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Online Trading

Online Trading

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Published by: jayakumary on Jun 26, 2011
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Security Analysis & Portfolio Management

Online Trading

Midhun V
M Com S4 Roll No: 3 Department of Commerce Iqbal College, Peringammala

Members of the exchange alone are entitled to the trading privileges. an investor desirous of buying a security gets in touch with a broker and places a buy order along with the money to buy the security. After the completion of a transaction at the trading floor between the brokers acting on . an investor intending to sell a security gets in touch with a broker. In this system. There are two ways of organizing the trading activity: floor trading system and online trading.Introduction: A Stock Exchange is a market for trading securities. Under this system. Investors interested to buying or selling securities should place their orders with the members (called brokers) of the exchange. In floor trading. places a sell order and hands over the share certificate to be sold. Similarly. Floor Trading: The system of trading prevailing in stock exchanges for many years was known as floor trading. buyers and sellers transact business face to face using a variety of signals. Each stock exchange has certain listed securities and permitted securities which are traded on it. trading took place through an open outcry system on the trading floor or ring of the exchange during official trading hours.

the trading ring is replaced by the computer screen and distant participants can trade with each other through the computer network. floor trading is replaced with a new system of trading known as screen. It uses information technology to bring together buyers and sellers through electronic media to create a virtual market place. A large number of participants. foreign currency. and exchange traded derivatives electronically. In this new system. Online Trading: Online trading. . which have a fully automated computerized mode of trading. sometimes called electronic trading or e-trading or screen based trading is a method of trading securities (such as stocks.based trading. 2. and bonds). Quote driven system Order driven system. can trade simultaneously at high speeds from their respective locations. the buyer investor would receive the share certificate and the seller investor would receive the cash through their respective brokers. The member brokers can install trading terminals at any place in the country. geographically separated from each other. In the new electronic stock exchanges. The screen-based trading systems are of two types: 1.behalf of the investors.

These are then automatically matched by the system according to certain rules. that is. The market participants then place their orders based on the bid. Under the order driven system. Online trading in India: Online trading in India is the internet based investment activity that involves no direct involvement of the broker. inputs two-way quotes into the system. These are then fed into the system. the market-maker. There are many leading online trading portals in India along with the online trading platforms of the biggest stock houses like the National stock exchange and the Bombay stock exchange. who is the dealer in a particular security.offer quotes. The total portion of online share trading India has been found to have grown from just 3 per cent of the total turnover in 2003-04 to 19 per cent in 2009-10. his bid price (buying price) and offer price (selling price).Under the quote driven system. The buy and sell orders are automatically matched by the system according to predetermined rules. clients place their buy and sell orders with the brokers. Facilities of the online trading in India: The investor has to register with an online trading portal and get into an agreement with the firm to trade in different securities following the terms and .

life insurance. loans. supporting large amounts of data traffic.conditions listed down on the agreement. and possessing a countrywide network. . mutual funds. The order processing is done in correct timings as the servers of the online trading portal are connected to the stock exchanges and designated banks all round the clock. general insurance. Products and services of the online trading in India: The major financial products and services of the Online trading in India are like equities. They can also get updates on the trading and check the current status of their orders either through e-mail or through the interface. Indian Stock Exchanges: In spite of many private stock houses at present involved in online trading in India. portfolio management and financial planning. the NSE and BSE are among the largest exchanges. Brokerages also provide research content on their websites. commodities trading. The automated online systems used for trading by the national stock exchange and the Bombay stock exchange are the NIBIS or NSE’s Internet Based Information System and NEAT for the national stock exchange and the BSE OnLine Trading system or BOLT for the Bombay stock exchange. share trading. They handle huge daily trading volumes. such that the clients can take their own decisions on stocks before investing.

screen-based trading in securities was put into practice nation-wide within a record time of just 50 days. OTCEI’s screen based nationwide trading known as OTCEI Automated Securities Integrated System or OASIS. Bombay Stock Exchange: To facilitate smooth transactions. fully automated screen based trading. Over the Counter Exchange of India: OTCEI is the first screen based nationwide stock exchange in India. BSE had replaced its open outcry system with the BSE On-line Trading (BOLT) facility in 1995. BOLT has been certified by DNV for conforming to ISO 27001:2005 security standards. This totally automated. It uses a modern. The capacity of the BOLT platform stands presently enhanced to 80 lakh orders per day. fully computerised trading system designed to offer investors across the length and breadth of the country a safe and easy way to invest. OASIS combines the principles of order driven and . which adopts the principle of an order driven market.National Stock Exchange: NSE introduced for the first time in India. The NSE trading system called ‘National Exchange for Automated Trading’ (NEAT) is a fully automated screen based trading system.

. Advantages include being able to check our stock portfolio anywhere as long as we have an Internet connection. access to upto-date information. Online trading can give us accurate data on how different stocks are performing so we never have to miss a bargain. Even if we don’t have access to a computer at our fingertips while we are travelling.quotes driven markets and enables trading members to access a transparent & efficient market directly through a nationwide telecommunication network. we can always use a cell phone. Instead of chasing data when attempting to make an informed decision we can just go to a single place to get all of the information we need. absolute control over our portfolio. Brokers are constantly out doing each other in the form of fee reductions. competitive fee structures and the ability to access different markets. Some online brokerage services even send us messages to our cell phone that warns us of when may be a good time to buy or sell particular stocks. If we have a smart phone we make the transaction the second we receive the message. Advantages of Online Trading: Trading stocks online has a bevy of advantages (and disadvantages). extra functionality and conglomerating services into a single access point. Because online trading is such a massive market there is a lot of competition between brokers to get our business.

It is also a massive source of information in itself. Risks associated with online trading are relevant to those we can control. Because it is so easy to purchase stocks online. Whilst trading online may be an easy way to buy stocks – it is this simplicity that can land us in hot water. If the business we have invested in suddenly announces record losses then there is a good chance our money will have halved (or worse). We can get real advice from multiple sources. This is another . the economic climate and the specific business that we have invested in. it is too easy to over commit. If we think a stock is at the right price to buy then we might get carried away and spend a lot more money than we would have otherwise. However the risk is commensurate with the eventual monetary gains.The competition between brokers is not the only advantage of having multiple brokers available to serve us. Because of the inherent fluctuations in stock prices that can change within minutes – having people who cast a human eye over the data to ensure that their own information is up to date can mean the difference between purchasing a stock that will never recover and purchasing a stock that may double in value over the course of a day. Disadvantages of Online Trading: Online trading is a high risk business. The current economic climate is a good indicator of how stocks fluctuate based upon the financial situation of the planet.

nse-india.co. This is why they are more than happy to allow us to make decisions for our self rather than giving us proper guidance.bseindia. If a business that we have invested in has no chance of recovering fiscally then we have no chance of making back our money. It is too easy to make a poor decision which leads to an eventual loss rather than gain.thing that is a disadvantage when trading online – we don’t have a support network or advisors letting us know when to buy or sell.com : S. References: Security Analysis & Portfolio Management Investment Analysis & Portfolio Management http://www. We are also at the whim of our broker. Some brokers require a minimum purchase before they will enable us to purchase stocks. Kevin : Prasanna Chandra .in www. Their pay is not based on how well the stocks are performing – they get paid either way. We are alone (for the most part). Some brokers even go as far as charging us for not trading enough. They are also expensive to employ.otcei.net/faq/ www.com www.onlinetrading.

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