.


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5 paisa offers charge only 5 paisa for Rs100 of intraday trade done, which
is 0.05% brokerage. In case of in delivery trade, they charge an additional
0.20% for back office and securities handling.

Earlier the organizations which provided the facility of online trading was not safe
enough to invest but some of the changes in the past years in the Indian share
market have created the interest of trading in the shares by the people. Broadly
we can classify three important factors which have contributed to the development
of online trading in India-

Firstly the major step was taken by the National Stock Exchange (NSE) in the year
1994 which allowed the electronic trading and seeing to this various other stock
exchanges in India followed soon. This helped in making the fast, accurate and
transparent transactions saving a lot of time then the traditional method of
trading. The investors were also saved by the clutches of the fraud brokers at the
times when the clients were not aware of the true prices of the shares.

Secondly, in the year 1996 the dematerialization of the shares came (also known
as DEMAT) which avoided the online presence of shares in an electronic form
avoiding them from theft, pilferage or from other losses like counterfeiting and
frauds regarding share transfer.

The third step was the rapid growth of computer education and learning of
internet by the people. With the evolving of internet the online trading became a
hit and the investors became confident in investing just with a click of a mouse.

With the happening of such events the ratio of trading has improved a lot. As it
takes less time people praise this technology for trading purposes. Some people
who traded rarely now even trades 2-3 times every day as it provides edge of
researching about companies on the internet. The number of small investors is
increasing on the daily basis that trades on the internet. If a person invests or
trades in equities, derivatives, commodities etc through the use Internet it is
known as online trading enabling the investor to connect electronically to buy or
sell stocks, derivatives etc with the other investors. This can be done with the help
of online service providers like investsmart, indiaInfoline etc. A person can access
a stockbroker's website through a PC connected to Internet and can place his
orders. The benefits are-

A person can see the latest market movement through streaming quotes.
Reduces time lag due to self-execution and instant confirmation.
Empowers traders to have a complete control over their trading decisions.
A person can access his accounts and related information on the Website
Provides greater convenience of trade as a person can trade from home or
other convenient location.
It is cheap in terms of cost associated and offers reduction in overheads
A trader can view the historical charts on his computer


- 46



The Internet revolution has changed the way to communicate and the way to do
business in todays society bringing 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 new access by the online trading customers to low-cost transactions and
cutting-edge, real-time market information that formerly belonged only to brokers
has opened up extraordinary new investment opportunities as well as a crucial
need for state-of-the-art information.

Today the investors use the Internet Client-Server technology to buy and sell the
securities at an instant at any point of time. People investing online have reached
the proportions. Online trading allows an investor to buy and sell shares on the
exchange through Internet and helps in the direct control of his investments.













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6 GROWTH OF ONLINE TRADING

According to an article by Krishnamurthy B in 2005 after inception of online
trading in India in the year 2000 online trading is gained momentum with trading
volumes growing by 150 per cent per annum in the years 2005-2008 and it was
more than approx. 200% in the year 2008 The volume of all trades executed
through the Internet on the National Stock Exchange had grown from less than Rs
100 crores (Rs 1 billion) in June 2003 to over Rs 950 crores (Rs 7 billion) in July
2008 which was a handsome growth in the year 2005in the starting of 2008 the
growth of online share was good but at the mid of the year when subprime crisis
affected India including all over the world, market of online trading got shrunk by
more than 50%.

Now the growth of online trading is on its right track ,Indian stock market has
been announced the one of the Safe and stable market of the world, so here in
India the online trading is growing like anything in comparison to the whole world

At the end of July 2008, there were more than 168 registered brokers on the NSE
and the number of Internet trading subscribers to about 2.024 million. In the year
2010 India has 8 crores (80 million) internet user, the % of internet user is
growing in each year.

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

Today the total volume of online trade in India is about 29-31% of total trades.
According to brokers the better broadband connectivity across the country and
wider awareness of equity as an asset class will raise the online trade volumes to
over 50% of total trade. In India the demography is such that 75% of the
population is under the age of 36 and more than 50% of the 75% is under age of
25 and this is another supporting factor.

The Chief Executive of Reliance Money Ltd says that online investing is still at a
nascent stage in India and expects that Internet-based trading will eventually take
about half of the total stock market trading as like with developed markets such
as the US. Philippines has the highest online trade with about 55-60% execution
of trade is online. The reason is because they had wider Internet connectivity
years before India. The biggest challenge in India remains better Internet


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connectivity. The earlier Web-based technology used for Internet trading has been
replaced by specialized software which gives real-time global data streaming rates
to trader helping investors to analyze the market trends and helps in faster
execution of trades. Earlier the investors made trade calls over the phone which
sometimes led to the delays. Example of the tools used in these days online
trading









- 49




Online share trading in India was at a boom in the end of 2006 with daily-traded
volumes more than tripling from Rs 1,500 crores to Rs 5,000 crores in the last one
year and terminals was set up in small towns such as Rajkot, Hubli and
Vijayawada .In that year the share of online trading rose dramatically from 7%
last year to 20% as a percentage of overall traded volumes. Due to this factor the
top five US brokerage firms decided to make a foray into India in the next year
driven by strategic interest. Also at that time non-metros accounted for half of the
daily turnover of online trading.

