Professional Documents
Culture Documents
CHANDRASEKHAR GOUD.G
Roll No. 08J81E0010
Under the Guidance of
MR.SRINIVAS
(Assistant Professor of MBA Dept)
DECLARATION
I here by declare that this project report entitled A STUDY
OF ONLINE TRADING AND STOCK BROKING has been
prepared by me is an original work submitted to
Jawaharlal Nehru Technological University towards
partial fulfillment of the requirement for the award of
Master of Business Administration. I also here by declare
that this project report has not been submitted at any time
to any other university or institute for the award of any
Degree or Diploma.
CERTIFICATE
This is to certify that the project work entitled
A STUDY OF ONLINE TRADING AND STOCK BROKING
Internal Guide:
Mr. SRINIVAS
MR.D.H.B.R.PRASAD
Head of the department
Master of Business Administration
ACKNOWLEDGEMENT
I take this opportunity to express my gratitude high regards and
sincere thanks to our respected Principal Dr. R.V. Krishnaiah
for providing excellent infrastructure.
I thank Mr. D.H.B.R.Prasad Head of the Department of MBA for
his constant help and support.
I express my sincere thanks to our committed faculty
Mr.SRINIVAS for his support and guidance.
I have great regard for all the well wishers whose help is beyond
acknowledgement.
Chapter 1
Objectives
&
Methodology
It is to analyze the changes in trading after the exchange shifted from outcry
to online trading system.
To know about the latest and future development in the stock exchange
trading system.
Chapter 2
Company profile
INDUSTRY PROFILE
Following diagram gives the structure of Indian financial system:
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FINANCIAL MARKET:
Financial markets are helpful to provide liquidity in the system and for smooth
functioning of the system. These markets are the centers that provide facilities for
buying and selling of financial claims and services. The financial markets match the
demands of investment with the supply of capital from various sources.
According to functional basis financial markets are classified into two types.
They are:
Money markets (short-term)
Capital markets (long-term)
According to institutional basis again classified in to two types. They are
Organized financial market
Non-organized financial market.
MONEY MARKET:
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CAPITAL MARKET:
Capital market is a place where we can raise long
long-term capital.
Again the capital market is classified in to two types and they are
Primary market and
Secondary market.
E.g.: Shares, Debentures, and Loans etc.
PRIMARY MARKET:
Primary market is generally referred to the market of new issues or market for
mobilization of resources by the companies and government undertakings, for new
projects as also for expansion, modernization, addition, diversification and up
gradation.
n. Primary market is also referred to as New Issue Market. Primary market
operations include new issues of shares by new and existing companies, further and
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right issues to existing shareholders, public offers, and issue of debt instruments
such as debentures, bonds, etc.
The primary market is regulated by the Securities and Exchange Board of India
(SEBI a government regulated authority).
Function:
The main services of the primary market are origination, underwriting, and
distribution. Origination deals with the origin of the new issue. Underwriting contract
make the shares predictable and remove the element of uncertainty in the
subscription. Distribution refers to the sale of securities to the investors.
The following are the market intermediaries associated with the market:
1. Merchant banker/book building lead manager
2. Registrar and transfer agent
3. Underwriter/broker to the issue
4. Adviser to the issue
5. Banker to the issue
6. Depository
7. Depository participant
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SECONDARY MARKET
The primary market deals with the new issues of securities. Outstanding securities
are traded in the secondary market, which is commonly known as stock market or
stock exchange. The secondary market is a market where scrips are traded. It is a
market place which provides liquidity to the scrips issued in the primary market.
Thus, the growth of secondary market depends on the primary market. More the
number of companies entering the primary market, the greater are the volume of
trade at the secondary market. Trading activities in the secondary market are done
through the recognized stock exchanges which are 23 in number including Over The
Counter Exchange of India (OTCE), National Stock Exchange of India and
Interconnected Stock Exchange of India.
Secondary market operations involve buying and selling of securities on the stock
exchange through its members. The companies hitting the primary market are
mandatory to list their shares on one or more stock exchanges in India. Listing of
scrips provides liquidity and offers an opportunity to the investors to buy or sell the
scrips.
The following are the intermediaries in the secondary market:
1. Broker/member of stock exchange buyers broker and sellers broker
2. Portfolio Manager
3. Investment advisor
4. Share transfer agent
5. Depository
6. Depository participants.
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At present there are 23 stock exchanges recognized under the securities contracts
(regulation), Act, 1956. Those are:
Ahmadabad Stock Exchange Association Ltd.
Bangalore Stock Exchange
Bhubaneshwar Stock Exchange Association
Calcutta Stock Exchange
Cochin Stock Exchange Ltd.
Coimbatore Stock Exchange
Delhi Stock Exchange Association
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The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions (FIs)
to provide access to investors from all across the country on an equal footing. Based
on the recommendations, NSE was promoted by leading Financial Institutions at the
behest of the Government of India and was incorporated in November 1992 as a
tax-paying company unlike other stock exchanges in the country. On its recognition
as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April
1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment
in June 1994. The Capital Market (Equities) segment commenced operations in
November 1994 and operations in Derivatives segment commenced in June 2000
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NSE's mission is setting the agenda for change in the securities markets in India. The
NSE was set-up with the main objectives of:
The standards set by NSE in terms of market practices and technology, have
become industry benchmarks and are being emulated by other market participants.
