Introduction Indiabulls is India’s leading Financial, Real Estate and Power Company with a wide presence throughout India. They ensure convenience and reliability in all their products and services. Indiabulls has over 640 branches all over India. The customers of Indiabulls are more than 4,50,000 which covers from a wide range of financial services and products from securities, derivatives trading, depositary services, research & advisory services, consumer secured & unsecured credit, loan against shares and mortgage & housing finance. The company employs around 4000 Relationship managers who help the clients to satisfy their customized financial goals. Indiabulls entered the Real Estate business in the year 2005 with its group of companies. Large scale projects worth several hundred million dollars are evaluated by them. Indiabulls Financial Services Ltd is listed on the National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange. The market capitalization of Indiabulls is around USD 2500 million (29thDecember, 2006). Consolidated net worth of the group is around USD 700 million. Indiabulls and its group companies have attracted USD 500 million of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of the large shareholders of Indiabulls are the largest financial institutions of the world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.
Growth of Indiabulls Year 2000-01: One of India’s first trading platforms was set up by Indiabulls Financial Services Ltd. with the development of an in-house team. Year 2001-03: The service offered by Indiabulls was increased to include Equity, F&O, Wholesale Debt, Mutual fund, IPO Financing/Distribution and Equity Research. Year 2003-04: In this particular year Indiabulls ventured into Distribution and Commodities Trading business. Year 2004-05: • • • • • This was one of the most important years in the history of Indiabulls. In this year: Indiabulls came out with its initial public offer (IPO) in September 2004. Indiabulls started its Consumer Finance business. Indiabulls entered the Indian Real Estate market and became the first company to bring FDI in Indian Real Estate. Indiabulls won bids for landmark properties in Mumbai.
Year 2005-06: In this year the company acquired over 115 acres of land in Sonepat for residential home site development. The world renowned investment banks like Merrill Lynch and Goldman Sachs increased their shareholding in Indiabulls. It also became a market leader in securities brokerage industry, with around 31% share in Online Trading. The world’s largest hedge fund, Farallon Capital and its affiliates committed Rs. 2000 million for 2
Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing Finance Ltd. In the same year, the Steel Tycoon Mr. L N Mittal promoted LNM India Internet venture Ltd. acquired 8.2% stake in Indiabulls Credit Services Ltd. Year 2006-07: In this year, Indiabulls Financial Services Ltd. was included in the prestigious Morgan Stanley Capital International Index (MSCI). Indiabulls Financial Services Ltd. was benefited with the Farallon Capital agreeing to invest Rs. 6,440 million in it. The company also received an “in principle approval” from Government of India for development of multi product SEZ in the state of Maharashtra. Indiabulls Financial Services Ltd acquired 100% of the equity share capital of Noble Realtors Pvt. Ltd. Noble Realtors is a Company engaged in the business of construction and development of real estate projects. Indiabulls Real Estate Business was demerged to become a separate entity called Indiabulls Real Estate Ltd. The Board of Indiabulls Financial Services Ltd., Resolved to Amalgamate Indiabulls Credit Services Ltd and demerge Indiabulls Securities Limited. Indiabulls Financial Services Ltd Year 2008-09: Several developments across its group companies have propelled indiabulls forward and are expected to continue to power the rise of this conglomerate. Indiabulls financial services limited has recently signed a joint venture agreement with sogecap, the insurance arm of Societe Generale (SocGen) for its upcoming life insurance venture. At the same time it has also signed a Memorandum of understanding with MMTC. On the asset management front, the company has received formal approval uhby7hbfrom SEBI and is expected to shortly launch its first NFO. Indiabulls enter in to Public issue for his Indiabulls power Ltd.
Promoters for Indiabulls Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal Are the promoters of Indiabulls Financial Services Limited. While Sameer Gehlaut will have a 23.0% stake in the company post the IPO Rajiv Rattan and Saurabh Mittal will have a post issue holding of 11.5% and 10.1% respectively. All the three promoters of the company are engineering graduates while Saurabh Mittal is a management graduate as well. Sector
Since Indiabulls derives most of its revenues from the brokerage business, its fortunes are very much dependent on the Performance of the capital markets, i.e. debt, derivative and equity markets. The Indian equity markets have grown from strength to strength in the last decade with combined daily volumes of all segments on the BSE and the NSE touching Rs 232 bn in April 2004, from Rs 5 bn in FY96. Total shareholders in the country are over 20 m (2% of population) and this is the third largest after the US and Japan, in absolute terms. However, if one were to compare the percentage of all households in India that are invested in the stock markets, it is only about 1.9% as compared to an estimated 52% (including indirect ownership by way of mutual funds) of all households in the US. This highlights the long-term potential for the sector. to apply
Senior Vice President Yuv Raj Singh
Regional Manager Dashmeet Singh Branch Manager Senior Sales Manager Sujeet Roy Chowdary
Support System Vishal
Sujeet Roy Chowdary
Sales Function Subrot
Back Office Executive Ifran Khan
Local Compliance Officer Chary
RM/SRM Satish Kumar S
Dealer Badri Nath
. regulatory reporting. operating management. This team comprising highly qualified and experienced personnel has been responsible for the overall management of the company and has provided direction in diverse areas of business strategy. main strength lies in its formidable team.The Team:
Indiabulls Securities Ltd. human resources development and product development.
Indiabulls Insurance Advisors Pvt. Transparency and Ethical Behavior. Ltd. Ltd. Ltd Indiabulls Housing Finance Ltd.Vision statement: To become the preferred long term financial partner to a wide base of customers whilst optimizing stake holder’s value Mission statement: To establish a base of 1 million satisfied customers by 2010. Indiabulls Credit Services Ltd.
Indiabulls Securities Ltd is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) and its global depository shares are listed on the Luxembourg Stock Exchange
. Respect for Employees. Indiabulls Resources Ltd. We will create this by being a responsible and trustworthy partner Corporate action: An Approach to Business that reflects Responsibility. Indiabulls Securities Ltd. Clients & Stakeholder groups
Indiabulls Group entities in India • • • • • • • • • Indiabulls Capital Services Ltd. Indiabulls Finance Co. Pvt. Indiabulls Power Ltd. Indiabulls Commodities Pvt.
19 (US$ 0. 6) Unbiased & Objective advice: We partner you in your investment process. step by step. 4) Trust: Enjoys the pedigree of Indiabulls Securities Ltd and share its expertise in financial services. about institutional expertise and companies valuable understanding of the financial markets 3) One-stop shop: Caters to all customers’ investment needs under one roof. 5) Personalized service: Helps customer through the entire investment process.48) in September 2004 has been rewarded almost 100 times in three and a half years – a feat unparalleled in the history of Indian capital markets Indiabulls Real Estate Limited partnered Farallon Capital Management LLC of the US to bring the first Foreign Direct Investment into real estate
Seven Reasons why investing with Indiabulls Securities Limited is smarter
1) Customization: Formulates investment plans based on customer individual requirements 2) Expertise: Brings within customer reach. with innovative and efficient services.Reasons to choose Indiabulls Securities Ltd:
The Indiabulls Financial Services stock is the best performing stock in the MSCI Index – the global benchmark for equity investments A person who bought Indiabulls shares in the IPO at Rs. with our team of expert investment advisors 7
578 231.6 2. significant decline in Internet charges. Indiabulls currently has almost 20% market share of volumes in the Internet trading space. To put things in perspective. the offline brokerage on equities is around 1.5% in the online trading space. This is primarily driven by increasing penetration of computers.4 3.642
73 81 154 51 379 430
0. Enabled members* FY00 FY01 FY02 FY03 CM F&O** FY04 CM F&O** 3 61 82 80 13 70 14 Registered clients* Trading Value (Rs % of total trading bn) value
123.0% as compared to 0.340 413. which we believe is likely to be robust going forward as well. convenience of usage and cost advantage.454 164. F&O: Futures and Options market * At the end of the financial year ** trading value for F&O segment compiled from June 2009 Advisory services:
.420 69.5 1..5 2
CM: Cash Market.Reasons to apply Online trading potential is huge: Online trading accounted for 5% of overall market in FY04 as compared to an estimated 3% in FY03.899 346.. The table below indicates the growth in volumes of the Internet trading segment on the NSE over the last few years.5 1. The growth is indicative of the potential of this segment. NSE online trading statistics.
considering the penetration levels of mutual funds and insurance in the country. The platform provides enhanced trade information and executes orders on an integrated software based trading platform. these are highly profitable business segments. Aggressive growth plans: Indiabulls has set aggressive targets to expand its business in the offline space.Indiabulls is also into mutual fund and insurance advisory businesses.