Graph is showing the declining in the turnover of online trading in Indian stock
exchange during slowdown in economy due to subprime mortgage crisis



- 50



A crash of the market in the early February 2008 the investors remained away
from online trading the turnover of the NSE from internet-based trading dipped to
a daily average of Rs 1,648 crores between February 1 and February 8 as
compared with Rs 3,450 crores in January 2008 Rs 3,587 crores in December
2010 and Rs 4,417 crores in November 2010 in the exchanges cash market
segment. In the mid February 2008 it accounted for just 12% of NSEs total cash
turnover as compared with a high of 24% in November last year.

"Issues that need to be addressed are education on cyber crime and the security
solutions around it," says Vinesh Menon, Deputy CEO & Head for Online
Investment & Branch Channel, Bajaj Capital.

"It's a matter of time when we will see exponential growth in the online trading
segment, not just through the computer but also through our mobile phones,"
adds Menon. 20 million investors are expected next 5 yrs.

India boasts of the third highest investor base in the world, unthinkable till a few
years ago. The most online stock broking companies started from 2000 onwards
because of development of global Internet economy and for years 2000 to 2003
the stock market was under a bear hug. The intense competition among a new
wave of online brokerage companies hammered down brokerage rates from 1%
(in 2000) to 0.25 %, or even lower to 5 paisa.

The number of investors opting for online trading has gone up manifold, according
to the recently published 'Indias Leading Equity Broking Houses, 2008' by Dun &
Bradstreet (D&B). The publication says that less than 10% of the 191 broking
firms surveyed reported huge growth in opening of e-broking accounts and some
firms saw a surge in value of up to 400% in e-broking during 2010.



- 51



According to the report, numbers of e-broking accounts registered in 2010 have
grown exponentionally. Indiabulls Securities Ltd added 4,51,611 accounts while a
relatively new firm in the industry, Reliance Money added 2,15,678 accounts
during the same time period. Motilal Oswal Securities Ltd managed to add 19,065
accounts while Unicon Financial Intermediates Pvt Ltd could increase their e-
broking accounts by 13,787.

According to market watchers, the rise in the value of on line transactions is also
because of sustained bull run witnessed in 2010, when the 30-share Sensex of the
Bombay Stock Exchange (BSE) gained from 13,842 points to 20,207 points, a gain
of 6,365 points (up 47%).



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E-broking is contributing a sizeable portion to the trading volumes and also to the
revenue generated for leading stock broking firms. Some examples of the
percentage contribution to trading volumes contributed by e-broking are 91% in
case of Reliance Money, 62% for India Bulls, 20% each for ASL Capital and
Shreyas Stock, 19% Angel Broking, and 15% Farsight Capital. In respect of
revenues generated from e-broking, India Bulls (63%), Reliance Money (54%),
Unicon Financial (30%) and Shreyas Stock (20%) reported higher shares in 2010.
Ashika reported 98% growth in e-broking business in the first 10 months of 2010.

Another significant trend is the growth in international business of broking firms.
Firms that reported presence of offices outside India include Reliance Money,
Motilal Oswal, Karvy Stock Broking, JRG securities, Vogue and Bonanza Portfolio.

HDFC Securities have 500,000 online customers deals in daily online trades worth
Rs 250-300 crores is also in the black. The revenues it had in 2010-08 is Rs 100
crores. HDFC Securities had revenues of Rs 67 crores and a net profit of Rs 7.21
crores in 2006-07. ICICIdirect has 1.5 million online broking accounts and parent
ICICI Securities reported revenues of Rs 750 crores for March 2008. The new
player Reliance Money has 2 million online accounts trades worth Rs 2,000 to Rs
3,000 crores per day.


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7 EFFECTS OF ONLINE TRADING ON THE
INVESTMENT COMMUNITY (TME)

7.1 BENEFITS OF ONLINE TRADING TO INVESTORS

Some online brokerage firms reported 100+ per cent annual growth rates
through the year 2000. The increase was because of the benefits investors
can gain from online investing. These benefits include low transaction
costs, speed, convenience, boundary spanning abilities, and immediate
access to financial information. According to, transaction costs have been
driven down because of the increased number of online brokerage firms. In
fact, the dramatic increase of online brokerage firms has led to increased
competition and lowered commissions that an investor must pay per trade.