NSE is more than a mere market facilitator. It's that force which is guiding the
industry towards new horizons and greater opportunities.
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The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875
as "The Native Share and Stock Brokers Association". It is the oldest one in Asia,
even older than the Tokyo Stock Exchange, which was established in 1878. It is a
voluntary non-profit making Association of Persons (AOP) and is currently engaged
in the process of converting itself into demutualised and corporate entity. It has
evolved over the years into its present status as the premier Stock Exchange in the
country. It is the first Stock Exchange in the Country to have obtained permanent
recognition in 1956 from the Govt. of India under the Securities Contracts
(Regulation) Act 1956.The Exchange, while providing an efficient and transparent
market for trading in securities, debt and derivatives upholds the interests of the
investors and ensures redresses of their grievances whether against the companies
or its own member-brokers. It also strives to educate and enlighten the investors by
conducting investor education programmers and making available to them
necessary informative inputs.
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Governing
Board
having
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Board
consists
of
Chief
Operating
Officer.
The Executive Director as the Chief Executive Officer is responsible for the day-to-day
administration of the Exchange and the Chief Operating Officer and other Heads of
Department assist him.
The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to
constitution of the Executive Committee of the Exchange. Accordingly, an Executive
Committee, consisting of three elected directors, three SEBI nominees or public
representatives, Executive Director & CEO and Chief Operating Officer has been
constituted. The Committee considers judicial & quasi matters in which the
Governing Board has powers as an Appellate Authority, matters regarding
annulment of transactions, admission, continuance and suspension of memberbrokers, declaration of a member-broker as defaulter, norms, procedures and other
matters relating to arbitration, fees, deposits, margins and other monies payable by
the member-brokers to the Exchange, etc.
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The securities and exchange board of India was constituted in 1988 under a
resolution of government of India. It was later made statutory body by the SEBI act
1992.according to this act, the SEBI shall constitute of a chairman and four other
members appointed by the central government.
With the coming into effect of the securities and exchange board of India act, 1992
some of the powers and functions exercised by the central government, in respect of
the regulation of stock exchange were transferred to the SEBI.
OBJECTIVES AND FUNCTIONS OF SEBI
Regulating the business in stock exchanges and any other securities market.
Performing such functions and exercising such powers under the provisions
of capital issues (control) act, 1947and the securities to it by the central
government.
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Capital adequacy norms have been laid down for the members of various stock
exchanges depending upon their turnover of trade and other factors.
All recognized stock exchanges will have to inform about transactions within 24
hrs.
TYPES OF ORDERS:
Buy and sell orders placed with members of the stock exchange by the investors.
The orders are of different types.
Limit orders: Orders are limited by a fixed price. E.g. buy Reliance Petroleum at
Rs.50.Here, the order has clearly indicated the price at which it has to be bought
and the investor is not willing to give more than Rs.50.
Best rate order: Here, the buyer or seller gives the freedom to the broker to execute
the order at the best possible rate quoted on the particular date for buying. It may be
lowest rate for buying and highest rate for selling.
Discretionary order: The investor gives the range of price for purchase and sale. The
broker can use his discretion to buy within the specified limit. Generally the
approximation price is fixed. The order stands as this buy BRC 100 shares around
Rs.40.
Stop loss order: The orders are given to limit the loss due to unfavorable price
movement in the market. A particular limit is given for waiting. If the price falls below
the limit, the broker is authorized to sell the shares to prevent further loss. E.g. Sell
BRC limited at Rs.24, stop loss at Rs.22.
Buying and selling shares: To buy and sell the shares the investor has to locate
register broker or sub broker who render prompt and efficient service to him. The
order to buy or sell specifying the number of shares of the company of investors
choice is placed with the broker. The order may be of any type. After receiving the
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order the broker tries to execute the order in his computer terminal. Once matching
order is found, the order is executed. The broker then delivers the contract note to
the investor. It gives the details regarding the name of the company, number of
shares bought, price, brokerage, and the date of delivery of share. In this physical
trading form, once the broker gets the share certificate through the clearing houses
he delivers the share certificate along with transfer deed to the investor. The investor
has to fill the transfer deed and stamp it. The stamp duty is one of the percentage
considerations, the investor should lodge the share certificate and transfer deed to
the register or transfer agent of the company. If it is bought in the DEMAT form, the
broker has to give a matching instruction to his depository participant to transfer
shares bought to the investors account. The investor should be account holder in
any of the depository participant. In the case of sale of shares on receiving payment
from the purchasing broker, the broker effects the payment to the investor.
Share groups: The scrips traded on the BSE have been classified into
A,B1,B2,C,F and Z groups. The A group represents those, which are in the
carry forward system. The F group represents the debt market segment (fixed
income securities). The Z group scrips are of the blacklisted companies. The C
group covers the odd lot securities in A, B1&B2 groups.
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The firms online trading and investment site - www.sharekhan.com - was launched on
Feb 8, 2000. The site gives access to superior content and transaction facility to retail
customers across the country. Known for its jargon-free, investor friendly language and
high quality research, the site has a registered base of over one lakh customers. The
content-rich and research oriented portal has stood out among its contemporaries
because of its steadfast dedication to offering customers best-of-breed technology and
superior market information. The objective has been to let customers make informed
decisions and to simplify the process of investing in stocks.
