ONLINE TRADING and INVESTMENT MANAGEMENT Presented By Dr. Rana Singh www.ranasingh.org MBA (Gold Medalist) Ph. D.

9811828987 singh_rana@yahoo.com

The ability to learn faster than your competitors may be the only sustainable competitive advantage
- Peter Senge The Fifth Discipline

Evolution of Online Trading    

Only a decade ago, the primary method by which individual investors were able to get information and trade on the stock market was by going to the stock broker's office or calling the broker on the telephone. telephone automation allowed investors to dial into the broker's computer system and place their trading orders without having to go through a human operator. As personal computers and telecommunications became more prevalent, investors started to use their computers to dial into their broker's systems and conduct their transactions electronically. Evolution of World Wide Web .

Services Available
Investment Management

Content/Data

Trading

Financing Options

Advice

Information

Account Management

Content/Data 

Information 
   

Real time stock quotes Market Summaries News & Headlines Charts Report and trade alerts Real time Chat with experts New Investment Ideas Forthcoming IPO advice & analysis 

Advice 
 

Financing Options 


Loans Credit on sales done

Online Trading 

What can you trade? 
   

Stocks Options IPO s Mutual Funds Bonds

Trading (Continued) 

Ways of trading 
 

Online Interactive Voice Response(IVR) Traditional Broker Assisted

Account Management 
    

Account Summary Track Orders Check trading limits Check open positions View Transactions Cash & Securities due

A Typical Online Transaction
Place Orders Web Server User Database Confirmation to User Stock Exchange database Confirmation To the Brokers Server Stock Exchange Web Server

Online Trading
A Simple Representation

Major Components 
 

Stock feed data source Storage of stock data Retrieving of data from the www

Stock feed data source  

Stock data is derived from a live data feed connected to the exchange Modem based connection to an NT stock feed processing server for preprocessing of the data feed before broadcasting over the net.

Storage of Stock data  

Database server receives the packets containing the updated information It collects,reprocesses and stores the information

Retrieving of data from www  

The web server running the software accepts realtime stock data that is updated on the database The software queries the database,formats the information and presents it to the users.

Typical Functionality Provided 
   

Stock information retrieval system Monitoring stock market movement Stock market analysis Personal portfolio management Simulated stock transactional services

Information Retrieval System   

NT server broadcasts the Stock feed on the network Database server collects the stock feed and stores it in the stock database Stock info retrieved by querying the stock database

Subfunctionality Provided  

General information on all the stocks arranged in various orders Up to date market summaries as well as market indices. 
 

Top five gainers Top five losers Top five volumes

Monitoring market movement  

Stock database is updated continuously for accurate monitoring from the exchange If the information received is new the database server changes the records of the current stock information

Market Analysis  

User can analyze the information using the utilities provided by the system User can download raw stock data in the form of ASCII files and use them as inputs for custom analysis tools

Portfolio Management   

Users can setup and manage their own portfolio Stocks kept in the portfolio are stored in tables so that users can keep track once they login Portfolio profit calculation will aid the users in their buy/sell decisions

Simulated Transactional Services 

Users can trade as they do in the real stock market environment 
 

User sends in a request which is queued After some time the request is processed according to the current stock prices Brokerage fees ,contract stamp,clearing fees are all taken into account while preparing the bill which is sent to the user

Indian Scenario Opportunities 
 

Growing internet usage There were 5.5 million internet users in india in january 2001 and 48% of the users accessed the net daily. Nasscom predicts that there will be 300 million internet users in India by December 2010.

Opportunities (cont.)  

e-commerce is now fully legal in India with the information technology act that took effect in October 2000. Along with lending a coherent legal framework the act provides penalties for cyber crimes.

Opportunities (cont.) 
 

People are enthusiastic about e-trading Growing user base especially in professionals and brokers. Many first time users are becoming loyal customers of services from sites like ICICI direct and sharekhan.com

Threats 
  

Security threats Internet penetration in India is still not good enough. People are still reluctant to trade shares online, and prefer their traditional calling the broker options. Only the tech savvy, professionals and major stock brokers are using it currently.

Threats 

Cyber laws have been formulated but implementation is still not well tried out.

The general reasons for the use of the WWW for trading were as follows: -

Category

Response

Number

Percent

Male

Female

Why use the WWW?

Timely data

53

81.5%

81.0%

85.7%

Access News

53

81.5%

81.0%

85.7%

Discussions

22

33.8%

36.2%

14.3%

Convenient

56

86.2%

86.2%

85.7%

Faster Execution

16

24.6%

19.0%

71.4%

Fun

36

55.4%

55.2%

57.1%

The following was the result of the most preferred form of trade on the net
Category Response Number Percent Male Female

Preferred Trading Method

Full Service

23

24.7%

31.3%

30.0%

Discount Broker.

31

33.3%

39.1%

60.0%

Automated Phone

8

8.6%

9.4%

20.0%

Modem to Broker

11

11.8%

14.1%

20.0%

WWW

20

21.5%

26.6%

30.0%

Preferred Source

Traditional. Broker

12

15.0%

18.8%

0.0%

of Information

Automated Phone

4

5.0%

3.1%

20.0%

Electronic

7

8.8%

7.8%

20.0%

WWW

57

71.3%

76.6%

80.0%

Percentage of people who believe that the net will be popular: -

Category

Response

Number

Percent

Male

Female

Interested in electronic

Yes

59

79.7%

79.7%

80.0%

On-line trading?

No

3

4.1%

4.7%

0.0%

Don't Know

12

16.2%

15.6%

20.0%

Will the electronic trading

Yes

44

59.5%

57.8%

70.0%

Become more popular

No

17

23.0%

23.4%

20.0%

Than traditional brokers?

Don't Know

13

17.6%

18.8%

10.0%

Will digital stock exchanges

Yes

34

45.9%

46.9%

40.0%

Become more popular than

No

20

27.0%

31.3%

0.0%

Traditional stock markets?

Don't Know

20

27.0%

21.9%

60.0%

Advantages of Online Trading over Traditional Modes 
  

Eliminates manual order entry and paper trail Increases accuracy and speed of placing orders. Better record keeping by investors, brokers and regulatory organizations. Investors can make more informed investment decisions because they have access to vast amounts of data round the clock which can be accessed from the convenience of home, office or anywhere else the investor can get access to the Internet

Advantages of Online Trading vs Traditional Modes(Cont.) 

The WWW also provides a wide variety of analysis tools to aid the serious investor. Such tools range from simple graphs and charts of historical data, to complex technical analysis that predicts the movement of stock prices. Investors also have the choice of using on-line portfolio tracking tools that can automatically place a buy or sell order when certain events are triggered such as an increase or decrease in stock price. All these tools serve the user by providing them with better information for making investment decisions.

Reality Check  

  

Perception of inadequate security & privacy Difficulty of electronic funds transfer Information may be inaccurate or false Risk of system failure Slowness in internet access or a digital meltdown

Reality Check (Cont.) 


Digital meltdown Caveat emptor

Future Trend   

Stock brokers will have to provide etrading to remain competitive Resolution of perceived security issues will give popularity to electronic trading Advances in hardware and software will increase efficiency of electronic trade executions

Choosing a safe Password
Should not be names or personal information Should not be a word from the dictionary Should not be sequence of letters or numbers Should be at least 6 characters long Mix UPPER CASE and lower case letters Mix letters, numbers and punctuations Find a way to remember

Symmetric Encryption and decryption
A
Plain text Ciphertext Encryption

B
Plain text Decryption Hi Bob.

HI Bob.

&#@*;t

Key e = Key d Key e Key d

Myth -Clarification 

Thank You

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