Indiabulls financial service offers: ? SME finance ? Mortgage loans ? Commercial vehicle loans ? Farm equipment loans ? Commercial credit loans
. Though these businesses currently account for an insignificant portion of overall revenues. This includes investments in upgradation of branch network and opening another 75 branches by the end of calendar year 2009 (150 in total). Though this field is extremely competitive and requires significant research skills. prospects are promising. The company has also indicated its intent to acquire strategic stake in other companies towards growing the business inorganically Products provided Power Indiabulls An online trading system designed for the high-volume trader.
Distribution: Mutual funds. .? Loan against shares and ? Third part distribution of insurance products. Insurace. Divisions: Investment Advisory and Broking Division Project Syndication Division Institutional Equity Broking Division Institutional Debt Broking Division
Retail Offerings: ? Wealth Management Services ? Portfolio Management Services ? Securities Broking-Equities and derivatives ? Depository & Custodial Service & Distribution of financial Products. Home loans. Derivatives. Currency Derivatives.
8) Depository Services 9) Payment Gateway 10) Other back office support
. 1) Equities 2) Commodities 3) Wholesale debts 4) Futures and options 5) Depository services 6) Equity research services 7) Post Trade -Custodial.Services: Indiabulls securities provides a wide range of services that include Power Indiabulls: An online trading system designed for the high-volume trader. The platform provides enhanced trade information and executes orders on an integrated software based trading platform.
Indiabulls acquired Pyramid Retail including Piramyd Megastores and Trumart.Online Banks Tie-ups for trading:
Company having online transaction tie-ups with banks like HDFC BANK. IDBI BANK. Company Achievements: The Indiabulls Group is one of the top fifteen conglomerates in the country with businesses in several significant sectors. their chain of lifestyle and convenience outlets
. Indiabulls Real Estate Limited partnered Farallon Capital Management LLC of the US to bring the first Foreign Direct Investment into real estate. Indiabulls Financial Services Limited was accorded the highest rating P1+ for short term debt and the highest rating of AAA (SO) by CRISIL for loan receivables securitization while Indiabulls Securities Limited is the only broker in India to be assigned CRISIL’s highest broker quality grading of BQ1. In December 2007. CITI BANK. ICICI BANK. The Indiabulls Financial Services stock is the best performing stock in the MSCI Index – the global benchmark for equity investments.
ICICI Securities Ltd.Company competitors
Kotak Securities Ltd. HDFC Securities Ltd. Religare Securities Ltd.
. Birla Money. Indiainfoline Ltd.
32 75368614 75368614
2.32 24.Financial position:
Balance Sheet of Indiabulls Securities------------------.20 10.75 5.in Rs. ------------------Ltd
anShareholding pattern in Indiabulls From 30 Sep 2009
Share holding pattern as on : Face value
31/12/2009 Of %
0.19 7.93 9.32 75368614 75368614
Promoter's holding Indian Promoters 75368614 Sub total 75368614 Non promoter's holding Institutional investors Banks Fin.65 3. Cr.33 5988096 28467067 23742559 1.32 24.53 155954530 50. Inst. Of %
30/06/2009 2.00 No.62 48.00 No.45
147281983 47.52 32.72 Holding Shares 24. Shares
Holding Shares 24.04 45. and 131800 Insurance FII's 141369414 Sub total 150775461 Other investors Private Corporate 9918855 Bodies NRI's/OCB's/Foreign 33301563 Others Others 15612572
0.00 No.54 14.02 32. Of % Holding 29.72 29.06 15.66
41300 82471653 83290623 3902722 35648843 39177681
00 253629769 100.57 16241286 6.40 309888300 100.04 24911235 8.00 2.78 78729246 31.00 58832990 18.00
.04 20359934 6.99 58197722 18.00 2.00 309880800 100.Share holding pattern as on : Face value Sub total General public Grand total
1200 crore (US$ 300 million). listed in important Indian and overseas markets. 19 (US$ 0.48) in September 2004 has been rewarded almost 100 times in three and a half years – a feat unparalleled in the history of Indian capital markets
. In less than eight years since the company was first registered. In December 2007.000 and from one office to 600 across the country
The Indiabulls Financial Services stock is the best performing stock in the MSCI Index – the global benchmark for equity investments. have distributed over Rs. Indiabulls acquired Pyramid Retail including Piramyd Megastores and Trumart.000 crore (US$ 6.25 billion) while group revenues have grown at a cumulative annual rate of over 100% to now reach Rs. Its companies. it has grown from just five employees to 21. their chain of lifestyle and convenience outlets Indiabulls’ growth has been nothing short of stupendous. 25.ABOUT INDIABULLS GROUP The Indiabulls Group is one of the top fifteen conglomerates in the country with businesses in several significant sectors. Indiabulls Financial Services Limited was accorded the highest rating P1+ for short term debt and the highest rating of AAA (SO) by CRISIL for loan receivables securitisation while Indiabulls Securities Limited is the only broker in India to be assigned CRISIL’s highest broker quality grading of BQ1. The group companies have a market capitalisation of over Rs. A person who bought Indiabulls shares in the IPO at Rs. 3100 crore (US$ 775 million) and the group profit has surged to over Rs. 700 crore (US$ 175 million) as dividend in the year 2008.
after acquiring orbis Securities. wholesale debt. Rajiv Rattan and Saurabh Mittal acquired Orbis. The challenges facing it were immense – not least of all the mind set of investors who were called to make the big leap from traditional stock trading to a completely online interface. The company had achieved the distinction of becoming only the second brokerage firm in India to be granted this consent.a Delhi based stock broking company.The office had a tin roof and two computers. mutual fund distribution and equity research. Real estate. Companies History in India
In 1999. The idea of leveraging technology for trading stocks led to the creation of Indiabulls Incorporated on 10th January 2000. Indiabulls ventured into insurance distribution and commodity trading. the new sunrise industry. Its original idea of leveraging technology bore fruit when Indiabulls was accorded permission to conduct online trading on Indian stock exchanges. In 2003/04. a stock brokerage company in Delhi. F&O.Indiabulls Real Estate Limited partnered Farallon Capital Management LLC of the US to bring the first Foreign Direct Investment into real estate. was the next frontier for Indiabulls.
. the company later expanded its service portfolio to include equity. it entered this sector. Having overcome this resistance. But it wasn’t just real estate that was booming. In 2004/05. The group started its operations from a small office near Hauz Khas bus terminal in Delhi. Young entrepreneur Sameer Gehlaut established Indiabulls in 2000. it was converted into a public limited company on 27th February 2004. It successfully floated its IPO in September 2004 and in the same year entered the consumer finance segment. three IIT-Delhi alumni Sameer Gehlaut.
the insurance arm of Societe Generale (SocGen) for its upcoming life insurance venture.
. Indiabulls will feature prominently in it. The company attributes its dominant position in the brokerage industry to the preferential status it enjoys with investors Coupled with its forays into various segments. To cement its position in the Indian business and industry firmament. when a case study on India’s youngest brands which have had a profound impact on the economy is crafted. the Group believes that the bulk of its brand story is yet to be written. Indeed.