On April 17, 2002 Sharekhan launched Speed Trade, a net-based executable
application that emulates the broker terminals along with host of other information
relevant to the Day Traders. This was for the first time that a net-based trading station of
this caliber was offered to the traders. In the last six months Speed Trade has become a
de facto standard for the Day Trading community over the net.
Share khans ground network includes over 1288 centers in 325 cities in India which
provide a host of trading related services.
Sharekhan has always believed in investing in technology to build its business. The
company has used some of the best-known names in the IT industry, like Sun
Microsystems, Oracle, Microsoft, Cambridge Technologies, Nexgenix, Vignette,
Verisign Financial Technologies India Ltd, Spider Software Pvt Ltd. to build its trading
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engine and content. The Morakhiya family holds a majority stake in the company.
HSBC, Intel & Carlyle are the other investors.
With a legacy of more than 80 years in the stock markets, the SSKI group ventured into
institutional broking and corporate finance 18 years ago. Presently SSKI is one of the
leading players in institutional broking and corporate finance activities. SSKI holds a
sizeable portion of the market in each of these segments. SSKIs institutional broking
arm accounts for 7% of the market for Foreign Institutional portfolio investment and 5%
of all Domestic Institutional portfolio investment in the country. It has 60 institutional
clients spread over India, Far East, UK and US. Foreign Institutional Investors generate
about 65% of the organizations revenue, with a daily turnover of over US$ 2 million.
The Corporate Finance section has a list of very prestigious clients and has many firsts
to its credit, in terms of the size of deal, sector tapped etc. The group has placed over
US$ 1 billion in private equity deals. Some of the clients include BPL Cellular Holding,
Gujarat Pipavav, Essar, Hutchison, Planetasia, and Shoppers Stop.
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Sharekhan ltd.
Year of Establishment:
1925
Headquarter
Sharekhan SSKI
A-206 Phoenix House
Phoenix Mills Compound
Lower Parel
Mumbai - Maharashtra, INDIA- 400013
Nature of Business
Service Provider
Services
Number of Employees :
Over 3500
Revenue
Website
www.sharekhan.com
Slogan
Vision
To be the best retail brokering Brand in the retail business of stock market.
Mission
To educate and empower the individual investor to make better investment
decisions through quality advice and superior service.
Technology
With its online trading account one can buy and sell shares in an instant from any PC
with an internet connection. One can get access to its powerful online trading tools that
will help him take complete control over his investment in shares.
Accessibility
Sharekhan provides ADVICE, EDUCATION, TOOLS AND EXE
EXECUTION
CUTION services for
investors. These services are accessible through its centers across the country over the
internet (through the website www.sharekhan.com) as well as over the Voice Tool.
Knowledge
In a business where the right information at the right ttime
ime can translate into direct
profits, one can get access to a wide range of information on Sharekhan limiteds
content-rich portal. One can also get a useful set of knowledge-based
ased tools that will
empower him to take informed decisions.
Convenience
One can call its Dial-N-Trade
Trade number to get in
investment
vestment advice and execute his
transactions. Sharekhan ltd. have a dedicated call
call-centre
centre to provide this service via a
Toll Free Number 1800-22-7500
7500 & 1800-22-7050 from anywhere in India.
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Customer Service
Sharekhan limiteds customer service team will assist one for any help that one may
require relating to transactions, billing, demat and other queries. Its customer service
can be contacted via a toll-free number, email or live chat on www.sharekhan.com.
Investment Advice
Sharekhan has dedicated research teams of more than 30 people for fundamental and
technical researches. Its analysts constantly track the pulse of the market and provide
timely investment advice to its clients in the form of daily research emails, online chat,
printed reports and SMS on their mobile phone.
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Dinesh Murikya
Tarun Shah
Shankar Vailaya
Director (Operations)
Jaideep Arora
Pathik Gandotra
Head of Research
Rishi Kohli
Nikhil Vora
Depository services
Online services
Commodities trading
Dial-n-trade
Portfolio management
Share shops
Fundamental research
Technical research
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CLASSIC ACCOUNT
This is a User Friendly Product which allows the client to trade through website
www.sharekhan.com and is suitable for the retail investor who is risk-averse and
hence prefers to invest in stocks or who does not trade too frequently. This
account allow investors 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.
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This is an internet-based software application, which enables one to buy and sell in an
instant. It is ideal for active traders and jobbers who transact frequently during days
session to capitalize on intra-day price movement.
This account comes with the following features:
a.
b.
c.
d.
e.
f.
g.
h.
i.
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j.
CHARGE STRUCTURE
Fee structure for General Individual:
Charge
Account Opening
Classic Account
Rs. 750/=
Intra-day 0.10 %
Intra-day - 0.10%
Delivery - 0.50 %
Delivery - 0.50%
Brokerage
Depository Charges:
Account Opening Charges
Annual Maintenance Charges
Rs. NIL
Rs. NIL first year Rs. 300/= p.a. from
second calendar year onward
One need to call them at phone number provided below and asks that he want
to open an account with them.
a. One can call on the Toll Free Number: 1-800-22-7500 to speak to a
Customer Service executive
b. Or If one stays in Mumbai, he can call on 022-66621111
One can visit any one of Sharekhan Limiteds nearest branches. Sharekhan has
a huge network all over India (640 centers in 280 cities). One can also log on to
http://sharekhan.com/Locateus.aspx link to find out the nearest branch.