Along with low transaction costs, the main strategy of online discount
brokerages is the speed and delivery of almost instantaneous transactions.
In todays world of fast food and 24-hour service, investors cannot help but
want the same type of fast service applied to the financial industry. That is
why many investors enjoy the conveniences e-brokerages offer by allowing
them to go online and complete transactions at almost any time during the
day or night. Time is saved because investors do not have to phone their
broker during normal business hours in order to complete their
transactions.

Another benefit of online trading is its ability to span boundaries. Many
investors are interested in buying foreign stocks and with online trading
systems in place; these investors are drawn to its boundary spanning
capabilities. This is also true for foreign investors who want to invest in the
U.S. market. Now, with the Internet, they have easier access to make their
overseas transactions.

A final benefit investors can derive from online trading is access to
instantaneous information. Vakil and Lu (2005) stated that the Internet has
given people access to immediate financial information whenever they want
it. They felt that the availability of this financial information should lead
investors to make better-informed choices. This thought is also shared by
Bhasin (2005-2006), especially since the information that is now available
to the average investor was once only available to people working in the
business of finance.



- 54

7.2 COST OF ONLINE TRADING TO INVESTORS
Even with all of the benefits e-brokerages offer to their clients, there are
still costs associated with online investing. Some of these costs include
unobservable costs, information-processing costs, information illusion,
frequent trading behavior, and the lack of personal advice. Transaction
costs have two components: observable costs and unobservable costs.
According to Konana, Menon, and Abramowitz (1999), observable costs are
the actual commissions that an investor is charged in order to complete a
transaction, where unobservable costs are the costs that are related to the
transaction being executed inefficiently and from information asymmetry.
These unobservable costs are determined by where e-brokerages choose to
complete their transactions. For example, they might not choose to
complete the transactions at the actual exchanges, but instead they might
choose to use third-parties and market-makers in exchange for a
percentage of the bid-ask spread. Obviously investors must be aware of
these unobservable costs and the potential that they have to create
opportunistic behavior by e-brokerages because of the commissions that
they can receive from market-makers. To cut down on this type of
arbitrage, the Securities and Exchange Commission (SEC) could help create
transparency by putting into effect new regulations that state what
information must be provided to the investor.

A second cost created by online investing is the cost of processing
information. Information-processing costs are the costs that online
investors sustain before they actually make a transaction and it is defined
by the time and energy that the investor expands trying to reach an
investment decision. Hong also stated that because of the huge volume of
information found on the Internet that it can take investors a lot of extra
time to find, sort, and analyze all of the relevant information. This in turn
can out-weigh the benefits of online trading for some investors because
they might not be able to afford the opportunity costs associated with
spending a lot of time doing research.

Another cost to be aware of in regards to online trading is information
illusion. This illusion results when investors think that because they have
access to so much information via the Internet that they have an
advantage over the entire market and this can lead them to make bad
investment decisions. These investors then have an exaggerated sense of
control over the outcomes of their investments.

Frequent trading is another cost associated with online investing. Low
transaction costs can encourage frequent trading according to Konana,
Menon and Balasubramanian (2000). In fact, in Singapore, 71.1 per cent of
online investors say that they trade more frequently than they did prior to


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online trading. This increase is troubling because people who trade the
most generally have the worst performance.

Finally, the downside of investing online is the lack of personal advice from
those in the financial field. According to Phelan (2001), the Web will never
be able to substitute for the judgment and expertise of financial planners,
nor will it be able to protect investors from all of the scams that are
abundant on the Internet. So the bottom line is that the investors must
weigh these costs against the benefits and decide whether online trading is
right for them.

7.3 BENEFITS OF ONLINE TRADING TO BROKERS/FINANCIAL
PLANNERS

The investors are just one group affected by the development of online
investing; another group that has been influenced is the brokers/financial
planners. With e-brokerages attracting twelve million investors from 1994
to 2000, it may seem like traditional financial planners will soon be extinct.
However, this is not the case, as many people in the financial industry have
witnessed that the growth of online trading has created benefits for them
as well. This includes increased publicity, lower start-up costs, increased
client base, ease of communication, and risk management. The attention
that has been given to online brokerages in terms of advertising has
encouraged more people to trade and thus, in the long run, this has
created more business for the financial markets in general. Financial
planners feel that average people will be drawn into trading online because
of its novelty and then they will eventually realize that they need a financial
planner in order to help them get a comprehensive view of their finances.

