A Project Report

On

“A Study of Online Trading”

Submitted To,

Savitribai Phule Pune University

In Partial Fulfillment of Requirement For The Award Of Degree Of,

Master of Business Administrative (MBA)

By

Chaitanya Mukunda Satao

Seat No. 32489

Under The Guidance Of,

Prof. Dr. Vikas Barbate

ASM Institute of Professional Studies

(2021-2023)

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 Declaration

I, the undersigned solemnly declare that the project report,

―A Study of Online Trading‖ is based on my own work carried out during the course of
our study under the supervision of ―Prof. Dr. Vikas Barbate ‖. The work contained in the
report is original and has been done by me. I have followed the guidelines provided by the
university in writing the report. Whenever I have used materials (data, theoretical analysis, and
text) from other sources, I have given due credit to them in the text of the report and giving their
details in the references.

Place:

Date : Chaitanya Mukunda Satao (Seat No.32489)

:Signature of the student

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 Acknowledgement

It is not possible to prepare a project report without the assistance and encouragement
of other people.

On the very outset of this report, I would like to extend my sincere and heartfelt
obligation towards all the personages who have helped me in this endeavor. Without their active
guidance, help, cooperation and encouragement, I would not have made this project report
possible.

I would like to express my special thanks of gratitude to my mentor Prof. Dr. Vikas
Barbate Sir, who helped me and guided me throughout the project. Also I‘m thankful to our .
Head of Department Dr. Lalit Kanore gave us the opportunity to do this wonderful project that
also helped me in doing lot of research which will be beneficial for me further.

I would also like to thank Prof.Vikas Barbate for always being there to help me in
making this project report. And a last but not least gratitude goes to all my classmates who
helped me to complete this project.

Thanking you,

Chaitanya Satao.

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 LIST OF ABBREVIATION

B – Buy

B-D – Broker Dealer

SEBI –Security Exchange Board Of India

BSE- Bombay Stock Exchange

NSE- National Stock Exchange

ETF- Exchange Traded Fund

PIN- Personal Identification Number

DEMAT- Dematerialization

DP – Depository Participants

NSDL- National Securities Depository Ltd.

CDSL- Central Depository Services Ltd

MKT- Market Orders

LMT - Limit Orders

RRF - Remat Request Form

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 CONTENT PAGE

Sr. Index Page No.

No.
1. Executive Summary 6

2. Industry Profile 7-14

3. Objective of The Study 15

4. Introduction 16-18

5. Study of Online Trading 19-28

6. Research and Methodology 29-34

7. Conceptual Background 35-51

8. Conclusion 52-54

9. Learning 55-56

10. Bibiliography 57-58

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 Executive Summary

The main objectives at the time of starting the project were to study the processes of
Online trading, strategies use investors for investment knowledge in the field of the capital
market and find out the major factors responsible for each of the activities and also ascertain
areas of improvement. The other objectives are to study and understand the process of online
trading Demat account opening procedure, which they follow as well as the corresponding flow
of various documents which are involved in it.

How to brought clients to for equity investment and for Mutual Fund investment. The
whole concept of capital market, its classification, stocks, the detail study of online trading, the
actual procedure involve in it. Things like the benefits of the online trading, its limitations and
relationship between the client and broker is to be cover in this report. Project shows the internal
workings of the online trading how firms relate to it how do the operate their client, etc.

This project helps in to understand the financial securities and how online trading
done. This project gives information about process to analyze the strategies used by traders by
studying case .

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INDUSTRY PROFILE

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1. Capital market:

1.1 Introduction to the capital market

The capital market is the market for securities, where companies and the government
can raise long term funds. The capital market includes the stock market and the bond market.
Financial regulators ensure that investors are protected against fraud. The capital markets consist
of the primary market, where new issues are distributed to investors, and the secondary market,
where existing securities are traded.

Capital market thus plays a vital role in channelizing the savings of individuals for
Investment in the economic development of the country. As a result the investors are not
constrained by their individual abilities, but by the abilities of the companies, which in turn
enhance the savings and investments in the country, liquidity of capital market is an important
factor affecting growth. Since projects require long term finance, but on the other hand, the
investor may not like to relinquish control over their savings for a long time. A liquid stock
market ensures a quick exit without incurring heavy losses or costs.

1.2 Capital market Segment – Primary And Secondary

Broadly , the comprises of two segments – the new issue market which is
commonly known as primary market and the stock market which is known as secondary
market.

a) Primary

A primary offering, such as with a corporate bond, means you are buying it
directly from the issuer, at par value, usually. A secondary market is where you sell or
buy existing issues. i.e. if you bought a bond last year, now need to get your principal,

8
you can sell it in the secondary market. You may not get par value. If rates are up since
you bought the bond, then you will likely have to sell it at a discount to be able to get rid
of it. If rates have fallen since you bought it, you could get a premium for it.

b) Secondary

The market where securities are traded after they are initially offered in the primary
market. Most trading is done in the secondary market. To explain further, it is trading in
previously issued financial instruments. An organized market for used securities. Bombay Stock
Exchange (BSE), National Stock Exchange NSE, bond markets, over-the-counter markets,
residential mortgage loans, governmental guaranteed loans etc

Secondary Market refers to a market where securities are traded after being initially
offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the
trading is done in the secondary market. Secondary market comprises of equity markets and the
debt markets. For the general investor, the secondary market provides an efficient platform for
trading of his securities. For the management of the company, Secondary equity markets serve as
a monitoring and control conduit—by facilitating value-enhancing control

activities, enabling implementation of incentive-based management contracts, and aggregating

information (via price discovery) that guides management decisions.