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One can also visit the site www.sharekhan.com and click on the option Open an
Account to fill a small query form which will ask the individual to give details
regarding his name, city he lives in, his email address, phone number, pin code
of the city, his nearest Sharekhan Ltd. shop and his preferences regarding the
type of account he wants.
These information are compiled in the headquarter of the company that is in
Mumbai from where it is distributed through out the countrys branches in the
form of leads on the basis of cities and nearest share shops. After that the
executives of the respective branches contact the prospective clients over phone
or through email and give them information regarding the various types of
accounts and the documents they need to open an account and then fix
appointment with the prospective clients to give them demonstration and making
them undergo the formalities to open the account. After that the forms that has
collected from the clients, is scrutinized in the branch and then it is sent to
Mumbai for further processing where after a few days the clients account are
generated and activated. After the accounts are activated, a Welcome Kit is
dispatched from Mumbai to the clients address mentioned in the documents
provided by them. As soon as the clients receive the Welcome Kit, which
contains the clients Trading ID and Trading Password, they can start trading and
investing in shares.
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GIVING
DEMONSTRATION
YES
NO
DOCUMENTATION
TRADING
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Apart from two passport size photographs, one needs to provide with the following
documents in order to open an account with Sharekhan Limited.:
Photo copy of any of the following documents duly attached which will serve as
correspondence address proof:
a.
b.
c.
d.
e.
f.
g.
Passport (valid)
Voters ID Card
Ration Card
Driving License (valid)
Electricity Bill (should be latest and should be in the name of the client)
Telephone Bill (should be latest and should be in the name of the client)
Flat Maintenance Bill (should be latest and should be in the name of the
client)
h. Insurance Policy (should be latest and should be in the name of the client)
i. Lease or Rent Agreement.
j. Saving Bank Statement** (should be latest)
Two cheques drawn in favour of Sharkhan Limited, one for the Account
Opening Fees and the other for the Margin Money (the minimum margin money
is Rs. 5000).
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SSKI has been voted as the Top Domestic Brokerage House in the research
category, twice by Euromoney Survey and four times by Asiamoney Survey.
Sharekhan Limited won the CNBC AWARD for the year 2004.
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Chapter 3
Project Analysis
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PROJECT ANALYSIS
OUTCRY SYSTEM
The broker has to buy or sell securities for which he has received the orders. For
this, the broker or his authorized representatives goes to the stock exchange. This
method is called the open outcry system. Basically the brokers shout while buying or
selling the securities. The floor of the stock exchange is divided into a number of
markets also known as post pit or wing based on particular securities dealt there.
In the post pit or wing, the broker using open outcry method makes an offer or bid
price. For making the necessary bargain, he quotes his purchase or sale price, also
known as offer or bid price. The dealer, to whom the price is quoted, quotes his own
price when the quotation of the dealer suits the broker, he may loose the bargain. If
he is not satisfied with the quote price, he may turn to some other dealer. On the
close of the bargain, the dealer as well as the broker makes a brief note of the
particulars of the deal. Such notes are made on some pad and on it the number of
shares, the price agreed upon, the name of the party, what membership number
etc., are noted.
DISADVANTAGES OF OUTCRY SYSTEM:
It lacks transparency.
Signal were more important in the outcry system any member who could not
interpret the buy/sell signal correctly often landed himself in disaster situation.
Due to the above disadvantages of the outcry system the SHAREKHAN has
shifted from outcry system to online trading from February 29th 1997.
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MANUAL TRADING
Trading procedure before introduction of online trading:
Trading on stock exchanges is officially done in the trading ring. In the trading ring
the space is provided for specified and non-specified sections, the members and
their authorized assistants have to wear a badge or carry with them an identity card
given by the exchange to enter the trading ring. They carry a sauda book or
confirmation memos, duly authorized by the exchange and carry a pen with them.
The stock exchanges operations are floor level are technical in nature .Nonmembers are not permitted to enter in to stock market. Hence various stages have
to be completed in executing a transaction at a stock exchange .The steps involved
in this method of trading have given below:
Choice of broker:
sell shares and transact business, have to act through member brokers only. They
can also appoint their bankers for this purpose as per the present regulations.
Placement of order:
The next step is the The prospective investor who wants to buy shares or the
investors, who wants to placing order for the purchase or sale of securities with a
broker. The order is usually placed by telegram, telephone, letter, fax etc or in
person. To avoid delay, it is placed generally over the phone. The orders may take
any one of the forms such as At Best Orders, Limit Order, Immediate or Cancel
Order, Limited Discretionary Order, and Open Order, Stop Loss Order.
Execution of order or contract:
Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30
P.M on all working days Monday to Friday, and a special one-hour session on
Saturday. The members or the authorized assistants have to wear a badge given by
the exchange to enter into the trading ring. They carry a sauda Block Book or
conformation memos, which are duly authorized by the exchange when the deal is
struck; both broker and jobber make a note in their sauda block books. From the
sauda book, the contract notes are drawn up and posted to the client. A contract
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note is written agreement between the broker and his clients for the transaction
executed.