A second benefit, according to Barber and Odean (2001), is that the fixed
start-up costs of opening an online brokerage are far lower than opening a
traditional brokerage service. Therefore, many brokers might consider
putting a part of their services online, thus reduce their staff costs. The
staff costs can be reduced because it does not take as many personnel to
run an e-brokerage site as it does to manage a traditional brokerage firm.

E-brokerages have also allowed brokers wider access to a variety of
different people, therefore increasing their client base and allowing them to
offer many different types of services to their customers. Ameritrade and
E-Trade are examples of firms that have found new ways to deliver
traditional services and new services.

Another benefit to brokers is ease of communication. Many financial
planners see the greatest gift that the Internet has given them as allowing


- 56

them to improve communication with their clients. They appreciate the fact
that the Internet has saved them money by reducing the costs of
communication and by making it easier to get information to their
customers.

One final benefit that online trading has for brokers is that it makes risk
management much easier. When an investor places a trade online, the
system first can check the investors bank account to make sure that the
individual has the funds available to make the trade and this lowers the
credit and payment risk that traditional brokers have had to deal with in
the past.

7.4 COST OF ONLINE TRADING TO BROKERS/FINANCIAL
PLANNERS

The costs of online trading to brokers and financial planners are fairly
obvious and straightforward. Lower transaction costs online have led many
investors to e-brokerages and away from traditional brokers to place their
trades. Yet, with the media talking constantly about how easy online
trading is, one cannot really blame brokers clients for wanting to try it.
Brokers might be concerned that the bid-ask spread, used to gauge trading
costs, and has dropped 30 per cent since Electronic Communication
Networks (ECNs) have surfaced. While this is good for the investor, it leads
to smaller commissions for the broker.

Another concern is that since investors feel that they can distinguish
between the good and bad advice that they find on the Internet, they
therefore might not be willing to continue to pay a financial planner solely
for their expert opinion. This is in part due to the information illusion
discussed previously where investors feel that since they have access to so
much information that they can do it better on their own.

Finally, many investors, especially entrepreneurs, want to see if they can
make better investments than what their financial advisors are already
doing for them, so it becomes a game that they want to win. To try to keep
some of their clients from turning to online trading alone, many advisors
have placated them by setting aside play money that they can invest on
their own so that they will feel more in control of their investments.



- 57

7.5 CHARACTERISTICS OF ONLINE TRADERS

According to research by Barber and Odean (2002), many online
shareholders share similar characteristics. The majority of them are young
men without children and a high level of income. They found that active
traders with a propensity for high investment risk and an unusually strong
performance in the stock market are all characteristics shared by many
investors who decide to trade online.

Opiela (2000) quotes a research firm as saying that the two types of
investors that are trading online are by their definition the Aggressive
Affluent and those who would like to Get Rich Quick. On that note,
Hurley (2000) states that online trading is spawning a younger type of
client that is more aggressive and well informed. It has also been stated
that investors who participate in online trading generally have a higher
education level, are at ease navigating the Internet for relevant
information, and know how to apply it in order to make their transactions.

Konana, Menon, and Abramowitz (1999) break online investors into two
categories: the early adopters and the late adopters. They state that the
early adopters are aggressive do-it-yourself types of investors whereas
the late adopters rely more on a brokers advice before going through with
trades. But even if they rely on a broker for some forms of advice, most
online investors have to be self-directed because online brokerages do not
make a habit of giving advice on what or when to trade.

It is also interesting that once investors start trading, many of them
become very overconfident according to a study by Barber and Odean
(2002). This is due to an illusion of knowledge and an illusion of control. An
illusion of knowledge is when investors believe that since they have access
to additional information that they become better investors and they will
not listen to information that states otherwise. In fact, usually because
they have access to so much information, investors suffer from information
overload and their actual predictive skills for picking stocks begin to
decline. An illusion of control is when an investor believes that his
involvement will change the outcomes. They will feel that since they are in
control of their investments that they have control over their returns and
can therefore beat the market. As a result of this illusion of control, these
investors will have a tendency to trade too often and too speculatively.

7.6 ONLINE TRADING INTERNATIONALLY



- 58

Online trading is not a phenomenon that is sweeping only the United
States; it is being implemented in other countries as well. For the purpose
of this study, articles regarding online trading that took place in
Switzerland, India, and Singapore were analyzed. In Switzerland, 40 per
cent of the shareholders search for their financial information via the
Internet and more than 25 per cent of people between the ages of eighteen
and twenty-nine also place their orders via the Internet. The characteristics
of online investors are very similar to those in the U.S. Swiss Internet
investors are generally male professionals with a high level of education
and income. They also are very self-directed individuals that make
decisions regarding their finances on their own.