1.3 Stock Exchange :

Brief About The Stock Exchange

Stock Exchange is a market like any other centralized market where both buyers and
sellers come and conduct their business of purchase and sale of shares & securities. In
other words, it is a market place for shares environment

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a) Meaning of Stock Exchange

A stock exchange, share market or bourse is a corporation or mutual organization

which provides "trading" facilities for stock brokers and traders, to trade stocks and other
securities. Stock exchanges also provide facilities for the issue and redemption of securities as
well as other financial instruments and capital events including the payment of income and
dividends. The securities traded on a stock exchange include: shares issued by companies, unit
trusts and other pooled investment products and bonds. To be able to trade a security on a certain
stock exchange, it has to be listed there.

Usually there is a central location at least for recordkeeping, but trade is less and less
linked to such a physical place, as modern markets are electronic networks, which gives them
advantages of speed and cost of transactions. Trade on an exchange is by members only. The
initial offering of stocks and bonds to investors is by definition done in the primary market and
subsequent trading is done in the secondary market. A stock exchange is often the most
important component of a stock market. Supply and demand in stock markets is driven by
various factors which, as in all free markets, affect the price of stocks (see stock valuation).There
is usually no compulsion to issue stock via the stock exchange itself, nor must stock be
subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter.
This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global
market for securities.

b) Functions of Stock Exchange:

Stock exchange is established into the main purpose of providing a market

place for the members to deal in securities under well laid down regulations and to
protect the interest of the investors. The main functions of stock exchange are;

1. It brings the companies and investors together so that the investors can put risk capital
into companies and thus, companies can use the capital.
2. It provides an orderly regulated market for securities.
3. It provides continuous, ready and open market for selling and buying securities.

10
 4. It promotes savings and investment in the economy by attracting funds from the
investors.
5. It facilitates take over by means of acquiring majority of shares traded on the stock
market.
6. It acts as a clearing house of business information.

7. It motivates the managers of well reputed companies, to retain their shares in ‗A‘ group,
to improve performance.
8. It induces the managers to improve performance for converting non-specified shares into
specified shares in the exchange.
9. It enables the investors to evaluate the net worth of their holdings.
10. It also allows the companies to float their shares in the market.

1.4 Brokering Firm

A brokerage firm acts as the legal mediator between a buyer and a seller of financial
products. Brokerage firms are usually associated with finance houses, although the terminology
has been borrowed by the real estate and insurance industries as well. All investment trades must
be made through a brokerage firm because individuals cannot interact directly with the stock
exchange.
There are two main types of brokerage firms, traditional brokerage and discount
brokerage. Traditional brokerage firms offer a hands-on approach to investment advice guiding
clients with expert and in-depth knowledge on the products available. Their agreements often act
as a legal power of attorney to conduct trades on behalf of clients as long as they are in-keeping
with a previously determined strategy. The associated fees are notoriously high, but
proportionate to the extensive services provided.
A traditional brokerage firm usually undertakes more than simply carrying out a stock
or bond trade. The staff of a this type of brokerage firm is entrusted with the responsibility of
researching the markets to provide appropriate recommendations and in so doing they direct the
actions of pension fund managers and portfolio managers alike. These firms also offer margin
loans for certain approved clients to purchase investments on credit, subject to agreed terms and

11
conditions. Traditional brokerage firms have also become a source of up-to-date stock prices and
quotes.

Brokerage firms are the business entities that deal with stock trading. India, with an
increasing capital market and a growing number of investors, has a number of brokerage firms.
In Indian retail brokerage industry, the brokerage firms primarily work as agents for buying and
selling of securities like shares, stocks and other financial instruments and earn commission for
each of the
transactions. Brokerage firms, also known as brokerdealers, are licensed by the Securities and
exchange commission(SEC) to buy and sell securities for clients and for their accounts. Firms
frequently maintain research departments for their own and clients benefits. They may also
provide a range of financial products and services, including financial planning, asset
management and educational programmes.

Brokerage firms come in all sizes, from one two person offices to huge firms with
offices around the world. They are sometimes differentiated as full services or discount firms,
based on pricing structure and client relationships.
Some brokerage firms exits entirely online, and nearly all firms offer you the option of
placing orders electronically rather than over the telephone. In most cases, trading electronically
is substantially less expensive than giving buy and sell orders by phone.

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Top Brokerage Firms in India:

 The following are the tabular representation of the top three brokerage firms in
India:

Motilal Angel Kotak

Oswal Broking Securities
Name Securities Limited Limited
Terminals 7923 5715 4320
Sub Brokers 890 NA 910
No. of
Employees 2193 284 4008
No. of
Branches 63 NA 350

Objectives Of Study

1. To study the online trading and its process.

2. To study the strategies used by investors during online trading.
3. To analyze the strategies used by traders by studying case.