Recent Developments Several developments across its group companies have propelled Indiabulls forward and are expected to continue to power the rise of this conglomerate. Indiabulls Financial Services Limited has recently signed a joint venture agreement with Sogecap. Indiabulls acquired Pyramid Retail In 2007 and marked its presence in the power sector by launching Indiabulls Power Brand Values
Indiabulls is amongst the largest non-banking financial services companies in India and enjoys strong brand recognition and customer acceptance.Opportunities were opening up in retail and infrastructure as well.
At the same time it has also signed a Memorandum of Understanding with MMTC. On the asset management front. 2009 . the company has received formal approval from SEBI and is expected to shortly launch its first NFO. Sameer Gehlaut Chairman & CEO
Karan Singh Prem Prakash Mird
The Board of Directors Following is the list of our Board Members as on November 4. Mr. to establish a Commodities Exchange with 26% Ownership held by MMTC. the largest commodity trading house in India.
Saurabh K Mittal
NEED FOR THE STUDY:
The present study to review the online trading procedure a case study of ONLINE TRADING at INDIA BULLS as the exchange has changed it’s trading from the
there is need to assess the performance of the capital market.outcry mode to online trading on 20th February 1997. The appropriate configuration to set the network.
METHODOLOGY OF THE STUDY: The data collection methods include both primary and secondary collection methods. It is to study the functions of INDIA BULLS through various departments. Primary method: This method includes the data collected from the personal interaction with authorized members of Sharekhan Securities limited.
To know about the latest and future development in the stock exchange trading system. Secondary method: The secondary data collection method includes:
. which would link the to individual INDIA BULLS members. OBJECTIVES OF THE STUDY:
It is to analyze the changes in trading after the exchange shifted from outcry to online trading system. To know the online screen based trading system adopted by INDIA BULLS and about its communication facilities.
LIMITATIONS OF THE STUDY: The study is confined to online trading procedure only. capital market and other related topics. economic times.
. The brochures and material provided by India bulls Securities limited.The lecturers delivered by the superintendents of respective departments. The data collected from the magazines of the NSE. Various books relating to the investments. Problems of listing are not covered due to limited time and to keep the study in manageable limits.
INDUSTRY PROFILE Following diagram gives the structure of Indian financial system:
According to functional basis financial markets are classified into two types. treasury bills. The organized market comprises of official market represented by recognized institutions. individual professional and non-professionals. Again the money market is classified in to Inter bank call money market Bill market and Bank loan market Etc. CD's etc. The unorganized market is composed of indigenous bankers. Again the capital market is classified in to two types and they are
. moneylenders. The financial markets match the demands of investment with the supply of capital from various sources. MONEY MARKET: Money market is a place where we can raise short-term capital. These markets are the centers that provide facilities for buying and selling of financial claims and services. They are: Money markets (short-term) Capital markets (long-term) According to institutional basis again classified in to two types..Financial markets are helpful to provide liquidity in the system and for smooth functioning of the system. CAPITAL MARKET: Capital market is a place where we can raise long-term capital. commercial papers. They are Organized financial market Non-organized financial market.g. E. bank and government (SEBI) registered/controlled activities and intermediaries.
The following are the market intermediaries associated with the market: 1.g. and distribution. and issue of debt instruments such as debentures. addition. Registrar and transfer agent 3. further and right issues to existing shareholders. Distribution refers to the sale of securities to the investors. underwriting. Origination deals with the origin of the new issue. Underwriting contract make the shares predictable and remove the element of uncertainty in the subscription. public offers. bonds. The primary market is regulated by the Securities and Exchange Board of India (SEBI a government regulated authority). Primary market operations include new issues of shares by new and existing companies.: Shares. diversification and up gradation. Primary market is also referred to as New Issue Market. Banker to the issue 6. 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. Debentures. Underwriter/broker to the issue 4. Depository 7. E. Merchant banker/book building lead manager 2. Depository participant Investors’ protection in the primary market:
. Function: The main services of the primary market are origination. Adviser to the issue 5. modernization. etc. for new projects as also for expansion. Primary market and Secondary market.
Investment advisor 4. SECONDARY MARKET The primary market deals with the new issues of securities. the growth of secondary market depends on the primary market. Thus. The principal ingredients of investors’ protection are: Provision of all the relevant information Provision of accurate information and Transparent allotment procedures without any bias. Depository 6. Share transfer agent 5. which is commonly known as stock market or stock exchange. Secondary market operations involve buying and selling of securities on the stock exchange through its members. the greater are the volume of trade at the secondary market. Outstanding securities are traded in the secondary market. The following are the intermediaries in the secondary market: 1. 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). The term investor protection has a wider meaning in the primary market. the investing public should be protected. Depository participants.To ensure healthy growth of primary market. Broker/member of stock exchange – buyers broker and sellers broker 2. 27
. The companies hitting the primary market are mandatory to list their shares on one or more stock exchanges in India. National Stock Exchange of India and Interconnected Stock Exchange of India. “The secondary market is a market where scrip’s are traded”. More the number of companies entering the primary market. It is a market place which provides liquidity to the scrip’s issued in the primary market. Portfolio Manager 3. Listing of scrip’s provides liquidity and offers an opportunity to the investors to buy or sell the scrip’s.
selling or dealing in securities. constituted for the purpose of assisting. purchases and sales of shares are affected in conditions of free competition.STOCK MARKETS IN INDIA: Stock exchanges are the perfect type of market for securities whether of government and semi-govt bodies or other public bodies as also for shares and debentures issued by the joint-stock companies. regulating or controlling the business of buying. Government securities. Bonds
History of Stock Exchanges: 28
.” The securities include: Shares of public company. The bargains that are struck in the trading ring by the members of the stock exchanges are at the fairest prices determined by the basic laws of supply and demand. Government securities are traded outside the trading ring in the form of over the counter sales or purchase. In the stock market. Definition of a stock exchange: “Stock exchange means any body or individuals whether incorporated or not.
the securities contract (regulation) act became law in 1956.Gorwala went into the bill for securities regulation. During the war boom. Municipal corporations. organizing new ventures and completing projects of expansion. Under this act. central legislation was proposed and a committee headed by A. a number of stock exchanges were organized. By obtaining the listing and trading facilities.D. Functions of Stock Exchanges: Stock exchanges provide liquidity to the listed companies. it was a state subject and the Bombay securities contracts (control) act of 1925 used to regulate trading in securities. Soon after it became a central subject.The only stock exchanges operating in the 19th century were those of Mumbai setup in 1875 and Ahmedabad set up in 1894. trade and commerce. diversification and modernization. public investment is increased and companies were able to raise more funds. the central and state government have raised crores of rupees by floating public loans. The quoted companies with wide public interest have enjoyed some benefits and assets valuation has become easier for tax and other purposes. These were organized as voluntary non-profitmarking associations of brokers to regulate and protect their interests. they help trading and raise funds from the market. and industry. trust and local bodies have obtained from the public their financial requirements. On the basis of the committee’s recommendations and public discussion. By giving quotations to the listed companies. Various Stock Exchanges in India:
.the backbone of the country’s economy-have secured capital of crores or rupees through the issue of stocks. the Mumbai stock exchange was recognized in 1927 and Ahmedabad in 1937. Over the hundred and twenty years during which the stock exchanges have existed in this country and through their medium. shares and debentures for financing their day-to-day activities. Before the control on securities under the constitution in 1950.
Jaipur Stock Exchange Ltd Kanara Stock Exchange Ltd Ludhiana Stock Exchange Association Ltd Madras Stock Exchange
. 1956. Those are: Ahmedabad 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 Guwahati Stock Exchange Ltd Hyderabad Stock Exchange Ltd. Act.At present there are 23 stock exchanges recognized under the securities contracts (regulation).
Saurashtra Kutch Stock Exchange Ltd. Magadh Stock Exchange Limited Meerut Stock Exchange Ltd. Uttar Pradesh Stock Exchange Association Vadodara Stock Exchange Ltd.Madhya Pradesh Stock Exchange Ltd.
