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A Study on Online Trading System in Indian Stock Exchanges

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Indian Journal of Natural Sciences www.tnsroindia.org.in ©IJONS

Vol.13 / Issue 72 / June / 2022 International Bimonthly (Print) ISSN: 0976 – 0997
RESEARCH ARTICLE

A Study on Online Trading System in Indian Stock Exchanges

Subhramaya Nayak

Asst Professor, School of Management, Centurion University of Technology and Management, Odisha,
India.

Received: 06 Mar 2022 Revised: 07 Apr 2022 Accepted: 10 May 2022

*Address for Correspondence

Subhramaya Nayak
Asst Professor,
School of Management,
Centurion University of Technology and Management,
Odisha, India.

This is an Open Access Journal / article distributed under the terms of the Creative Commons Attribution License
(CC BY-NC-ND 3.0) which permits unrestricted use, distribution, and reproduction in any medium, provided the
original work is properly cited. All rights reserved.

Yashoda
ABSTRACT
Trading in stock market is one of the most popular and attracting investment alternative among the
investors now a days, especially among the young investors. Due to its easy access, transparency and
mobile friendly behavior the young investors are preferring this investment vehicle more than other
traditional products. Now a days all the trading and settlement process are taking place through online
mode like placing buying and selling orders, opening of Demat and trading account, clearing and
settlement of shares, transfer of funds , etc. As we know that in India both the two leading stock
exchanges BSE and NSE are providing online trading facilities to the investors. In this article we will
discuss about the online trading facilities provided by stock exchanges, advantages, disadvantages and
different soft wares and applications provided by the stock brokers.

Keywords: Online Trading, Stock Exchange, financial service, economic growth.

INTRODUCTION

In this era the information Technology has brought out revolutionary changes in the function of stock exchanges in
India. Almost all financial service providers are depending more on technology. The new technology has replaced
traditional method of trading without the use of technology which was time consuming and inefficient. The
technological changes has attracted many new players in the markets which leads to the economic growth of the
country due to more circulation of funds. Due to the new trading technologies the volume of trading has also
increased. National stock exchange (NSE) first time in India introduced a nationwide on line fully automated Screen
Based Trading System (STBS) . Geojit securities is the first stock broker to go online. Now other stock exchanges
have been forced to adopt SBTS and today India can boast that almost 100% trading take place through electronic
order matching. Under SBTS, a member can place the order for the quantities and the price at which he likes to
transact the transaction for a particular share. It is executed as soon as it finds a matching buy or sell order from a
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Vol.13 / Issue 72 / June / 2022 International Bimonthly (Print) ISSN: 0976 – 0997

Subhramaya Nayak

counter party. Thus, we can say that technology is used to carry the trading platform from the trading exchanges to
the premises of stock brokers. Both NSE and BSE are providing their online trading facilities through their online
platform NSE NEAT and BSE BOLT respectively. The online trading facilities is also helping the brokers to settle the
intraday and delivery-based trading in a more smoothen way. One can buy or sell shares online only after opening a
Demat and trading account with registered depository participant and registered broker respectively. The different
steps include to start online trading are:
 Find a broker: First of all, one need to find a registered broker with whom the investor wants to trade. While
selecting a broker the investor should consider the account opening charges, brokerage charges, service quality,
soft wares or mobile apps provided by the company for trading purpose, etc.
 Open Demat and trading account: After finding a broker the investor has to open a demat account with the
registered depository participant and trading account. The documents required to open a trading account are
Aadhaar card , PAN card, Bank account details and other KYC documents , valid email id , valid mobile
number.
 Login to account and add money : Once the account is opened then the account holder has to add money to the
account for trading purpose which is known as margin money.
 Select the company and start trading : After opening the accounts and adding initial margin money the client
now can trade.

Objectives
The name of the study itself tells that the basic objective of the study is based on the detail mechanism of online
trading .

The main objectives of my study are:

 To know the process of online trading.
 To differentiate between online and offline trading.
 To highlight the advantage and disadvantage of online trading.
 To explain terms related to online trading.

RESEARCH METHODOLOGY

For this study purpose all the data and information has been collected from secondary source like financial websites ,
books , etc. No statistical tools have been used for the study, it is based on theoretical explanation.