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Introduction

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1.1 Meaning of Online Trading

“Change is the law of nature”. There were times when man was a wanderer or a
normal. He himself had to go place to place in search of food, water and now everything is
available at your doorstep just at the click of the mouse. The growth of information technology
has affected almost all sectors of life. Internet has enabled us to get every information at our
doorstep. When Internet has affected all sectors he could ―stock markets‖ the most
important player of the economy, has remained far behind? Like all other sectors Internet has set
its feet in the stock markets also.

Internet trading commissions are clearly posted on the websites of the various services,
and are typically a fixed rate charge, depending upon the type of security being traded and the
size of trade. In theory, therefore, an Interest investor always knows what commission he is
being charged on each trade. Internet investors can take as much time as they would like to take
prior to placing a trade order. Similarly the online investor likely does not have to worry that his
broker is making unauthorized trades. Since there is no individual broker making a commission,
the only person who is authorized to trace in the account is the actual investor. Furthermore, the
internet investor can never become a victim of excessive trading (where for the broker) since the
investor maintains total control over the number of transactions which take place in the account.

All of these positive features of internet trading may lead the unwary investor to
believe that Internet trading is a way to take control of their finances and save more money in
the process. Unfortunately, this is not always the case.

The advantages of Internet stock trading have also its weaknesses and these weaknesses present
significant drawbacks for the average investor.

First and foremost, the average investor is not an expert in the financial markets.
There is a danger for allowing the autonomy of online trading to hull you into the belief that you
are an expert investor. An online investor sitting at home at a personal computer also foregoes
proper investment advice and financial planning, perhaps among the most valuable services
provided by traditional brokers.

15
 There are, of course, additional risks relative to performing transactions over the
Internet especially on a shared computer. Those people whom investors have provided their
account number and password can freely trade that account while the investor will have little, if
any, resource against the brokerage firm for the breach of security.

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 Study of Online Trading

When was online trading introduced in India ?

Online trading started in India in February 2000 when a couple of brokers started
offering an online trading platform for their customers.

Market Timings

Trading on the derivatives segment takes place on all days of the week (except
Saturdays and Sundays and holidays declared by the Exchange in advance). The market timings
of the derivatives segment are:

Normal Market / Exercise Market Open time : 09:55 hours

Normal market close : 15:30 hours
Set up cut of time for Position limit/Collateral value : till 15:30 hrs
Trade modification end time / Exercise Market : 16:15 hours

1.2 Strategies used by investors during online trading

 Trading strategies vary from investor to investor. A majority of traders who invest
in the stock market, regardless of whether they do it for a living or for pleasure,
have their own stock trading strategies that help them decide what stocks would
be best to buy and when. Some traders plan out their own strategies while others
learn them from brokers or friends who also invest in the stock market. In many
cases, once people discover stock trading strategies that work, they stick with
them for constant success.

 For individuals who want to learn the best stock trading strategies, there are
several ways to educate themselves. A good number of local universities offer
courses and training on the most tried and true stock trading strategies. While
these courses can prove to be extremely beneficial for novice traders, individuals

17
 who have been dealing with stock for a while may not find these courses all that
beneficial.

 There are generally several different course levels, corresponding with experience
so individuals should pick the one that is most suited to their experience level.

 The Internet is also a great stock trading strategy resource. Several traders freely
share their tried and true stock trading strategies on a variety of websites, and
individuals can actually learn a lot. For small fees, individuals may able to
download e-books and other informational packages to learn in more detail about
stock trading strategies.

 Growth investing is a stock trading strategy used by investors who source stocks
which have potential for growth in the future. This can be achieved by looking at
the current earnings rate and assessing whether it is likely to continue in
comparison with other industries within the sector.

 Value investing strategy is one in which investors assess the present value of the
company based on all the financial statistics such as price

to earnings ratio, debt to equity ratio and other such factors. Income investing is a
type of strategy in which investors search for blue chips, which have a large
number of assets behind them and the company, has been providing a high
dividend yield. There are many stock trading strategies and some investors use a
combination of the above because they have found that to be successful.

 Online updates at SMS alerts are a very systematic and convenient way of
gathering information. Since the Internet is accessible worldwide, individuals and
brokers on vacation or work can easily avail of all the information, by clicking on
the relevant site. Companies also send regular e-mails to brokers, banks, business
organizations and investors to keep them updated with the latest information on
different stock investments.

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  The Internet enables customers to personalize their stock information. They are
advised on the apt time to invest, the real estate market, stock exchange and the
properties available. A major advantage of the Internet is that the information, as
well as personal details of the customers, is well guarded. The introduction of
computers and the Internet has made investment and financial advice more
accessible to the masses making stock investment a possibility for a larger number
of people.