Out of these major stock exchanges were: NSE
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 (FI’s)
. Mumbai Stock Exchange National Stock Exchange of India OTC Exchange of India Pune Stock Exchange Ltd.
Ensuring equal access to investors all over the country through an appropriate communication network. 1956 in April 1993. The NSE was set-up with the main objectives of:
Establishing a nation-wide trading facility for equities and debt instruments. efficient and transparent securities market to investors using electronic trading systems. Enabling shorter settlement cycles and book entry settlements systems.
The standards set by NSE in terms of market practices and technology.
. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. Providing a fair. Based on the recommendations. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000 NSE's mission is setting the agenda for change in the securities markets in India. have become industry benchmarks and are being emulated by other market participants. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act.to provide access to investors from all across the country on an equal footing. It's that force which is guiding the industry towards new horizons and greater opportunities. NSE is more than a mere market facilitator. and Meeting the current international standards of securities markets. NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a taxpaying company unlike other stock exchanges in the country.
The Exchange has inserted new Rule No. 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. who are from the broking community (one third of them retire ever year by rotation). Byelaws pertaining to constitution of the Executive Committee of the Exchange. It has evolved over the years into its present status as the premier Stock Exchange in the country. which decides the policies and regulates the affairs of the Exchange. A Governing Board having 20 directors is the apex body. which was established in 1878. debt and derivatives upholds the interests of the investors and ensures redresses of their grievances whether against the companies or its own member-brokers. Accordingly. an Executive
The Executive Director as the Chief Executive Officer is responsible for the day-today administration of the Exchange and the Chief Operating Officer and other Heads of Department assist him.The Exchange. Mumbai. while providing an efficient and transparent market for trading in securities. of India under the Securities Contracts (Regulation) Act 1956. The Governing Board consists of 9 elected directors. three SEBI nominees. It also strives to educate and enlighten the investors by conducting investor education programmers and making available to them necessary informative inputs. six public representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer.126 A in its Rules. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. 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.BSE
The Stock Exchange.
1956” and “Securities Exchange Board of India 1952”. The Committee considers judicial & quasi matters in which the Governing Board has powers as an Appellate Authority. matters regarding annulment of transactions. The qualifications for becoming a member of a recognized stock exchange are given below:
• • • • • • •
The minimum age prescribed for the members is 21 years. margins and other monies payable by the member-brokers to the Exchange. deposits. He should be neither a bankrupt nor compound with the creditors.
SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) 34
. Executive Director & CEO and Chief Operating Officer has been constituted. fees. Three tier regulatory structure comprising Ministry of finance The Securities And Exchange Board of India Governing body Members of the stock exchange: The securities contract regulation act 1956 has provided uniform regulation for the admission of members in the stock exchanges. procedures and other matters relating to arbitration. consisting of three elected directors. declaration of a member-broker as defaulter. three SEBI nominees or public representatives. He should be an Indian citizen. The minimum required education is a pass in 12th standard examination.Committee.
REGULATORY FRAME WORK OF STOCK EXCHANGE A comprehensive legal framework was provided by the “Securities Contract Regulation Act. etc. He should not be engaged in any other business connected with a company. admission. He should not be a defaulter of any other stock exchange. norms. continuance and suspension of member-brokers. He should not be convicted for fraud or dishonesty.
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. public representatives and government representatives to the extent of 50% of total number of members. 1947and the securities to it by the central government. Prohibiting insider trading in securities. With the coming into effect of the securities and exchange board of India act. Performing such functions and exercising such powers under the provisions of capital issues (control) act.
• • • •
SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK EXCHANGES):
Board of Directors of Stock Exchange has to be reconstituted so as to include non-members. Registering and regulating the working of intermediaries associated with securities market as well as working of mutual funds. the SEBI shall constitute of a chairman and four other members appointed by the central government. Regulating the business in stock exchanges and any other securities market. Promoting and regulating self-regulatory organizations. Regulating substantial acquisition of shares and take over of companies. 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
• • •
To protect the interest of investors in securities.
Capital adequacy norms have been laid down for the members of various stock exchanges depending upon their turnover of trade and other factors.according to this act.
E. It gives the details regarding the name of the company.’Here. The orders are of different types.24.•
All recognized stock exchanges will have to inform about transactions within 24 hrs. E. Limit orders: Orders are limited by a fixed price. The order stands as this “buy BRC 100 shares around Rs.50. number of shares bought. The order to buy or sell specifying the number of shares of the company of investors’ choice is placed with the broker. Stop loss order: The orders are given to limit the loss due to unfavorable price movement in the market. Generally the approximation price is fixed. The order may be of any type. stop loss at Rs.g. the order is executed. price. In this physical trading form. 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. The broker then delivers the contract note to the investor. Once matching order is found.22. Best rate order: Here. Discretionary order: The investor gives the range of price for purchase and sale. 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.g. and the date of delivery of share. brokerage. the broker is authorized to sell the shares to prevent further loss.50. After receiving the order the broker tries to execute the order in his computer terminal. The broker can use his discretion to buy within the specified limit. It may be lowest rate for buying and highest rate for selling. Sell BRC limited at Rs.40”. If the price falls below the limit. ‘buy Reliance Petroleum at Rs. once the broker gets the share certificate through the clearing houses he delivers
. 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. A particular limit is given for waiting.
TYPES OF ORDERS: Buy and sell orders placed with members of the stock exchange by the investors.
‘B1’&’B2’ groups. Then it was extended to “A” stocks in Modified Carry Forward Scheme. the settlement period is n days after the trading day. the broker effects the payment to the investor. After the T+3 rolling
. Share groups: The scrips traded on the BSE have been classified into ‘A’. the settlement takes place n days (usually 1. ROLLING SETTLEMENT SYSTEM: Under rolling settlement system. Automated Lending and Borrowing Mechanism (ALBM) and Borrowing and lending Securities Scheme (BELSS) with effect from Dec 31.’B1’. the investor should lodge the share certificate and transfer deed to the register or transfer agent of the company. 2001. In the case of sale of shares on receiving payment from the purchasing broker.1 crore or more. The rolling settlement system is noted by T+N i. which are in the carry forward system. Generally longer settlement periods are shortened gradually. 2. The investor should be account holder in any of the depository participant.’F’ and ‘Z’ groups. If it is bought in the DEMAT form.the share certificate along with transfer deed to the investor. The ‘A’ group represents those. SEBI made RS compulsory for trading in 10 securities selected on the basis of the criteria that they were in compulsory demat list and had daily turnover of about Rs.’B2’. 3 or 5days) after the trading day. The ‘C’ group covers the odd lot securities in ‘A’. The ‘F’ group represents the debt market segment (fixed income securities). SEBI has introduced T+5 rolling settlement in equity market from July 2001 and subsequently shortened the cycle to T+3 from April 2002. The investor has to fill the transfer deed and stamp it.e. The stamp duty is one of the percentage considerations.’C’. A rolling period which offers a large number of days negates the advantages of the system. The Z group scrips are of the blacklisted companies. The shares bought and sold are paid in for n days after the trading day of the particular transaction. the broker has to give a matching instruction to his depository participant to transfer shares bought to the investors account. Share settlement is likely to be completed much sooner after the transaction than under the fixed settlement system.
30 a.m on T+2 from the brokers’ pool accounts. The buy and sale positions in the same scrip can be settled and net quantity has to be settled.30 p.settlement experience it was further reduced to T+2 to reduce the risk in the market and to protect the interest of the investors from 1st April 2003. The depository processes the pay in requests and transfers the consolidated pay in files to clearing House/clearing Corporation by 11. Depository participants accept the instructions for pay in securities by investors in physical form upto 4 p. In the demat mode net basis settlement is allowed.00am/on T+2. The time limit and the additional changes for the exception window are dedicated by the exchange. the depositories accept from other DPs till 8p. A provision of an exception window would be available for late confirmation.m on T+1.