Drawing Up and Bills:
Both sale and purchase bills are prepared along with the contract note and it is
posted on the same day or the next day. This in a purchase transaction, once the
shares are delivered to the client effects payment for the purchases and pays the
stamp fees for transfer, a bill is made out giving the total cost of purchase, including
other expenses incurred by the broker in the price itself. With this, the process ends.
DEMATERLIZATION:
Dematerialization is the process by which physical certificates of an investor are
converted to an equipment number of securities in electronic from and credited in
the investor account with his DP. In order to dematerialize the certificates, an
investor has to first open an account with a DP and then request for the
Dematerialization Request Form, which is DP and submit the same along with the
share certificates. The investor has to ensure that he marks Submitted for
Dematerialization on the certificates before the shares are handed over to the DP
for demat. Dematerialization can only be done to those certificates, which are
already registered in your name and belong to the list of securities admitted for
Dematerialization at NSDL.
Most of the active scrips in the market including all the scrips of S&P CNX NIFTY
and BSE SENSEX have already joined NSDL. This list is steadily increasing.
Briefly, the process is as follows: after completion of transfer, the investor gets the
option to dematerialize such shares. Investors willing to exercise this option sends a
Demat request along with the option letter sent by the company to his DP. The
company or its R&T agent would confirm the Demat request on its receipt from the
DP to reduce risk of loss in transit.
Dematerialized shares do not have any distinctive or certificate numbers. These
shares are fungible-which means that 100 shares of a security are the same as any
other 100 shares of the security. Odd lot shares certificates can also be
dematerialized.
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It reduces the risk of bad deliveries, in turn saving the cost and wastage of time
associated with follow up for rectification. This has lead to reduction in brokerage to
the extent of 0.5% by quite a few brokerage firms.
In case of transfer of electronic shares, you save 0.5% in stamp duty. You avoid
You can receive your bonuses and rights issues into your DA as a direct credit,
You can also expect a lower interest charge for loans taken against Demat
There is no lost in transit, thus the overheads of getting a duplicate copy in such
circumstances is reduced.
RBI has also reduced the minimum margin to 25% for loans against
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ONLINE TRADING
Before getting in to the online trading we should know some things about the
internet, e-commerce and etc.
1) What is Internet?
Internet is a worldwide, self-governed network connecting several other smaller
networks and millions of computers and persons, to mega sources of information.
This technology shrinks vast distances, accelerating the pace of business reforms
and revolutionizing the way companies are managed. It allows direct, ubiquitous
links to anyone anywhere and anytime to build up interactive relationships.
A combination of time and space, called the Internet promises to bring
unprecedented changes in our lives and business. Internet or net is an interconnection of computer communication networks spanning the entire globe, crossing
all geographical boundaries. It has re-defined the methods of communication, work
study, education, business, leisure, health, trade, banking, commerce and what not it
is virtually changing every thing and we are living in dot.com age. Net being an
interactive two way medium, through various websites, enables participation by
individuals in business to business and business to consumer commerce, visit to
shopping arcades, games, etc. in cyber space even the information can be copied,
downloaded and retransmitted.
The use of Internet has grown 2000 percent in last decade and is currently growing
at 10 percent per month. In India, growth of Internet is of recent times. It is expected
to bring changes in every functional area of business activity including management
and financial services. It offers stock trading at a lower cost. Internet can change the
nature and capacity of stock broking business in India.
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2. E-commerce
Electronic commerce is associated with buying and selling over computer
communication networks. It helps conduct traditional commerce through new way of
transferring and processing of information. Information is electronically transferred
from computer to computer in an automated way. E-commerce refers to the
paperless exchange of business information using electronic data inter change,
electronic technologies. It not only reduces manual processes and paper
transactions but also helps organization move to a fully electronic environment and
change the way they operated.
PCs and networking attempts to introduce banks of the tools and technologies
required for electronic commerce. The computers are either workstations of
individual office works or serves where large databases and information reside.
Network connects both categories of computers; the various operating systems are
the most basis program within a computer. It manages the resources of the
computer system in a fair and efficient manner.
Now we can enter in to the concept known as online trading.
In the past, investors had no option but to contact their broker to get real time access
to market data. The net brings data to the investor on-line and net broking enables
him to trade on a click of mouse. Now information has become easily accessible to
both retail as well as big investor.
Stockbrokers will offer on their sites features such as live portfolio manager,
live quotes, market research and news, etc. to attract more investors.
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Brokers (now e-brokers) will offer value management or services like initial
public offering online, on-line asset allocation, portfolio management, financial
planning, tax planning, insurance services, etc. and enables the investors to
take better and well considered decisions.
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Investor protection
Some of the brokers offering net trading include ICICI direct, kotakstreet, etc.
Voter ID card
Driving license
PAN card( in case of to trade more than 50000)
Ration card
Bank pass book
Telephone bill
First page of the bank pass book and last 6 months statement.
Bank managers signature along with banks seal, manager registration code on
photograph.
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investors can see themselves the price at which the deal takes place.