1.3 Features of Online Trading

The Online Trading is having many features which make it most suitable for the
investors to go for. Some of these features are as follows:
a) Freedom of information

The Internet can provide a new sense of control over your financial future. The amount of
investment information available online is truly astounding. It's one of the best aspects of being a
wired investor. For the first time in history, any individual with an Internet connection can:

 Know the price of any stock at any time

 Review the price history of any stock in chart format
 Follow market events in-depth
 Receive a wealth of free commentary and analysis about stock markets and
the global economy
 Conduct extensive financial research on any company

b) Control of your money

One of the great appeals of using an online trading account is the fact that the account
belongs to you, and is under your direct control. When you want to buy or sell stock, you no

19
longer need to call your broker on the phone; hope that he is in the office to place your order;
possibly argue with the broker about the order; and hope that the transaction is executed
instantly.

c) Access to the market

At the most basic level, an online trading account gives you more agility in buying and
selling stocks. This is through sophisticated information streams, dedicated trading platforms and
sophisticated tools for accessing the markets.

d) Ensure the best price for investor

Every broker house aims at providing the investor with the best price available. Also
due to the high level of transparency with regard to display of information relating to the specific
stocks and company profiles, you will be able to get the best quote for your orders.

e) Offer greater transparency

Online trading offers you greater transparency by providing you with an audit trail.
This involves a complete integrated electronic chain starting from order placement, to clearing
and settlement and finally ending with a credit into your depository account. All these stages are
subject to inspection, thus bringing in transparency into the system.

f) Enables hassle free trading

Online trading integrates your bank account, your trading account and your demat
accounts, which leads to easy and paperless trading for you.

g) Allow instant trade execution

You as an Investment online customer will be able to execute the entire trading
transaction, right from logging on to our site, to the execution and settlement of your bank
account, in a very short period of time.

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h) Provide a level playing field

Trading on the net, gives even the smallest retail investor access to information that
earlier was available only to the big traders. This provides a level playing field for all investors in
the securities market.

i) Reduces the settlement risk

This method of trading reduces the settlement risk for the investor, as in this case all
short sell orders are squared off at the specified cut-off time and not allowed to be carried
forward.

In the case of a demat account your demat account is checked by us before executing
your sell transaction. This reduces the settlement risk for the buyer, who is assured of the
delivery of the securities and for you as a seller of the securities.

j) Instant order trade confirmation

Every trade is confirmed immediately and you will receive an on-screen confirmation
following every trade with full details for your records. This avoids costly errors that would have
been discovered when it is too late.

k) Integrated accounts

Your Bank, Depository and online account are integrated for your convenience. Various
broking houses provide access to many of the popular banks.

1.4 Benefits of Online Trading

a) Less Costly:

The most significant advantage of the Online broking is the cost reduction in the
brokerage. Due to the power of the Internet one has the privilege of becoming the clients of
really large brokerages with the benefits of enjoying the low charges hithelio before enjoyed only
by the big players.

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 As the DP account has got linked to the trading account most players do not charge a
minimum transaction cost thus truly allowing one to buy a single share and achieve meaningful
rupee price averaging whatever be your buying power.

b) Peace of Mind:

One can never have complete peace of mind but online investing does away with the
hassles of filling up instruction slips, visits to the broker for handing over these slips and
consequent costs.

c) Keeping Records:

The site one trades on keeps a record of all transactions down to unexecuted orders and
cancelled orders thus keeping one abreast of all your transactions 24 hours a day. No paperwork
means more time at one‘s disposal for research and analysis.

d) Access to Information and investment Tools:

Most online investing sites have a wealth of information for their registered members.
This includes research reports, results, analysis and even gossip and the buzz in the market.

e) Unparalleled Liquidity:

The. bank account linked with the trading account invariably has an A TM free. Most
partner banks offer Internet banking as well. This results in one‘s money becoming available to
him whenever he like from his trading account. Conversely in case he spot an opportunity in the
market he can immediately allocate money from his savings account to his trading account and
make profits.

f) Unparalleled Safety:

Most sites are secure using 128-bit algorithms -highest available commercially
anywhere in the world. Moreover even if somebody broke in and tampered with one‘s account
the money from the stocks he sold or the stock bought from the money in his account is in his
account only.

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g) Reduces the settlement risk:

This method of trading reduces the settlement risk for the investor, as in this case no
Short sale is possible i.e. the seller will not be able to sell the securities unless he has their actual
possession. In the case of a demat account (required for an online transaction), when a seller
wants to sell the securities, his demat account is checked by the Depository Participant before
executing the sale transaction. This reduces the settlement risk for the buyer, who is assured of
the delivery of the securities.

h) Offers greater transparency:

Online trading gives greater transparency to the investors by providing them an audit
trail. This involves a complete integrated electronic chain starting from order placement, to
clearing and settlement and finally ending with a credit to the depository account of the investor.
All these stages are subject to inspection, thus bringing in transparency into the system.

i) Ease of trade:

It is the ease of doing the trade through net, with a click of mouse, one can buy or sell
any share that is dematerialized.

Other than the above-mentioned advantages, Internet trading provides some additional
advantages to the investors, brokers and also helps the nation to channelize the resources. Net
trading would increase competition in the market hence increase in the bargaining power of the
investors. The entire communication between the investor, broker and exchange would take
place within milliseconds.

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Research And Methodology

24
What is Research and Methodology?

Research methods are specific procedures for collecting and analyzing data. Developing
your research methods is an integral part of your research design. The description of the
methods used should include enough details so that the study can be replicated by other
Researchers, or at least repeated in a similar situation or framework.

Research Methodology refers the discussion regarding the specific methods chosen and
used in a research paper. This discussion also encompasses the theoretical concepts that further
provide information about the methods selection and application.

 The most basic methods for data collection

are: Primary data :

Primary data represent data originated for the specific purpose of the study, with its research
questions. The methods vary on how Authors and Researchers conduct an experiment, survey or
study, but, in general, it uses a particular scientific method.

Primary data collection could lead to Quantitative and Qualitative research.