.00 am.m on T+2 to the depositories and clearing banks. The exchange/clearing house/clearing corporation executes the pay-out of securities and funds latest by 1. Activities on T+2: The depository permits the download of the paying in files of securities and funds till 10. The exchanges/clearing house/ clearing corporation would process and download the obligation files to the broker’s terminals late by 1.m for same day processing. Activities on T+1: conformation of the institutional trades by the custodian is sent to the stock exchange by 11.m and in electronic form upto 6 p.30 p.m.
quotes his own price when the quotation of the dealer suits the broker. 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. For making the necessary bargain. If he is not satisfied with the quote price. the broker using ‘open outcry’ method makes an offer or bid price. The dealer. In the post pit or wing. also known as offer or bid price. Basically the brokers shout while buying or selling the securities. This method is called the open outcry system. the broker or his authorized representatives goes to the stock exchange. he may loose the bargain. he may turn to some other dealer.CHAPTER-3
PROJECT ANALYSIS OUTCRY SYSTEM The broker has to buy or sell securities for which he has received the orders. On the close of
. For this. he quotes his purchase or sale price. to whom the price is quoted.
They carry a sauda book or confirmation memos. The stock exchanges operations are floor level are technical in nature .The steps involved in this method of trading have given below: Choice of broker:
. In audibility was another disadvantage of the outcry system. what membership number etc.. the dealer as well as the broker makes a brief note of the particulars of the deal. are noted. 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. Hence various stages have to be completed in executing a transaction at a stock exchange . duly authorized by the exchange and carry a pen with them.Non-members are not permitted to enter in to stock market. Due to the above disadvantages of the outcry system the SHAREKHAN has shifted from outcry system to online trading from February 29th 1997. DISADVANTAGES OF OUTCRY SYSTEM:
• • •
It lacks transparency.the bargain. In the trading ring the space is provided for specified and non-specified sections.
MANUAL TRADING Trading procedure before introduction of online trading Trading on stock exchanges is officially done in the trading ring. the price agreed upon. the name of the party. The scope of manipulation. 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. speculation and mal practice is more. Such notes are made on some pad and on it the number of shares.
30 P. both broker and jobber make a note in their sauda block books. Stop Loss Order. fax etc or in person. Placement of order: The next step is the placing order for the purchase or sale of securities with a broker. This works from 11:30 to 2. Immediate or Cancel Order. To avoid delay. which are duly authorized by the exchange when the deal is struck.
Execution of order or contract: Orders are executed in the trading ring of the BSE.M on all working days Monday to Friday.The prospective investor who wants to buy shares or the investors. From the sauda book.
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. Limit Order. They can also appoint their bankers for this purpose as per the present regulations. Limited Discretionary Order. the contract notes are drawn up and posted to the client. it is placed generally over the phone. The orders may take any one of the forms such as At Best Orders. This in a purchase transaction. telephone. The order is usually placed by telegram. have to act through member brokers only. They carry a sauda Block Book or conformation memos. letter. and Open Order. who wants to sell shares and transact business. once the shares are delivered to the client effects payment for the purchases and pays the stamp fees for
. The members or the authorized assistants have to wear a badge given by the exchange to enter into the trading ring. A contract note is written agreement between the broker and his clients for the transaction executed. and a special one-hour session on Saturday.
To get back dematerialized securities in the physical form. 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. Briefly. With this. Odd lot shares certificates can also be dematerialized. an investor has to first open an account with a DP and then request for the Dematerialization Request Form. the investor gets the option to dematerialize such shares. 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. the process is as follows: after completion of transfer. including other expenses incurred by the broker in the price itself. request DP for Rematerialization of the same is made. These shares are fungible-which means that 100 shares of a security are the same as any other 100 shares of the security. a bill is made out giving the total cost of purchase. which are already registered in your name and belong to the list of securities admitted for Dematerialization at NSDL.
. Dematerialization normally takes about fifteen to thirty days. which is DP and submit the same along with the share certificates. Dematerialized shares do not have any distinctive or certificate numbers.
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. the process ends.transfer. Investor’s willing to exercise this option sends a Demat request along with the option letter sent by the company to his DP. Most of the active scrip’s in the market including all the scrip’s of S&P CNX NIFTY and BSE SENSEX have already joined NSDL. Dematerialization can only be done to those certificates. This list is steadily increasing.
5% by quite a few brokerage firms. This has lead to reduction in brokerage to the extent of 0. 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 dematerialized securities as against 50% for loans against physical securities. There is no lost in transit. this eliminating risk of loss in transit. you save 0. You can receive your bonuses and rights issues into your DA as a direct credit.
In case of transfer of electronic shares. You can also expect a lower interest charge for loans taken against Demat shares as compared to loans against physical shares. in turn saving the cost and wastage of time associated with follow up for rectification.Rematerialization is the process of converting electronic shares in to physical shares.5% in stamp duty. Benefits of Demat:
It reduces the risk of bad deliveries. You avoid the cost of courier / notarization.
ONLINE TRADING Before getting in to the online trading we should know some things about the internet. It has re-defined the methods of communication. education. Internet can change the nature and capacity of stock broking business in India. games. It helps conduct traditional commerce through new way of 44
. health. ubiquitous links to anyone anywhere and anytime to build up interactive relationships. What is Internet? Internet is a worldwide. Internet or net is an inter-connection of computer communication networks spanning the entire globe. called the Internet promises to bring unprecedented changes in our lives and business. business. It offers stock trading at a lower cost. trade. accelerating the pace of business reforms and revolutionizing the way companies are managed. visit to shopping arcades. In India. A combination of time and space. The use of Internet has grown 2000 percent in last decade and is currently growing at 10 percent per month. leisure. e-commerce and etc. commerce and what not it is virtually changing every thing and we are living in dot. in cyber space even the information can be copied. crossing all geographical boundaries. Net being an interactive two way medium.
2. etc.com age. It is expected to bring changes in every functional area of business activity including management and financial services. growth of Internet is of recent times. 1. It allows direct. This technology shrinks vast distances. enables participation by individuals in business to business and business to consumer commerce. to mega sources of information. E-commerce Electronic commerce is associated with buying and selling over computer communication networks. work study. downloaded and retransmitted. self-governed network connecting several other smaller networks and millions of computers and persons. through various websites. banking.
Information is electronically transferred from computer to computer in an automated way. Network connects both categories of computers.e. Now we can enter in to the concept known as online trading.
EVOLUTION OF BROKING IN INDIA: The evolution of a broking in India can be categorized in three phases •
Stockbrokers will offer on their sites features such as live portfolio manager. live quotes. Brokers will offer online broking and relationship management by providing and offering analysis and information to investors during broking and nonbroking hours based on their profile and needs. to attract more investors.transferring and processing of information.
. etc. Now information has become easily accessible to both retail as well as big investor. 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. E-commerce refers to the paperless exchange of business information using electronic data inter change. It manages the resources of the computer system in a fair and efficient manner. the various operating systems are the most basis program within a computer. market research and news. customized services. The net brings data to the investor on-line and net broking enables him to trade on a click of mouse. investors had no option but to contact their broker to get real time access to market data. PC’s and networking attempts to introduce banks of the tools and technologies required for electronic commerce. In the past. electronic technologies. i. The computers are either workstations of individual office works or serves where large databases and information reside.
you will access a stockbroker’s website through your internet enabled PC and place orders through the broker’s internet based trading engine.
In India: Internet trading started in India on 1st April 2000 with 79 members seeking permission for online trading. by increasing quote continuity and market depth. Objectives: Internet trading is expected to
Increase transparency in the markets. on-line asset allocation. In the real world you place orders on your stockbroker either verbally (personally or telephonically) or in a written form (fax).
The actual definition of “Online Trading” is as explained below: “Online trading is a service offered on the internet for purchase and sale of shares. tax planning. portfolio management. The net is used as a mode of trading in internet trading.•
Brokers (now e-brokers) will offer value management or services like initial public offering online. The SEBI committees on internet based securities trading services has allowed the net to be used as an Order Routing System (ORS) through registered stock brokers on behalf of their clients for execution of transaction.