In India, trading via the Internet refers to giving your orders to brokers via
a website and not directly on an exchange. Goswami (2003) also explains
how the Internet in India acts as an Order Routing System since all orders
must be routed through the same exchange mechanisms this helps to
ensure transparency and security. India investors are professional self-
directed people that are highly educated. Goswami rates convenience, low
cost, and speed as the benefits of online trading that are most important to
the Indian investors.

Finally in Singapore, the self-investing trend has led to many e-brokerages
with lower fees than traditional brokerages. The majority of investors in
Singapore are young professional males with at least one college degree.
However, since stock trading on the Internet has become so accepted in
Singapore, it is not correct to say that investors are only the young and the
educated. Instead, Internet trading is appealing to investors across
different age levels and different educations. Nevertheless, according to
Teo, Tan and Peck, the one characteristic that almost all online investors
have is high-level incomes. They found that this was because most local
online brokerages require a deposit of at least $1000 (Singapore dollars) in
order to start trading.

7.7 THE FUTURE OF TRADITIONAL BROKERS AND ONLINE
TRADING

Even though the Internet is being used more and more for investing
purposes, it is highly unlikely that virtual brokerages will replace full
service traditional brokerages over the long run. In fact, many financial
planners feel that online trading will not hurt their businesses since the
greater part of them work with the wealthiest portion of the population
who do not have time to do their own investing.



- 59

It was interesting to discover that in the late nineties, when the market
was going strong, many investors made large returns by trading individual
stocks and wondered why they should even pay for financial advice from
an advisor. These investors became overconfident and suffered from the
illusion of control that Barber and Odean (2001) researched in their study.
However, after the market drop in 2001, many online investors continued
to trade online, but they went back to financial planners for advice (Vakil &
Lu, 2005). According to Hurley (2000), for the first time in 2000 since the
mid-nineties, the highly diversified low risk portfolios that financial
planners created have produced better results than portfolios that their
clients were managing by themselves online. This is because many online
traders only focus on the here and now and do not look at the whole
picture or at the future as financial advisors are trained to do.

Many brokers may have clients that want to try to invest on their own but
do not have a large amount of play money to set aside to invest, as was
mentioned in a previous section. One option for this type of client is for
the broker to open an account online for the customer that the broker can
oversee and step in if it looks like his client is heading for trouble.

With regards to online investing, many e-brokerages are trying to expand
to offer newer and better services to clients. One option is for e-
brokerages to offer more knowledge and information support and in turn
raise the commissions in order to cover the costs associated with offering
this service. This can be done by adding knowledge-based transaction
processing systems to e-brokerages that can give investors more
personalized advice. By simply adding artificial intelligence systems to the
original transaction processing systems that are already found on most
online investing websites, e-brokers can create a knowledge-based
system. Online investing firms might also consider adding educational web
pages and other services that will teach beginning investors how to invest
online.

7.8 DISCUSSION AND IMPLICATIONS FOR THE FUTURE

Has online investing benefited or impaired the financial industry? The
purpose of any efficient market is to bring all possible buyers and sellers
together so that all the preferences are reflected in the market price.
Online investing benefits the financial industry by helping the stock market
to reach this goal. It allows more buyers and sellers to come together to
carry out transactions.

Some fear that online investing will increase market fragmentation, which
is when too many competitive suppliers enter an active or new market.


- 60

Although that may happen over a short period of time, in the long run, the
number of suppliers and consumers should even out as more people start
using the Internet to trade.

Whether to switch to online trading is something that investors will have to
decide for themselves. At this time, average Internet traders might fall
into the category of young highly educated men with larger incomes, but
this is sure to change. Women are now beginning to use the Internet more
for online shopping and paying bills so using the Internet to invest should
follow. Also a number of inexperienced investors have started trading
online because of the amount of publicity touting its ease and
convenience. These immature investors will need a lot of knowledge and
advice from e-brokerages, and online investing firms must take a step up
and be available for more personal advice. That may mean that
transaction costs will go up for more nave investors who request more
personalized service, but it will be worth it for them in the long run.

It is also important to educate new investors that investing online tends to
make them look to the short term instead of investing for the long term,
and that this can cause them to trade more frequently, thereby lowering
their returns. Buying individual stocks can be very risky and without the
right advice on how to diversify investments, a nave investor could end up
losing a lot of money.

Since no online investing firms are the same, investors will value certain
ones over others based on their needs. The new breed of investor that
enjoys risk and likes to trade frequently will favor sites that gives them
low transaction costs and lots of control. However, beginning investors will
want sites that give them more advice and handholding tools. More value-
added knowledge should be added to as many sites as possible.