The time gap has narrowed in every stage of operation. Confirmation and execution
of trade reaches the investor within the least possible time, mostly within 30
seconds. Instant feedback is available about the execution. Some of the websites
also offer;
News and research report
BSE and NSE movements
Stock analysis
IPO and mutual fund centers
Step by step procedure in online trading:
Following steps explain the step by step approach to on-line trading:
1) Log on to the stock broker's website
2) Register as client/investor
3) Fill the application form and client broker agreement form on the requisite value
stamp paper
4) Obtain user ID and pass word
5) Log on to the broker's site using secure user ID and password
6) Market watch page will show real time on-line market data
7) Trade shares directly by entering the symbol or number of the security
8) Brokers server will check your limit in the on-line account and Demat account for
the number of shares and execute the trade
9)
53
Limit / stop orders: orders that can be go unfilled, but there is an extra Charge
for this leeway facility since one need to hold a price.
2)
Market orders: orders can be filled at unexpected prices, but this type is much
more risky, since you have to buy stock at the given price.
3)
Cash account: where funds have to be available prior to placing the order.
4)
Online trading has made it possible for anyone to have easy and efficient access
to more reports and charts than it was previously possible if one went to any
brokers' office. Thus we have access to a lot more information online.
2)
Online trading has let room for smaller organizations to compete with
multinational organizations since it is no longer a leg it issue. Being online does
not identify the size of any particular organization, therefore, this additional power
to the underdogs.
3)
Online trading has allowed companies to locate themselves where they want as
physical location is not an issue anymore. Companies can establish themselves
according to their gains and losses, for instance where tax (sales and value
added taxes) is best suited to them.
4)
Online trading gives control to individuals and they can exercise it over accounts
thus comprehend what is going on when they trade. It is like going back to school
and re-educating oneself on how to trade online.
5)
Individuals benefit by saving comparatively a lot more when trading online as the
cost per trade is less.
6)
Individuals can invest in a variety of products, unlike earlier when people bought
bonds, mutual funds, and stock for long-term basis and sat on them. Now they
can invest in stocks, stock and index options mutual funds, government, and
even insurance.
54
They have control over their accounts, can make their own decisions and dont
have to give reasons for their actions. They are independent.
2)
They have a reason to participate in the market and learn about it.
3)
4)
A lot of information is online so they can keep up-to-date with what is happening
in the trading world.
5)
6)
The immediate impact will be competition and benefits will accrue to the
investors.
7)
It will lead to brokerage commissions going down and brokers striving to increase
business afloat.
8)
Investors will now go to place, which have better trading conditions and also
members to offer them better facilities.
9)
They have access to numerous tools to invest, and can create their own portfolio.
55
When network crashes, there will be problems and delays due to a large influx of
rapid online trading criteria.
2)
Individuals are restricted to first-hand financial guidance. This simply means that
the individual is himself / herself alone to.
3)
A tax (sales tax and value added tax) evaluation becomes an issue, especially
when you are trading internationally.
4)
One has no idea with whom he is dealing with on the other end.
5)
6)
Individuals think that they are trading with the market directly and know what they
are doing, but the truth is that even though technology has taken over, the basic
rules of trading are the same. It seems that the middleman has been removed,
but that is not so. When the individuals click on the mouse, his trade goes
through a broker. The commissions online pertain to the intermediary.
7)
There is a need for more effective communication links over the Internet and the
ability of the server to deal with a large volume of visitors.
56
The ease of operation from the view of the both members and the investors.
All these resulted in ever-increasing volumes on the exchanges offering the online
trading.
TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING
ShareKhan deals in buying and selling equity shares and debentures on the National
Stock Exchange (NSE), the Bombay Stock Exchange (BSE) and the Over-TheCounter Exchange of India (OTCEI).
Share Khan is provided with a computer and required software from their registered
stock exchanges. These centers are called Broker Work Stations. These
computers are connected to the server at the stock exchanges through cable.
The member or broker sitting in his office can send the quotations, orders,
negotiations, deals, in-house deals, auction orders etc., through the computer. The
Central trading system (CTS) will accept these orders and send it for match. If there
is any mistake in the order, CTS will reject the orders and send respective error
message to the member concern. All these operations are in built. The main
objective of CTS is to monitor the Stock Exchanges operations.
Order placed by the broker will be sent for a match and if the match is found
suitable, the transaction will be executed. Otherwise, the order will be deleted
57
automatically after completion of trading time. The carry forward transactions (Good
Till cancellation) are forwarded to the next day. Even if the match is not found with in
the prescribed period, the order will not cancel.
TRADING SESSION
Trading timings are from 9:55 A.M. to 3:30 P.M. on all 5 days of the trading period.
Monday to Friday is the trading period in all the stock exchanges. SEBI has
stipulated that all the stock exchanges in India must have same trading period.
BROKER WORK STATION:
At the broker workstation the BBOs, the last traded price, the days opening price,
previous days closing price, highest and lowest prices, the weighted average price
and total trade value will be available continuously, as the BBO for each scrip.
Other information will be available on query from the BWS. These include top
gainers /losers of the day. Trader-wise, scrip wise net position, client wise net
position, top scrip by the volume/value, market summary etc.
Brokers are also provided with information relating to the companies in the matter of
Book closure, Dividend declarations, resolutions in board meeting, information about
liquidated companies, company report etc.
58
ORDERS:
Orders can be done one at a time or in a batch mode.
The submitted order will be accepted at the CTS, after validation if it finds any invalid
reason the order is return back to the BWS, with the appropriate error message. If
Accepted at the CTS it will be added to the local pending order book.