.” In online trading. Under the ORS the client enters his requirements (security. These orders are routed to the stock exchange without manual intervention and executed thereon in a matter of a few seconds. price buy/sell) on broker’s site. financial planning. and enables the investors to take better and well considered decisions. etc. Enhance market quality through improved liquidity. quantity. Orders are communicated to the stock exchange through website. insurance services.
through internet trading three fundamental objectives of securities regulation can be easily achieved. Requirements for net trading: For investors: 1. Compliance with SEBI guidelines for net trading The following should be produced to get a demat account and online trading account: As identity proof & address proof any one of the following:
. A bank account 6. Telephone connection 4. Installation of a computer with required specification 2. etc. Installation of a modem 3. kotakstreet. Provide management information system. Introduce flexibility in system. by elimination of mismatches. these are:
• • •
Investor protection Creation of a fair and efficient market. Registration for on-line trading with broker 5. and Reduction of the systematic risks.
Besides. Depository account 7.
Some of the brokers offering net trading include ICICI direct. so as to handle growing volumes easily and to support nationwide expansion of market activity.• • •
Reduce settlement risks due to open trades.
Secured and reliable software system 5. Bank manager’s signature along with bank’s seal. Internet trading started in India on 1st April 2000 with 79 members seeking permission for online trading. manager registration code on photograph. Permission from stock exchange for net trading 2. 50 lac 3. Orders are communicated to the stock exchange through website. Communication of order (trade confirmation to investor by e-mail) 7.• • • • • •
Voter ID card Driving license PAN card( in case of to trade more than 50000) Ration card Bank pass book Telephone bill
For stock brokers: 1. Issue of contract notes within 24 hours of the trade execution 9. Adequate. Adequate back-up system 4. Net worth of Rs. Setting up a website. The net is used as a medium of trading in internet trading. The SEBI committees on internet based securities trading services has allowed the net to be used as an 48
. experienced and trained staff 6. which are necessary
First page of the bank pass book and last 6 months statement. Use of authentication technologies 8.
Step 2: After registration. the broker will provide to them a Login name.
. Under the Order Routing System the client enters his requirements (security. An order can then be placed by using the place order window as under: (a) First by entering the symbol and series of stock and other parameters like quantity and price of the scrip on the place order window. Step 5: After the review has been satisfactory. the order has to be sent by clicking on the send option. NEAT-IXS. Password and personal identification number (PIN).Order Routing System (ORS) through registered stock brokers on behalf of their clients for execution of transaction. (b) Second. Step 4: It is the process of review. who are interested in doing the trading over internet system i. They are checked electronically against the clients account and routed electronically to the appropriate exchange for execution by the broker. Step 6: The investor will receive an "Order Confirmation" message along with the order number and the value of the order. The client receives a confirmation on execution of the order. price. quantity. fill in the symbol. the investor has to review the order placed by clicking the review option. Thus. series and the default quantity. The customer's portfolio and ledger accounts get updated to reflect the transaction. The system permits only a registered client to log in using user id and password. The user should have the user id and password to enter into the electronic ring. Procedure for net trading Step 1: Those investors. Order can be placed using place order window of the website. He may also re-set to clear the values.e. Step 3: Actual placement of an order. and buy/sell) in broker's site. He should also have demat account and bank account. should approach the brokers and get them self registered with the Stock Broker.
Confirmation and execution of trade reaches the investor within the least possible time. only the broker knew the actually transacted price. the broker will ask the investor for transfer of funds to his account. Some of the websites also offer. Internet trading provides total transparency between a broker and an investor in the secondary market. for which there are different mode. At present. In the open outcry system. When the trade is executed. Some brokers will take some advance payment from the investor and will fix their trading limits. Screen based trading provides more transparency.Step 7: In case the order is rejected by the Broker or the Stock Exchange for certain reasons such as invalid price limit. Instant feedback is available about the execution. Step 8: It is regarding charging payment. The time gap has narrowed in every stage of operation. a time lag of about 10 seconds is there in executing the trade. an appropriate message will appear at the bottom of the screen. With online trading investors can see themselves the price at which the deal takes place. • • • • News and research report BSE and NSE movements Stock analysis IPO and mutual fund centers
. mostly within 30 seconds.
to increase Purchasing power. but this type is much more risky.
. Confirmation is e-mailed to investor by broker Contract note is printed and mailed in 24 hours Settlement will take place automatically on the settlement day Demat account and the bank account will get debited and credited by electronic means. since you have to buy stock at the given price. Market orders: orders can be filled at unexpected prices.Step by step procedure in online trading: Following steps explain the step by step approach to on-line trading:
• • •
Log on to the stock broker's website Register as client/investor Fill the application form and client broker agreement form on the requisite value stamp paper Obtain user ID and pass word Log on to the broker's site using secure user ID and password Market watch page will show real time on-line market data Trade shares directly by entering the symbol or number of the security Brokers server will check your limit in the on-line account and demat account for the number of shares and execute the trade Order is executed instantly (10-30 seconds) and confirmation can be obtained. Cash account: where funds have to be available prior to placing the order. Margin account: where orders can be placed against stocks. but there is an extra Charge for this leeway facility since one need to hold a price.
• • • • •
• • • • •
ONLINE TRADING HAS LED TO ADDITIONAL FEATURES SUCH AS:
Limit / stop orders: orders that can be go unfilled.
ADVANTAGES OF ONLINE TRADING:
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.
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.
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.
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.
Individuals’ benefit by saving comparatively a lot more when trading online as the cost per trade is less. 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.
INVESTORS REASONS TO TRADE ONLINE:
They have control over their accounts, can make their own decisions and don’t have to give reasons for their actions. They are independent. They have a reason to participate in the market and learn about it. It is interesting, cheap, easy, fast, and convenient. A lot of information is online so they can keep up-to-date with what is happening in the trading world. It will give investors a greater choice and better realization. The immediate impact will be competition and benefits will accrue to the investors. It will lead to brokerage commissions going down and brokers striving to increase business afloat. Investors will now go to place, which have better trading conditions and also members to offer them better facilities. They have access to numerous tools to invest, and can create their own portfolio.
• • •
HERE ARE THE POSSIBLE DISADVANTAGES:
When network crashes, there will be problems and delays due to a large influx of rapid online trading criteria.
Individuals are restricted to first-hand financial guidance. This simply means that the individual is himself / herself alone to. A tax (sales tax and value added tax) evaluation becomes an issue, especially when you are trading internationally. One has no idea with whom he is dealing with on the other end. According to a study conducted by Mary Rowland, careful investor: is online trading bad for your portfolio, the more one trades the less returns one gets, meaning that an addicted trader gets, carried away online and begins to trade for too much which causes losses for him / her.
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.
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.
TRADING AND SETTLEMENT AT INDIA BULLS: The NSE first introduced online trading in India. The Online trading system imparted a greater level of transparency and investors preferred exchanges that offered Online trading because of the following factors:
The ease of operation from the view of the both members and the investors. Increase in the confidence of the investors because of higher level of transparency. Facilities better monitoring of the market by the exchange. The best price achieved in buying and selling.
All these resulted in ever-increasing volumes on the exchanges offering the online trading.
TRADING PROCEDURE AT INDIA BULLS STOCK BROCKING India bulls 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).
India bulls 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 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.