 Quantitative research

or empirical-analytical research focuses on a certain research purpose, with its

complementary research questions and operational definitions of the variables to be
measured. This type of study uses deductive reasoning and established theories as a
foundation for the hypotheses that will be tested and explained.

 Qualitative research

or interpretative research focuses on analytically disclosing certain practices or behaviors,

and then showing how these behaviors or practices can be grouped or clustered to lead to
observable outcomes. This type of research is more subjective in nature, and requires
careful interpretation of the variables.

25
 Readers need to understand how the information was gathered or generated in a way
that is consistent with research practices in a field of study. For instance, if you are using a
multiple choice survey, the readers need to know which questionnaire items you have examined
in your primary quantitative research. Similarly, if your academic article involves secondary data
from FED or Eurostat it is important to mention the variables used in your study, their values,
and their time-frame.

For primary research, that involve surveys, experiments or observations, for a valuable academic
article, Authors should provide information about:

 Study participants or group participants,

 Inclusion or exclusion criteria

Secondary data :

Secondary data are data that have been previously collected or gathered for other
purposes than the aim of the academic article‘s study. This type of data is already available, in
different forms, from a variety of sources.

Secondary data collection could lead to Internal or External secondary data research.

 Internal secondary data research

– particularly related to a company or organization, internal sources (such as sales data,

financial data, operations-related data, etc.) can be easily attained and re-purposed to
explore research questions about different aspects.

 External secondary data research

– represents a study that uses existing data on a certain research subject from government
statistics, published market research reports from different organizations, international
agencies (such as IMF, World Bank, etc.), and so on.

26
 In this report data is collected on secondary research that is the research which is
based on data collected from previous researches.

Secondary researches is based on tried and tested data which is previously

analyzed and filtered. The secondary research is conducted as follows:

 To identify the topic of research

Before beginning of the report the topic for research needs to be decided. Then the
purpose and the attributes were listed.

 To identify research resources

Research done on information sources that provides relevant and accurate data which
will be applicable to the report.

 To collect existing data

After finding the research resources, any previous data was checked that is already
available and can be applicable to the report. For example; newspapers, libraries, etc

 To combine and compare

After collection of data, it needs to be combined and compare for checking the
duplications or inaccuracy. Then it needs to be assemble in usable format.

 To analyze data

Data needs to be analyzed after collection and also should be identified.

Advantages of Secondary Research

1. Most information is secondary research is readily available. There are many sources from
which relevant data can be collected and used, unlike primary research, where data needs to
collect from scratch.

27
2. This is a less expensive and less time-consuming process as data required is easily available
and doesn‘t cost much if extracted from authentic sources. A minimum expenditure is associated
to obtain data.

3. The data that is collected through secondary research, gives organizations or businesses an
idea about the effectiveness of primary research. Hence, organizations or businesses can form a
hypothesis and evaluate cost of conducting primary research.

4. Secondary research is quicker to conduct because of availability of data. Secondary research

can be completed within a few weeks depending on the objective of businesses or scale of data
needed.

Disadvantages of Secondary Research

1. Although data is readily available, credibility evaluation must be performed to understand the
authenticity of the information available.

2. Not all secondary data resources offer the latest reports and statistics. Even when the data is
accurate, it may not be updated enough to accommodate recent timelines.

3. Secondary research derives its conclusion from collective primary research data. The success
of your research will depend, to a greater extent, on the quality of research already conducted by
primary research.

28
Conceptual Background

29
How Online Trading is Done?

a) Process of Online Trading

An investor interesting in trading through Internet shall have to,

 Firstly, register himself with an Internet brokerage firm. Some formalities such as
filling the account opening form of the e-broker, copies of identity proof, copy of
residence proof are made to register himself with the e-trader.

 Secondly, the investor would be required to open a bank account with a scheduled
bank and sufficient balance should be kept in the account.

 Thirdly, he would be required to open account with a depository participant because

only dematerialized shares can be traded on Internet

The client places order via the net by logging on to his

The broker accepts and executes the order and

places it with the exchange

The exchange accepts the order after checking the

The broker makes the payment either directly via the

client bank account or pays through its own account
and recovers it later from the client.

The exchange receives money and completes the

The client is intimated about the settlement

either through the demat or via e-mail.
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So, generally following steps are followed while doing the trading through the Internet:

Step-1:

Those investors interested in doing the trading over Internet system, that is,NEAT - ISX (NSE),
should approach the brokers and register with the Stock Broker.

Step-2:

After registration, the broker will provide to them a login name, password and a personal
identification number (PIN).

Step-3:

Actual placement of an order, Using the place order window as under can then place an order:

(a) First by entering the symbol and series of stock and other parameters such as quantity and
price of the scrip on the place order window.

(b) Second, fill in the symbol, series and the default quantity.

Step-4:

It is the process of review. Thus, the investor has to review the order placed by clicking the
review option. He may also re-set to clear the values.

Step-5:

After the review has been satisfactory; the order has to be sent by clicking on the send option.

Step-6:

The investor will receive an "Order Confirmation" 'message along with the order number and the
value of the order.

31
Step- 7:

In case the order is rejected by the Broker or the Stock Exchange for certain reasons such as
invalid price limit, an appropriate message will appear at the bottom of the screen. At present, a
time lag of about ten seconds is there in executing the trade.