The order will then be taken up for matching, if it is a buy order the system tries to
find a sell order, which fits the requirement of the buy order, when such match is
found a trade gets executed. Each trade involves two brokers and respective traders
who sent the order. Both these traders are informed of the trade being executed at
their respective BWS.
At the BWS the trade is added to the local trade book.
Orders sent by the brokers are two types:
1) Good for the day (GFD)
2) Good till cancellation(GTC)
Good for the day:
This is also called as market order. For an order if the member selects the deal as
good for the day, the order is treated as market order. If a best bid founds match
with best order then the transaction gets executed. If the match is not found then
after trade time the order gets cancelled that day. Next day he has to place a new
order.
For example if a member wants to purchase 1000 shares of satyam info @ 400 each
through Good for Day order. If the correct match is not found, order gets cancelled
automatically and new quotation has to be placed the next day.
Good till cancellation:
This order is forwarded to the last trading day of that settlement period. This is also
called as carry forward order like GFD; broker has to select the option of GTC for the
order. If the order finds match with in the trading settlement period, the order is
executed. If no match is found, the order is cancelled on the last day of settlement
period. This order is not carried forward to the next settlement period.
59
For example, if a member a place purchase order of 500 shares of SBI @ 690 per
share and selects the order as GTC and place an order. If the match is not found on
that day it will be forwarded to the next day until trading settlement period day.
SETTLEMENT OF TRANSACTIONS:
Clearing of transaction in the form of shares and cash is called settlement. Buyers
will take the delivery of shares through the depository participants like SHARE
KHAN and others.
Finally, the settlement is made by means of delivering the share certificates along
with the transfer deeds. The transferor (or the seller) duly signed transfer deed. It
bears a stamp of the selling broker. The buyer then fills up the certificates fills up the
particulars in the transfer deed. Settlement can be done in the following way.
Spot settlement: under this method, the delivery of securities and payment for
them are affected on the day of the contract itself.
Rolling settlement: Under this rolling settlement the trading is on T+2,basis i.e. if
Monday is trading day then Wednesday is the paying day . In case on non-delivery,
the securities will go for auction.
DETAILS OF PROCEDURES:
Delivery in : The members who are in pay-out position delivers share certificates in
to clearing house within the settlement period along with the delivery Chelan filled in
with the details of share certificates which has folio numbers or distinctive numbers
etc.
Delivery out: The buyer of shares who made pay in position will take delivery of
shares from the clearing house.
60
Pay-in: The member who is in paying position shall pay for value of shares with in
the trading settlement period (T+2).
Payout: The cheques paid in the clearinghouse will be paid to members who are in
paying position.
All disputes arising between members regarding non-deliveries, non-payments,
good and bad deliveries pertaining to the settlement will be settled by the settlement
committee of the exchange.
61
The given flow chart clearly explains the process of online trading:
Login
Sell transcation
Buy transcation
Orders accepted
orders accepted
flashed on your
screen immediately
on execution
on execution
of your orders
conformationcoul
d be send to your
e-mail and mobile
62
Chapter 4
Comparative
Analysis
63
119 13.45%
194 21.92%
38
Th
e
im
ag
4.29%
192 21.69%
46
The
imag
e
can
5.20%
121 13.67%
59
The image
cannot be
display ed.
Your co
6.67%
116 13.11%
64
HDFC SECURITIES:
Company Background:
HDFC Securities Ltd is promoted by the HDFC Bank, HDFC and Chase Capital
Partners and their associates. Pioneers in setting up Dial-a-share service with the
largest team of Tele-brokers.
advantage.
Pricing of HDFC Account
Brokerage:
Trading 0.15%* each side + ST
Delivery 0.50%** each side + ST
*Rs 25 Min Brokerage per transaction
**Rs 8 Min Brokerage per transaction
65
ICICI Direct:
Demat: NIL, 1st year charges included in Account Opening Plus a facility to open
additional 4 DPs without 1st yr AMC. Only Rs 100 as linking charges per DP
Brokerage: ICICIs brokerage rates are inclusive of Stamp duty (0.002%) for
trading and 0.010% for delivery while service tax (10.2%) on BROKERAGE land
turnover tax is EXTRA.
Brokerage
< 10 lakhs
0.75%
< 50 lakhs
10 25 lakhs
0.70%
50 lakhs 2 Cr
25 50 lakhs
0.55%
2Cr-5Cr
50 lakhs - 1 Cr
0.45%
5Cr- 10 Cr
1 Cr 2 Cr
0.35%
10Cr -20 Cr
2 Cr 5 Cr
0.30%
> 20 Cr
> 5 Cr
0.25%
----
66
--------
INDIABULLS:
Company Background:
India Bulls is a retail financial services company present in 70 locations covering 62
cities. It offers a full range of financial services and products ranging from Equities
to Insurance. 450 + Relationship Managers who act as personal financial advisors.
Signature Account: Plain Vanilla Account with focus on Equity Analysis. The
Power India bulls: Account with sophisticated trading tools, low commissions
Pricing of IB Accounts:
Signature Account
* Brokerage: Negotiable
* Brokerage: Negotiable
PAID Research:
SCHEME
FACILITY
WebBased-1-Month-500:
WebBased-1-Month-6000:
PrintReport-1-Month-750:
+ 10 Reports Delivered
PrintReport-1-Month-9000:
Kotakstreet:
Company Background:
Kotakstreet is the retail arm of Kotak Securities. Kotak Securities limited is a joint
venture between Kotak Mahindra Bank and Goldman Sachs.