BROKER WORK STATION: At the broker workstation the BBO’s. the day‘s opening price. top scrip by the volume/value. if it is a buy order the system tries to find a sell order. previous day’s closing price. to 3:30 P. Each trade involves two brokers and respective traders
. highest and lowest prices. as the BBO for each scrip. company report etc. Trader-wise.M. which fits the requirement of the buy order. Brokers are also provided with information relating to the companies in the matter of Book closure. resolutions in board meeting. on all 5 days of the trading period. market summary etc. with the appropriate error message. SEBI has stipulated that all the stock exchanges in India must have same trading period. The order will then be taken up for matching. Other information will be available on query from the BWS. Dividend declarations. the last traded price. after validation if it finds any invalid reason the order is return back to the BWS.M. Monday to Friday is the trading period in all the stock exchanges. ORDERS: Orders can be done one at a time or in a batch mode. information about liquidated companies. The submitted order will be accepted at the CTS. These include top gainers /losers of the day. If Accepted at the CTS it will be added to the local pending order book. scrip wise net position. when such match is found a trade gets executed. client wise net position. the weighted average price and total trade value will be available continuously.TRADING SESSION Trading timings are from 9:55 A.
Next day he has to place a new order. the order is cancelled on the last day of settlement period. This order is not carried forward to the next settlement period. order gets cancelled automatically and new quotation has to be placed the next day. For example if a member wants to purchase 1000 shares of satyam info @ 400 each through Good for Day order. For an order if the member selects the deal as good for the day. At the BWS the trade is added to the local trade book. Both these traders are informed of the trade being executed at their respective BWS.
. If a “best bid” founds match with “best order” then the transaction gets executed. Orders sent by the brokers are two types:
Good for the day (GFD) Good till cancellation(GTC)
Good for the day: This is also called as “market order”.who sent the order. If the correct match is not found. If no match is found. the order is executed. If the match is not found then after trade time the order gets cancelled that day. Good till cancellation: This order is forwarded to the last trading day of that settlement period. the order is treated as market order. This is also called as carry forward order like GFD. If the order finds match with in the trading settlement period. broker has to select the option of GTC for the order.
Buyers will take the delivery of shares through the depository participants like INDIA BULLS and others. Spot settlement: under this method.For example. Settlement can be done in the following way. It bears a stamp of the selling broker.basis i. The transferor (or the seller) duly signed transfer deed. the securities will go for auction. In case on non-delivery. SETTLEMENT OF TRANSACTIONS: Clearing of transaction in the form of shares and cash is called settlement. If the match is not found on that day it will be forwarded to the next day until trading settlement period day. if Monday is trading day then Wednesday is the paying day .
. the delivery of securities and payment for them are affected on the day of the contract itself. The buyer then fills up the certificates fills up the particulars in the transfer deed. Rolling settlement: Under this rolling settlement the trading is on “T+2”. the settlement is made by means of delivering the share certificates along with the transfer deeds.e. Finally. 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.
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. Pay-in: The member who is in paying position shall pay for value of shares with in the trading settlement period (T+2). good and bad deliveries pertaining to the settlement will be settled by the settlement committee of the exchange. non-payments.
. 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.
The given flow chart clearly explains the process of online trading:
T h e
t r a n s c
w i l l c
a t i o S n e l l
h e T
t r a n s c
a t i o
s y s t e m l i m i t s
h e s y s t e m w i l l c dk p b au cy ci n o g u n t q u a
r d e
p t e
e j e c t e d m u n i c
o r d e r s o w r do a t e d a l o n g
ue l r d s b w i t h
t r a n
i t t e d
e n d i n g b u y o rn d ee xr s e c u t i o p n e n d i n g s e l l o u l d b e d i s op fl a yy oe du r o r d w e r o s u l d b e d i s o n y o u r s c r e e n o n y o u r s c r
u e n
m a y y e d i n g y oo
o d u i t m y a o y u dr e l e ur d r e p r e n d i n g
t e y o u o r d p e er n
a y i n g
i t y o r d e r
y r o u m a y p e n d i n g
f l a s h e d o n s c r e e n i m m o n e x e c u t i
cy ed oe
oo nu fr d bi a e t -n m a
o r m a t i o c no c n o t s l ey n d t o b ey o s e i l a n d m o or b h
rua lc t n o t e ue nr t t o b y i al e n d d e l i v
HDFC and Chase Capital Partners and their associates. Pricing of HDFC Account 62 Plain Vanilla Account with focus on 3 in 1
.COM ICICIDIRECT.THE MAJOR PLAYERS IN ONLINE TRADING
• • • • •
SHAREKHAN.COM HDFCSEC.COM 5PAISA.COM
HDFC Securities Ltd is promoted by the HDFC Bank.COM KOTAKSTREET. Pioneers in setting up Dial-a-share service with the largest team of Tele-brokers.
Online Account Type: • HDFC Online Trading A/c: advantage.
1st year charges included in Account Opening Initial Margin : Rs 5000/.• • • •
Account Opening: Rs 750 Demat: NIL.for non HDFC Bank Customers (AQB) 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
75% 0.45% 0.010% for delivery while service tax (10.002%) for trading and 0. Only Rs 100 as linking charges per DP
Initial Margin : Nil
Brokerage: ICICI’s brokerage rates are inclusive of Stamp duty (0.1 Cr 1 Cr – 2 Cr 2 Cr – 5 Cr > 5 Cr
Brokerage 0.35% 0.035% Both Sides . 1st year charges included in Account Opening Plus a facility to open additional 4 DP’s without 1st yr AMC.ICICI Direct:
Account Opening: Rs 750 Schemes: For short periods Rs 750 is refundable against brokerage generated in a qtr.2%) on BROKERAGE land turnover tax is EXTRA.25%
Square Vol P.
Demat: NIL.08% Both Sides .M.70% 0. These schemes are introduced 3-4 times a year. < 50 lakhs 50 lakhs – 2 Cr 2Cr-5Cr 5Cr.05% Both Sides .55% 0.03% Both Sides --------
Delivery Vol per QTR < 10 lakhs 10 – 25 lakhs 25 – 50 lakhs 50 lakhs .10 Cr 10Cr -20 Cr > 20 Cr ----
Brokerage .30% 0.10% Both Sides .04% Both Sides .
Even older customers (on 0.Kotakstreet: Company Background: Kotakstreet is the retail arm of Kotak Securities. Keat Desktop with advanced tools comes at a charge of Rs 500 p. Non refundable.40%) have been moved to the slab wise structure w. Limit against shares Free Way: Flat Rs 999 Cover Charge p.e.5% charges
For Kotak FastLane / Keat Lite / Keat Desktop are trading interfaces.25% & 0.m. lower the brokerage. additional 0. Kotak Securities limited is a joint venture between Kotak Mahindra Bank and Goldman Sachs.03% per transaction High Trader : 6 Times Exposure Cash & Derivatives.m. 0. Auto sq off 2:55 Cash Expressway : Spot payment.m Initial Margin : Rs 5000(Compulsory) Min Margin Retainable : Rs 1000 Brokerage Slab wise: Higher the volume. Online Account Type • • • • Twin Advantage / Green Channel : 2 DP’s.5 p.f 1/4/2004
. PRICING OF KOTAK • • • • • Account Opening : Rs 500 Demat: Rs 22.
03% Both Sides --------
> 5 Cr ---do------
* Brokerage is inclusive of All Taxes * DP Charges Extra * Min Brokerage of Rs 0.30% 0.65% 0.5 Cr – 10 Cr > 10 Cr
* Brokerage is inclusive of All Taxes
* Min Brokerage of Rs 0.20 lakhs 20 lakhs – 60 lakhs 60 lakhs .04% Both Sides 0.035% Both Sides 0.05% Both Sides 0.20% < 10 lakhs 10 lakhs – 25 lakhs Brokerage ** 0.2 Cr0.04% Both Sides 0.
.01 per share Brokerage 0.50% 0.10% Both Sides 0.Slab structure of Kotak Delivery Vol p m < 1 lakhs 1 lakhs – 5 lakhs 5 lakhs – 10 lakhs 10 lakhs .25% 0.5 Cr 5.2 Cr >2 Brokerage * Square Vol P.05 per share Derivatives Vol off p m < 2 Cr 2 Cr .60% 0. 0.05% Both Sides 2 Cr 5 Cr 0.08% Both Sides
25 lakhs .40% 0.03% Both Sides
* Brokerage is inclusive of All Taxes.5.07% Both Sides 0.M.