Step-8:

It is regarding charging payment, for which there are different modes. Some brokers will take
some advance payment from the, investors and will fix their trading limits. When the trade is
executed, the broker will ask the investor for transfer of funds by the investor to his account.

b) How to place an online stock trade

If you are going to learn how to trade stocks online through stock trading platforms,
like Trade King, you will need to know the vernacular involved with the trading screens.

First, let's talk about the three simplest--but most important--terms to understand before
placing a trade online. You will see these words every time you get a quote on a stock (or an
option for that matter): Last, Bid and Ask.

 "Last" is the price of the last trade that occurred on the stock.
 "Ask" is the lowest current market price offered by a potential seller.
 "Bid" is the highest current market price offered by a potential buyer. (Naturally, the Ask
is usually the higher price and the Bid is the lower price.)

Demat account:

In India, shares and securities are held electronically in a Dematerialized (or "Demat")
account, instead of the investor taking physical possession of certificates. A Dematerialized
account is opened by the investor while registering with an investment broker (or sub-broker).
The Dematerialized account number is quoted for all transactions to enable electronic settlements

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of trades to take place. Every shareholder will have a Dematerialized account for the purpose of
transacting shares.

Access to the Dematerialized account requires an internet password and a transaction

password. Transfers or purchases of securities can then be initiated. Purchases and sales of
securities on the Dematerialized account are automatically made once transactions are confirmed
and completed.

Benefit of Demat Account

The bonus/right shares allotted to the investor will be immediately credited into his
account. There is no risk due to loss on account of fire, theft or mutilation. Transaction costs are
usually lower than that in the physical segment. A demat account also helps avoid problems
typically associated with physical share certificates. For example: delivery failures caused by
signature mismatch, postal

delays and loss of certificate during transit. Further, it eliminates the risks associated
with forgery and due to damaged stock certificates. Demat account holders also avoid stamp duty
(as against 0.5 per cent payable on physical shares) and filling up of transfer deeds. The biggest
advantage of having demat account is that you don't have to pay for stamp since these are
electronically stored which reduces the transaction cost.

Procedure for open an demat account

The process of opening a demat account through a DP of CDSL is simple and easy. It is similar
to the opening of a bank account

 To open a Demat account an investor needs to open an account with a Depository

Participant registered with SEBI.
 An investor has to first choose a DP based on his convenience and the DP‘s charges.
 The investor has to submit a completely filled, signed account opening form in the
prescribed format along with following documents such as photocopy of the PAN
(permanent account number) card, proof of identity and proof of address

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  Before opening the demat account, the investor will have to sign an agreement on a stamp
paper provided by the DP. The agreement includes the rights and obligations of both—
the investor and DP.
 On opening a demat account, a unique beneficial owner identification number is allotted,
which should be mentioned in all future transactions.
 After opening a demat account with CDSL, the investor is allotted a unique demat
account number, which ensures debit/credit of securities only to the

intended account. Thus, if an account number is keyed in incorrectly, the CDSL system
will not carry out the transaction.

 A demat account can be opened and maintained even with nil balance

 Demat services are currently offered by most of the broking houses, as well as several
financial and banking institutions. The entities offering depository services are known as
depository participants.

Depository participants :

A ―Depository‖ is a provider of facility for holding securities .

It is a kind of bank for securities like shares, debentures, bonds, etc.

Depository in India

 National Securities Depository Ltd. – NSDL

 Central Depository Services Ltd. - CDSL

Depository Participant

 Agent of the depository.

 Intermediary between the depository and the investors.

 Registered with SEBI.

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Services provided by Depository

 Dematerialisation (usually known as demat) is converting physical certificates to

electronic form.
 Rematerialisation, known as remat, is reverse of demat, i.e. getting physical
certificates from the electronic securities.
 Transfer of securities, change of beneficial ownership.
 Settlement of trades done on exchange connected to the Depository.

TYPES OF ORDER WITH EXAMPLE:

All trades are made up of separate orders, that are used together to make a complete
trade. All trades consist of at least two orders (one buy and one sell order), usually with one
order to enter the trade, and one or more orders to exit the trade.

A single order is either a buy order or a sell order, and an order can be used either to
enter a trade or to exit a trade. If a trade is entered with a buy order, then it will be exited with a
sell order, and vice versa. For example, if a trader expected the market's price to go up, the
simplest trade would consist of one buy order to enter the trade, and one sell order to exit the
trade. Conversely, if a trader expected the market's price to go down, the simplest trade would
consist of one sell order to enter the trade, and one buy order to exit the trade.
Traders have access to many different types of orders that they can use in various combinations
to make their trades. The following explanations will explain each of the order types, and how
these orders are used in trading.

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Market Orders (MKT)

Market orders are orders to buy or sell a contract at the current market price, whatever that
price may be. In an active market, market orders will always get filled, but not necessarily at the
exact price that the trader intended. For example, a trader might place a market order when the
best price is 1.2954, but other orders might get filled first, and the trader's order might get filled
at 1.2956 instead. Market orders are used when you definitely want your order to be processed,
and are willing to risk getting a slightly different price.
Example:

How it works/Example:

When using a market order, you're almost guaranteed that your order will be executed. When
you call your broker and say, "Buy 10 shares of ABC stock," the broker will enter the trade as a
market order and you will buy ABC at whatever price it is trading at when the order is fulfilled.