As the Internet becomes available to more people all over the globe,
foreign investors will increase their purchases of U.S. stock and U.S.
investors will begin to diversify by including more foreign stocks in their
portfolios. These foreign investors will appreciate the opportunity to invest
in U.S. stocks more conveniently and at lower costs. Foreign investors will
now be able to pay lower transaction fees and stop paying higher fees to
their brokers for international trades. The same can be said about U.S.
investors trading foreign stocks. Many advisors suggest holding foreign
stocks in a portfolio as it actually reduces undiversifiable risk, so online
investing will give investors an easier way to acquire these international
stocks.

More traditional brokers will need to start offering services via the Internet
if they have not already. However, they should not go completely online as
a majority of the investors like the security of knowing that there is an


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actual physical location where they can go if they need expert advice. For
investors that want to experiment with online investing but are already
clients of traditional brokers, the idea of setting up play money for them
to invest with is a suitable idea. Also, brokers could set up a mixture that
allows both online trading and traditional trading. Traditional brokers
should consider offering other services such as estate planning and tax
planning, which will not be as easy to offer online.

However, there are indications that online trading has somewhat
dampened since 2000. What began as an economic slowdown only got
worst with the September 11th terrorists attacks. Investors have generally
have become less tolerant and more risk averse. When dramatic events
such as September 11th happen, it directly affected the overall
performance of the economy and investors have the tendency to stay with
approaches that they are most comfortable with and not try anything new
(like online trading) while at the same time investing less (sine
investments involve risk). If the market picks up speed, investors will
change their minds. But, given the uncertainty in global oil prices and
other issues, including ballooning U.S. trade deficits and the war on
terrorism, investors are very unlikely to return to online trading in the
near future. However, they will do so as soon as the market picks up and
they once again become comfortable with this new approach to trading.

7.9 CONCLUSION

The Internet is drastically changing how everyone does business, including
the financial industry. Online investing has benefits to offer investors as
well as brokers. These benefits include low transaction costs, convenience,
speed, boundary spanning, improved communication, and risk
management. However, these benefits do not come without costs. Some
costs of online trading include information-processing costs, unobservable
costs, information illusion, and smaller commissions for brokers.

The characteristics of online traders are somewhat different from
traditional investors. Online traders tend to be males in their early
twenties to mid-thirties, with high income and education levels. Yet this
will be changing as more people gain access to the Internet and start
doing more everyday things online. Foreign investors will also increase
trading in U.S. stocks, and U.S. investors will begin investing in foreign
markets.

Although online investing is gaining prominence, it will not be for
everyone. Some will not trust the security of trading online and others will
not have the time to do the research required and will prefer to have


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traditional brokers invest for them. Overall, online investing will only
encourage new investors to trade in the stock market, bringing together
buyers and sellers to make the market more efficient. After some of the
kinks are worked out of online trading, it will tend to be more beneficial to
the financial industry in the long run without many negative effects.

Even though online trading has slowed down somewhat at the present
time, it is our belief that it will pick up speed in the future. Once investors
have become more comfortable with the current economic conditions and
foresee brighter economic conditions they will return.





























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8 ANALYSIS
Below is the analysis done while doing the study on Online Trading in India.

Ans.1 What is your education qualification?



INTERPRETATION

The people who are dealing with the stock market either online or offline. mort of
them are graduate, 49%of the total respondent who are dealing with the stock
market are graduate, then 16% are post graduate and 22% people is having
professional degree. So here this is showing that qualification up to graduation or
more than that is in the favor of the online trading pattern

Ans. 2 What is your annual income?




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INTERPRETATION

58% respondent are having the income level of 100000-200000 ,21% is having
200000-300000 , 12% in having 300000-400000 , 7% of the total respondent are
having income more than 400000 per annum and only 2% are having less than
100000 per annum.

To invest in the stock market minimum 100000 or more than this should be the
annual income level of the people. In India the per capita income in also
increasing so we can say that there is a good opportunity for the online trading
market

Ans.3 What percentage of your monthly household income could be
available for investment?



INTERPRETATION

According to the data 23% of the total respondent invest less than 5% of their
income, 41% respondents are saying that they invest 5%-10% of their monthly
income (which is highest) Whereas the 21% investor do the investment 10%-15%
of their total monthly income,13 invest between 15%-20% of the total income and
only 2% does more than 20% of their income invest in the market

We can easily understand that 75% of the total population is having a good
amount of investment, so the investment is there in the market, good number of
people are ready to invest a good amount in the market 91% of respondent is in
the income level of 100000 300000 (according to the last question analysis).

So we can say that stock brokerage houses will have to do a good business with
the help of Online trading system with few value addition services


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Ans.4 Where do you often invest your money?