GOI securities. Limited ground network. Apart from offering online trading in stock market the company offers mutual funds online.com. Company Fixed Deposits. present in 20 cities Online Account Types • • Investor Terminal : Investors / Students Trader Terminal : Day Traders / HNI’s
PRICING FOR RETAIL CLIENTS Investor Terminal • • • • Account Opening : Rs 500 Demat 1st Yr : Rs 250 Initial Margin : Rs 2500 (Compulsory) Min Margin Retainable : Rs 1000
. It also acts as a distributor of various financial services i. Insurance.e.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.
Brokerage : Trading 0.50% each side + ST (Negotiable to 0. SSKI owns 56% in Sharekhan. adjustable against brokerage Sharekhan Company Background
Sharekhan is the retail broking arm of SSKI Securities Pvt Ltd.10% each side + ST Delivery 0. First Caryle.50% each side + ST
PRICING FOR HNI CLIENTS Trader Terminal • • • • • Account Opening : Rs 500 Demat 1st Yr : Rs 250 Initial Margin : Rs 5000(Compulsory) Min Margin Retainable : Rs 1000 Brokerage : Trading 0.10% each side + ST Delivery 0. and Intel Pacific Into broking since 80 years Focused on providing equity solutions to every segment Largest ground network of 210 Branded Share shops in 90 cities
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Online Account Types • Classis Account / Applet : Investor in equities
. balance ownership is HSBC.05% each side & 0.25%) • Account Access Charges Monthly Rs 800. adjustable against Brokerage Yearly Rs 8000.
No access charges for gold customers (Above 1 lac brokerage p. adjustable qtrly against brokerage of Rs 9000/.50% each side + All Taxes (Negotiable based on volume) • Account Access Charges Monthly Rs 500.for qtr.10% each side + All Taxes Delivery 0.a)
Pricing for Retail Customers Classic / Applet • • • • • Account Opening : Rs 750 Demat 1st Yr : NIL Initial Margin : NIL Min Margin Retainable : NIL Brokerage:
Speed Trade : Trader in equities & derivatives
PRICING FOR HNI CLIENTS Speed Trade • • • • • Account Opening : Rs 1000 ( Refundable against brokerage in Month + 1) Demat 1st Yr : Incl in Account Opening Initial Margin : Nil Min Margin Retainable : NIL Brokerage : Trading 0.
professional advice of Tel-brokers who offer undiluted Sharekhan Research Inputs After-hours order placement facility ** Transfer of money using phone banking is available with Citibank only
.50% each side + All Taxes
Sharekhan online Trading Interfaces The customer can choose the online trading interface that meets his requirement based on his trading habits and preferences CLASSIC / APPLET The website is meant for customers who Invests in Equities 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. on entry of Phone Id & TPIN. the call is transferred Trusted. DNT – TOLL FREE FERTURES
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Dedicated Toll – Free number for Order placements Automatic fund transfer with phone banking* Simple and secure IVR based system for authentication No wait time.10% each side + All Taxes Delivery 0.Trading 0.
shortly Free calls for order placement on Toll-Free Trusted.55 am and 3.30p.** Between 9 a.m CLASSIC/WEBSITE FEATURES
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Facility to integrate choice of 4 Banks/DP/Trading Account Instant credit for shares sold from DP Automatic pick-up of shares from linked DP for pay – in Automatic deposit of shares into linked DP after pay-out 4 Times leverage on Margin Trades Margin Trading available for entire marker session Slab wise brokerage structure for delivery and margin trades.m to 9.m to 6 p. Professional advice of Tele-brokers Facility to enter After Market Orders online & via Phone
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Daily Research newsletter (Investor Eye) Via e-mail Access to new IPO without any paperwork Advanced portfolio monitoring Tools Integrated DP account with trading account Option of linking additional 4 DP accounts to trading account Choice of linking 4 banks to trading a/c for online payments Cash and Derivatives trading in a single account
and Most Active updated Live
. Top Losers.• •
E-mail confirmations for all transactions Choice of electronic/Physical contracts
SPEEDTRADE EXE FEATURES ALL THE FEATURES OF CLASSIC *Real – time streaming quotes using 2 Marker Watches *Trade Execution in 2-3 seconds * Instant Order/trade confirmations in the same window *Hot keys similar to a Broker’s Terminal *MULTIPLE Tic-by-Tic Intra-day charts with multiple indicators * Availability of 2 ISP & 6 Servers ensuring maximum uptime * Customized alerts based on multiple parameters * Cancel All/Square Off All Facility * Window for Top Gainers.
Easier access to the customer due to largest ground network of 280 branded share shops in 120 cities.SWOT ANALYSIS Strengths
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Strong credibility among investors because of its heritage. Excellent reputation among the business society. Efficient research and analysis team.
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. Ability to attract and retain superior and quality personnel. Highly sophisticated infrastructure. Quality research team. Capability of providing superior customer service. Abundant information about economy and companies. which by interpreting the economy and company’s performance accurately is enhancing the profitability of the clientele.
Promotional activities conducted by the company are not at par with the other firms.Weaknesses
Limited customer appeal as the company product line does not include mutual funds which is increasingly becoming a preferred customer investment option. Brand awareness is low in the financial market. Inadequate product awareness among the retail investors. Limited customer appeal as the company does not have access to the BSE online space.
Hyderabad covers only 2% of investors which gives huge potential for the market penetration. Awareness campaigns about online trading creates new market. Access to the BSE online space for the retail investors creates opportunity to increase clientele base. Bullish phase of the market attracts investing public.
Threat of entry is high in this industry as the manpower required is less and capital requirement is medium. There are more speculators than investors. Information plays a vital role in the secondary market.
Fluctuations are more in secondary market than any other market.Threats
Availability of Unit Linked Insurance Policies (ULIP’s) and mutual funds in the market.
New and advanced technologies have breached geographical and cultural barriers. and have brought the countrywide market to doorstep.
. things have changed dramatically over the last 3 to 4 years.
Things have changed for the better with the SHAREKHAN going on-line coupled with endeavor to stream line the whole trading system. kotakstreet.•
Previously rolling settlement is T+5 days.
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.
In the present scenario to compete with the Broker’s would require sound infrastructure and trading as per international standards. now it changed to T+2 days and further it will be changing to T+1 day. India bulls.
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.
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. ICICI direct and geojit.
I recommend the exchange authorities to be vigilant to curb wide fluctuations of prices. this is a service oriented industry hence the survival would require them to provide the best possible service to the clients. The trading of SHAREKHAN of the first day was Rs. not attracting the genuine investors to the greater extent towards the market.
The broker’s has a greater scope than compared to the earlier times because of invention of online trading. settlement system with adequate protection to investors. It has helped the brokers handling a vast amount of transactions and this can be an efficient trading.
Due to invention of online trading there has been greater benefit to the investors as they could sell / buy shares as and when required and that to with online trading. The concept of business has changed today.
I recommend the exchange authorities to take steps to educate Investors about their rights and duties. 1.•
The introduction of on-line trading would influence the investors resulting in an increase in the business of the exchange. The speculative pressures are responsible for the wide changes in the price. 78
.8 crores. I suggest to the exchange authorities to increase the investors’ confidences. delivering.
A. therefore the authorities of the exchange should be more vigilant to curb the speculation.K.Avadhani 79
Genuine investors are not at all interested in the speculative gain as their investment is based on the future profits.A.Bhalla Investment management -Preethi Singh Security Analysis And Portfolio Management -V.
Necessary steps should be taken by the exchange to deal with the situations arising due to break down in online trading.
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Investment management -V.Avadhani Marketing of Financial Services -V.
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www.com www.Share Khan.sebi.com www.bseindia.Y.•
Indian Financial System -M.com www.economictimes.nseindia.moneycontrol.com www.com