 Limit Orders (LMT)

Limit orders are orders to buy or sell a contract at a specific or better price. Limit orders may or
may not get filled depending upon how the market is moving, but if they do get filled it will
always be at the chosen price, or at a better price if there is one available.

How it works/Example:

For example, you want to buy ABC Inc. at $50. The stock is currently trading at $51, so you set a
limit order to buy at $50. The price may go up or it may go down, but you know that as soon
the stock trades at $50, your order will be triggered and you'll buy at your predetermined price.

Once you buy ABC at $50, let's say you decide you want to sell at $53. Again, you place your
limit order and wait. Once ABC trades at $53, your order becomes active and will sell at your
target price of $53.

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Limit orders are especially useful in volatile market environments. If a $50 stock trades between
$50 and $60 on a volatile day, investors using market orders will be at a decided disadvantage
because they won't have control over the price at which they buy or sell.

 STOP ORDER

A stop order (also called a stop-loss order or stop market order) is a trade order whereby the
investor instructs the broker to automatically sell the stock if it drops to a certain price.
Stop orders are similar to market orders, in that they are orders to buy or sell a contract at the
best available price, but they are only processed if the market reaches a specific price. Stop
orders will trigger if the market

trades at or past the stop price, so for a buy order, the stop price must be above the current price,
and for a sell order, the stop price must be below the current price.

How it works/Example:

For example, let's assume that you own 100 shares of Company XYZ stock, for which
you have paid $10 per share. You are expecting the stock to hit $12 sometime in the next month,
but you do not want to take a huge loss if the market turns the other way.

You direct your broker to set a stop order at $8.50. If the stock goes up,
you will realize all of the benefits. If the stock goes down and touches $8.50, your broker will
automatically place a market order to sell your shares.

It is important to note that when the stop order is triggered, it becomes a market order.
You will not necessarily receive $8.50 per share; you will most likely receive a little more or a
little less.

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Following is the information necessary for broker to know about his client

Client Broker Relationship

Know Your Client:

The stock Exchange must ensure that brokers have sufficient, verifiable information
about clients, which would facilitate risk evaluation of clients.

Broker- Client Agreement:

Brokers must enter into an agreement with clients spelling out all obligations and
rights. This agreement should also inter alia, the minimum service

standards to be maintained by the broker for such service specified by SEBI/Exchange for the
internet based trading from time to time. Exchange will prepare a model agreement for this
purpose. The broker agreement with clients should not have any clause that is less
stringent/contrary to the conditions stipulated is the model agreement.

Investor Information:

The broker web site providing the internet based trading facility should contain
information meant for investor protection such as rules and regulations affecting client broker
relationship arbitration rules, investor protection rules etc. The broker web site providing the
Internet based trading facility should also provide and display prominently, hyper link to the web
site/page on the web site of the relevant stock exchange (s) displaying rules/ regulations/
circulars. Ticker/quote/order book displayed on the web-site of the broker should display the
time stamp as well as source of such information against the given information.

Order/Trade Confirmation:

Order/Trade confirmation should also be sent to the investor through email at client‘s
discretion at the time specified by the client in addition to the other made of display of such
confirmation of real time basis on the broker web site. The investor should be allowed to specify

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the time interval on the web site itself within which he would like to receive this information
through email.

Facility for reconfirmation of orders which are larger than that specified by the
member's risk management system should be provided on the internet based system.

Handling Complaints by Investors:

Exchanges should monitor complaints from investors regarding service provided by

brokers to ensure a minimum level of service. Exchange should have separate cell specifically to
handle Internet trading related complaints. It is desirable that exchanges should also have facility
for on-line registration of complaints on their web site.

Risk Management:

Exchanges must ensure that brokers have a system-based control on the trading limits of
clients, and exposures taken by clients. Brokers must set predefined limits on the exposure and
turnover of each client. The broker systems should be capable of assessing the risk of the client
as soon as the order comes in. The client should be informed of acceptance/rejection of the order
within a reasonable period. In case system based control rejects an order because of client having
exceeded limits etc., the broker system may have a review and release facility to allow the order
to pass through.

Contract Notes:

Contract notes must be issued to clients as per existing regulations, within 24 hours of the
trade execution.

Cross Trades:

As a matter of abundant precaution, the committee seeks to reiterate that as III the case of
existing system, brokers using Internet based systems for routing client orders will also not be
allowed to cross trades of their clients with each other. All orders must be offered to the market
for matching.

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 It is emphasized that in addition to the requirements mentioned above, all existing
obligations of the broker as per current regulation will continue without changes. Exchanges may
also like to specify more stringent standards as they may deem fit for allowing Internet based
trading facilities to their brokers.

Enforcement:

A separate working group has been set to look into the surveillance and enforcement
related issues arising due to Internet based securities trading. However, general anti-fraud
provisions (SEBI Fraudulent and Unfair Trade Practices Regulations, 1995) would apply to all
transactions involving securities or financial services, regardless of the medium.

LIMITATION OF ONLINE BROKING:

1.) Server not found:

This may appear on one‘s screens when he is desperately trying to get out of an
unprofitable position. Some of the online sites are providing a telephone number for use in case
their sites are overloaded or their server down.