INTERPRETATION

Highest number of respondent is having their investment in the equity that is 65%
whereas the investment available for the mutual fund, term deposit and insurance
is 14%, 12% and 9% So the investor for equity is high which is again showing the
n number of opportunity for online trading

Ans.5 What is the primary objective of your investment?



INTERPRETATION

13% of the respondent invests the money for the reason capital appreciation but
most of the investor is having same motive that is source of income and
retirement plan, wealth preservation and education funding for children or other
are only 10%



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From the analysis we can have idea that the main objective of the investor to earn
the money through trading in stock market 77% of the respondent achieves their
objective with the help of investment in the equity market, because most of the
investment takes place in the form of equity (explanation of 4th ans.)

So we can say that there is a huge potential in the market for the trading in the
stock market

Ans.6 Do you owe a Computer?



INTERPRETATION

78% of the total respondent who are dealing with the stock market is having
computer in their house and only 22% is not having computer in their house

The people who is having computer that is 78% can also go for online trading
which can be a large number of people who will go for online trading they dont
need to do a additional investment for computer to go for online trading



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Ans.7 To operate a computer is easy for me



INTERPRETATION

76% (26+51) of the total respondent believe that operate a computer is easy for
me whereas 20%(13+7) of the respondent is having problem to operate a
computer out of that 20% , 75 believe that they cant go for computer

So, if 78% of the people who are dealing with the stock market is having
computer at their house and around 76% of the same population dont have any
problem to operate a computer

So around 60 % is there who is having computer and they dont have problem to
operate a computer

Ans.8 Online trading is a secure way of trading?



INTERPRETATION



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71% of the respondent is having a positive thinking that online trading is a secure
way of trading whereas 185 of the respondent believes that online trading is not a
secure way of trading Satisfaction about the process, by which they will be going
to do a trading that is online trading, should be there in the mind of the customer.
If they believe that there is no risk over the money which they are going to invest
in the market with the help of online trading, there will be a perception to go for
online trading at least one time.

Ans.9 online trading is easy and fast way of trading?



INTERPRETATION

51% of the total respondent believe that online trading is a easy task Whereas
41% of the respondent believes that to deal with online Trading is not a easy task
and 85 was confused to anything about that the trading via internet is an easy
task or not.

There is a difference between the people who believe and who dont believe is not
very big that is only 10% , the reason of this problem can be if a person is doing
its investment on its own he or she think of the problem of being mistaken in the
transaction. So there is a need of proper training to do trading online.




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Ans.10 At what time do you trade?



INTERPRETATION

45% of the total respondents do trading in office timing while 32% do trading in
non office timing and 23% of the respondents do the trading in free time

Here the people who do the trading in office timing they face the problem of not in
the continuous touch of the stock market, so online trading can be one of the good
solution of this problem.


Ans.11 Introduction of online trading helped to attract the new Investors
thus increasing the trading volumes at Stock Market?



INTERPRETATION

76% of the respondents believe that the introduction of online trading helped to
attract the new customer became the reason to increase the trading volume of the
market



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On the other side 16% of the respondents believe that it doesnt affect the trading
volume

Ans 12. What factor would you consider before choosing an account in a
brokerage house?

RELIABILITY ANALYSIS OF THE DATA

We calculate the value of cronbachs Alpha to calculate how reliable the data
collected by the sampling

Reliability Statistics

Cronbach's Alpha Cronbach's Alpha Based on Standardized Items N of Items
.880 .875 21


we also look for that if the value of cronbachs Alpha is more than average so that
data collected by the sample is showing the habit of the population the data is
representing the whole population we are having the value of cronbachs Alpha of
21 features that is .880 that is more than good , so here we can say that data is
reliable enough to go further analysis


DESCRIPTIVE STATISTICS ANALYSIS OF THE DATA

In the descriptive statistics analysis we calculate the MEAN and STANDARD
DEVIATION Where low mean shows the average of the respondent who think that
these quality should be in the product and deviation showing the differentiation in
opinion of the respondent Low S.D. means small difference in the opinion about
the particular factor which should in the product.



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If we do the analysis the data through value, we will find that few features are
most important for the customer. These are Brand, Compliance system,
infrastructure,

Regular delivery of contract notes, Efficiency at peak hours, Time to open an
account, Variety of products offered Helpline services, Guidance, Research reports
and Access to back office.

The mean of the given component is around 1.5 1.99. That is showing that
customer is looking theses component in the product.

S.D. of the product features Guidance, Variety of products offered, Efficiency at
peak hours, Brand, Compliance system, infrastructure is less than 1. Here the
respondent is not having different opinion about these components.