Online Account Type
Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per transaction
High Trader : 6 Times Exposure Cash & Derivatives, Auto sq off 2:55
For Kotak FastLane / Keat Lite / Keat Desktop are trading interfaces.
Keat Desktop with advanced tools comes at a charge of Rs 500 p.m, Non
refundable.
PRICING OF KOTAK
Even older customers (on 0.25% & 0.40%) have been moved to the slab wise
structure w.e.f 1/4/2004
68
< 1 lakhs
0.65%
1 lakhs 5 lakhs
0.60%
5 lakhs 10 lakhs
0.50%
25 lakhs - 2 Cr
10 lakhs - 20 lakhs
0.40%
2 Cr
20 lakhs 60 lakhs
0.30%
> 5 Cr
60 lakhs - 2 Cr
0.25%
---do---
0.20%
----
>2
< 10 lakhs
Brokerage **
5 Cr
--------
* DP Charges Extra
* Min Brokerage of Rs 0.05 per share
Derivatives Vol off p m
Brokerage
< 2 Cr
2 Cr - 5.5 Cr
5.5 Cr 10 Cr
> 10 Cr
69
5paisa
Company Background
Indiainfoline was founded in 1995 and was positioned as a research firm
In 2000 e-broking was started under the brand name of 5paisa.com.
Apart from offering online trading in stock market the company offers
mutual funds online.
It also acts as a distributor of various financial services i.e. GOI securities,
Company Fixed Deposits, Insurance.
Limited ground network, present in 20 cities
Online Account Types
Investor Terminal : Investors / Students
Trader Terminal : Day Traders / HNIs
PRICING FOR RETAIL CLIENTS
Investor Terminal
Sharekhan
Company Background
Sharekhan is the retail broking arm of SSKI Securities Pvt Ltd. SSKI owns 56%
in Sharekhan, balance ownership is HSBC, First Caryle, and Intel Pacific
Brokerage :
Trading 0.10% each side + All Taxes
Delivery 0.50% each side + All Taxes
(Negotiable based on volume)
71
Brokerage:
Trading 0.10% each side + All Taxes
Delivery 0.50% each side + All Taxes
SPEEDTRADE
The speed trade is meant for customers who trade in Equities
DIAL-N-TRADE Toll Free
The DNT is a value added services meant for all customers who
Want to transact but are not online.
DNT TOLL FREE FERTURES
CLASSIC/WEBSITE FEATURES
Slab wise brokerage structure for delivery and margin trades, shortly
CLASSIC/WEBSITE FEATURES
SWOT ANALYSIS
Strengths
1.
2.
3.
4.
5.
Easier access to the customer due to largest ground network of 280 branded
share shops in 120 cities.
6.
7.
8.
9.
Efficient research and analysis team, which by interpreting the economy and
companys performance accurately is enhancing the profitability of the clientele.
Weaknesses
1.
Limited customer appeal as the company product line does not include mutual
funds which is increasingly becoming a preferred customer investment option.
2.
74
3.
Limited customer appeal as the company does not have access to the BSE
online space.
4.
5.
Promotional activities conducted by the company are not at par with the other
firms.
Opportunities
1.
Hyderabad covers only 2% of investors which gives huge potential for the market
penetration.
2.
3.
Access to the BSE online space for the retail investors creates opportunity to
increase clientele base.
4.
Threats
1.
Availability of Unit Linked Insurance Policies (ULIPs) and mutual funds in the
market.
2.
Threat of entry is high in this industry as the manpower required is less and
capital requirement is medium.
75
Chapter 5
Finding
&
Observations
76
2.
3.
4.
Previously rolling settlement is T+5 days, now it changed to T+2 days and further
it will be changing to T+1 day.
5.
It was also observed that many broking houses offering internet trading allow
clients to use their conventional system as well just ensure that they do not loose
them and this instead of offering e-broking services they becomes
service
providers.
6.
The number of players is increasing at a steady rate and today there are over a
dozen of brokerage houses who have opted to offer net trading to their
customers and prominent among them are SHARE KHAN, India bulls,
kotakstreet, ICICI direct and geojit.
7.
The Bombay stock exchange sensex zoomed past the 7700 barrier for the first
time in history to achieve new all time high of 7800 intra day trade and ended at a
historic close of 7732 points.
77
Conclusion
&
Recommendations
78
79
10. Genuine investors are not at all interested in the speculative gain as their
investment is based on the future profits, therefore the authorities of the
exchange should be more vigilant to curb the speculation.
11. Necessary steps should be taken by the exchange to deal with the situations
arising due to break down in online trading.
80
BIBLIOGRAPHY
Books:
1.
Investment management
-V.K.Bhalla
2.
Investment management
-Preethi Singh
5.
Newspapers:
81
www.sharekhan.com
www.economictimes.com
www.moneycontrol.com
www.bseindia.com
www.nseindia.com
www.sebi.gov.in
www.investors.com
www.investopedia.com
chandu9041@gmail.com
82