2.) Connectivity of the Broker with NSE:

Recently ICICI Direct had a connectivity problem with the NSE for two and half
hours during trading hours. This problem is rare but be alive to its possibility.

3.) Cyber attack:

In the event of a malicious attack on the systems of one‘s broker he is protected only if
the company is taking proper precautions against such attacks and if proper backup is regularly
been taken. He may like to choose a brokerage that has a stated security policy and contingency
plan in place.

4.) Non-availability of a seamless interface:

As a client one will access the NSE through a server of the online brokerage and this
may involve queuing delays. If a number of client access the server the server takes its own time
sending the orders to the NSE server. He must check out the seamlessness of this interface before

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selecting an online brokerage. The faster the orders are processed the more seamless is the
interface.

5.) Non- availability of personalized advice:

If one likes to ask his broker "Aaj kya achcha lag raha hai" he may not be able to do
so. If he wants advice on a particular stock in his portfolio he may not even be able to get that.

6.) Margin:

If Internet trading alone is not fast and furious enough; many people are trading on
margin. That is where the brokerage firm lends you money by leveraging his account, allowing
him to buy a large amount of securities by putting up only a small amount of money. He may
have forgotten what he read in the small print of his agreement, but the brokerage firm has the
right to change the maintenance margin requirements without any warning or notice to him. In
fact, the firm has the right to liquidate his securities holdings (and it can pick and

choose which ones) without any notice to one if he fail to meet the margin call. And there he was
leveraged to the hilt, hoping to hit a home run when he discovered that he is required to make a
large deposit that he cannot make. The next thing one know, the firm is selling off his securities
at a point in time that is not the best for him. These are the perils of trading on margin.

7.) Little use of advisory services:

The advisory services being promised by the brokers would be of little use to
investors looking for an insight into the market. Many would not like to rely on research reports,
which are there for all. So, net investors will have to do their own research and take their own
decision, whether wild or wise.

8.) Increased charges:

Some of the brokers are of the view that they would have to provide advisory
services to the customers. But with increased volumes, they will have to follow the international
practice of charging a little more than the normal charges from a customer looking for personal
advice.

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 CONCLUSION

Why people are bending towards Online Trading :

Several broking houses now offer online trading facilities. You can trade online with
e-brokerages such as Motilal oswal, ICICI Direct, Kotakstreet, India bulls, India info line‘s
5paisa.com and HDFC securities.

If you are already comfortable trading with your regular broker, here are few reasons
why you may consider switching to trading online, or at least another avenue of trading. an
obvious advantage of online trading is that your transaction would be virtually paperless. Your
trading account would be linked to your demat and bank account, ensuring a smooth transaction
process. This is especially helpful in the extent T+2 settlement system, where you have just two
days to settle your transaction.

The normal process of issuing of delivery note, in case of a sale, or arranging for a
payment in case of purchaser of shares, is all taken care of the minute your order is executed
online. The absence of manual intervention ensures that you are completely in control of all
transaction.

There is also little room for error, as your order is always confirmed before it is
executed. You can also make better decision as you have a clear record of all your previous
transaction. When you trade offline, a demat statement is normally sent to you only on a
quarterly basis .keeping track of your portfolio can be a hassle in such a case. The inter net can
provide a new sense of control over your financial future. The amount of investment information
available online is truly astounding.

It‘s one of the best aspect of being a wired investor for the first time in history, any
individual with an internet connection can:

 Know the price of any stock at any time

 Review the price history of any stock in chart format
 Follow market events in-depth
 Receive a wealth of free commentary and analysis about stock markets and globe
economy.

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  Conduct extensive financial research on any company
 Talk with other investors around the world

At investment you can get real-time stock quotes, daily roundups of the stock market,
experts commentary, and a deep community of fellow investors. Convenience is probably the
greatest advantage online trading offers investors. if don‘t have time to trade during market hours
,perhaps you are at work, you can log on the web-trading site and place your order offline, during
off market hours. Your order would join the queue and be expected the next day. You would
need to enjoy a good relationship with your broker, for you to be able to reach him in the late
hours. For non-resident Indians (NRI), trading online is perhaps their easiest option to invest in
the Indian stock markets.

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 LEARNING

 Developed knowledge and key skills about online trading.

 Learned about financial concepts like derivatives, equity and mutual fund.

 Learned about how the whole functions of stock market is done.

 Learned about how to analyse and make report on stocks.

 Learned about the whole procedure of online trading.

 Learned about the various concepts of capital market.

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 BIBLIOGRAPHY

 Dr .A. Abdhul Rahim, April (2013), ―Problems and Prospects of Online Share Trading
Practices in India‖, International Journal of Marketing, Financial Services &
Management Research, Vol.2, No. 4.

 Arwinder Singh, H.S. Sandhu, (Corresponding Author), S.C. Kundu, April 2010,
―Investors‘ Adoption Of Internet Stock Trading: A Study‖, Journal Of Internet
Banking And Commerce, Vol. 15, No.1.

 Brad M. Barber and Terrance Odean, 2001, ―The Internet and the Investor Journal
of Economic Perspectives‖, Volume 15, Number 1, Pages 41–54.

Books

 Financial market, institution and services – N.K Gupta, Monika Chopra.

 Financial Services – Khushboo Manoj

Website

www.motilaloswal.com

www.bseindia.com

www.nseindia.com

www.sebi.gov.in

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