FACTOR NANLYSIS

In the factor analysis we look for the few component and each component is
having 1 or more than 1 features of the product



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If we analyze the given Rotated Component Matrix and Component
Transformation Matrix we will find that there are six component are coming and
each of them component include one or more than 1 features in its own

If we talk of component 1 it include few features which are most important while
designing the product Variety of products offered, Time to open an account,
Brokerage charged, Customer services, Software, Research reports and
infrastructure

In component 2 it include four features of the online trading product that is
Efficiency at peak hours, Customer relationship, Market exposure, Helpline
services. In component 3 it include four features of the online trading product that
is Effective execution, Regular delivery of contract notes. In component 4 there


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are three factor which are most important for the product and they are Access to
back office, Comprehensive stock trading portal, Employees skill According to
component 5 there is only a single feature which is Time to open an account is
important And the component 6 is also having only a single product feature that is
Recording confirmation. If we gone through the all component of the product we
will find that there are few quality or features which a product like online trading
should have.

These are Variety of products offered, Time to open an account, Brokerage
charged, Customer services, Software, Research reports






















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9 CONCLUSION

The online trading is growing with a rapid pace with the rising level of education
among the customers. The other factors being that the Indian Investor nowadays
wants to deal himself in trading rather than depending upon other middlemen.
They also consider the factors like time saving in doing the online transactions,
convenience etc. Although some people feel that online trading is not secure but
the people doing the trading online is happy about the increasing security
concerns among the companies.

The year 2008 has not been so good for the stock market and the Sensex and
Nifty has been dipping and affecting the business negatively for these companies
but the same trend reversed in 2009 - 2010. This is due to the fact that at these
times people do not prefer to open the DMAT and Trading accounts. So the
companies have to reduce their account opening fees to attract more and more
customers. Also people trade very less in the bearish market and the companys
profits against brokerage fees soars downwards. It is also a found fact that during
the bearish market the ratio of online trading becomes very less. Also there is an
intense competition among the companies and the companies come up with new
and new promotion schemes such as discounted and negotiable brokerages, Zero
balance accounts, waiving a/c opening fee and AMC etc. As the internet
penetration is growing in India this business holds a huge potential for growth.

Now if the existing company will have to capture the market they will have to look
for the innovation in their product as well as service mix.

The mantra for success in the current situation will be educating the customers
about the benefits of online trading and the amount of ROI that can be generated
through it.

















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10 RECOMMENDATIONS

The companies should come up with more and more innovative features in their
web portals.
We came to know about most important factor about the product with the
help of factor analysis, so we should go for change the product according to
the customer need.
We should also focus upon the value added services. Generally company
does claim that if you will by the product you will get these benefits but
company doesnt provide the services here. So services always does matter
when we talk of ONLINE TRADING
Company should also look for the problem which customer generally face
when they do trading (like problem of operating properly)
The customer should be educated regularly regarding the new technologies
and techniques of trading online and also other relevant information.
The companies should look after to develop more safe and secure ways of
transacting business online.
The companies should make maximum efforts to detect fraud cases and
minimize them




























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11 INDUSTRY RELEVANCE

My research project is quite relevant to the today generation of online trading
community. The following things can be useful for online trading community

They should know their market position with other competitors.
They should probe the broking company to get know some areas of
improvement.
The changing perception of market and the companies will also be made
clear.
They should get the broking companies to do effective segmentation of
their market based their research analysis teams for better trading.
Everyone should understand the effects & advantages of todays changing
technology and should keep themselves abreast with the changing &
upcoming technology.
































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12 LEARNING

The last two months has been a great learning experience for me because I came
to know about many aspects of online trading which I didnt know in last 6 years
of using the online trading facilities. Some of the learning of mine is:

I improved my communication skills by learning how to talk to different
kind of people as it requires the different approach to handle each person.
I became aware about various aspects of working of stock exchange
I learnt few things about back office work
I learnt about the consumer perception about the stock market and online
trading.
Patience was the thing I learnt the most as I have to approach various
persons to whom I had to explain same things again and again while
approaching or calling them at regular Intervals.
































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13 BIBLIOGRAPHY

money.rediff.com
www.reliancemoney.com
www.icicidirect.com
www.kotakstreet.com
www.bseindia.com
www.nseindia.com
www.bseindia.com
www.sebi.co.in
www.investorwords.com
www.advfn.com
www.investsmartindia.com
www.trendtraders.com
www.indiainfoline.com
www.sharekhan.com
www.kotaksecurities.com
www.indiabulls.com
www.motilaloswal.com/home
www.religaresecurities.com
http://en.wikipedia.org/wiki/National_Stock_Exchange_of_India
http://www.world-exchanges.org/statistics/ytd-monthly
http://www.nse-india.com/content/us/us_factsfigures.htm