LITERATURE REVIEW

In their research report Walia N. and Kumar R. (2012) examined the investors' preference for traditional trading and
online trading, investor's perception on Online trading & comparing current usage of online trading and offline
trading. The result of the study said that out of every 100 investors only 28 trade online, which points out a question
as why investors were not able to realize the importance of technology in stock trading. In the study they found that
Indian investors are conservative, they don’t change the brokers frequently. Jaiswal M., Vashist D. and Kumar A
(2009) had studies on the growth of online trading from the year 2000 using statistics on volume of online trading,
number of e- broking firms, brokerages and demographic patterns. In the result they found that online trading has
dramatically changed the way stock business has been conducted over the years. Dr. A Abdhul Rahim (2013) has
discovered the pitfalls related to online trading in his study “Problems and Prospects of Online Share Trading
Practices in India, International Journal of Marketing, Financial Services and Management Research”. He suggests
that investors should be protected from all hassles and problems so as to remain confident while trading online and
also explained about trading and equity related mutual funds. Professor Aadil Bade (2017) on his study “Analysis-
Demat account and online trading”, which was published in the Scholarly Research Journal for Interdisciplinary
studies, said that in India, Online trading is still at its infancy stage.
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Vol.13 / Issue 72 / June / 2022 International Bimonthly (Print) ISSN: 0976 – 0997

Subhramaya Nayak

Online Trading Scenario in Indian Stock Market

In India the demand for online trading is increasing by day to day due the advancement of technology, increase in
awareness among investors regarding stock trading, attractive schemes provided by discount brokers, etc. the
broking houses are using their own trading platform for trading purpose by developing some soft wares. Almost all
the stock brokers are focusing and following the trading system of the two leading stock exchanges in India Bombay
Stock Exchange (BSE) and National Stock Exchange (NSE) . the online trading system for BSE and NSE are popularly
known as BOLT ( BSE’s Online Trading System ) and NEAT ( National Exchange for Automated Trading ).

BSE BOLT
 Bombay Stock Exchange's trading system which is popularly known as BOLT (BSE's Online Trading System).
The BSE has deployed an Online Trading system (BOLT) on March 14, 1995
 BOLT has a two-tier architecture. The trader workstations are connected directly to the backend server, which
acts as a communication server and a Central Trading Engine (CTE).
 Other services like information dissemination, index computation, and position monitoring are also provided by
the system.
 Access to market related information through the trader workstations is essential for the market participants to
act on real-time basis and take immediate decisions
 It makes the trade efficient, transparent and time saving.

NSE NEAT
 NSE provides its customers with a fully automated screen based trading system known as NEAT system, in
which a member can punch into the computer quantities of securities and the prices at which he likes to transact
and the transaction is executed as soon as it finds a matching sale or buy order from a counter party.
 It electronically matches orders on a price/time priority and hence cuts down on time, cost and risk of error, as
well as on fraud, resulting in improved operational efficiency.
 It allows faster incorporation of price sensitive information into prevailing prices, thus increasing the
informational efficiency of markets.
 The stocks are hold in a demutualised format helping in fast, transparent and efficient preservation and
transactions.

The demand for digital trading or online trading by the investors is increasing day by day. As per the data of
statista.com “The digital trading market's volume grew by about 49 percent in financial year 2021 across India. This
was a steep increase from the previous year's growth rate of ten percent in the country”. From the graph 1 we can
find that the digital trading volume was just 5% in the year 2017 but in the year 2021 it is 49%. We can also say that
by analysing the data that the demand for digital trading has increased rapidly in post covid era that is after 2020
there is a rapid growth has seen in the digital trading. By referring the data provided by statista.com we can also say
that “the digital trading market in India grew by about 70 percent in financial year 2021. This was a steep increase
from the previous year's growth rate in the country.” The digital investments are expected to rise further in the
coming years owing to factors like higher digital penetration and increasing household income.The number of
Demat accounts also grew by about 35 percent in financial year 2021 across the country. It was an increase from the
previous year's growth rate of 14 percent in the country.

Types of Trading Platforms in India

In India almost all brokers are providing their trading software for trading purpose. They are providing their own
trading software for desk top , mobile applications for mobile trading and also providing the facility to trade on their
website. We can also say that primarily three types of online trading platform are used by traders and investors in
India. These are:
 Mobile-based
 Browser-based
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Vol.13 / Issue 72 / June / 2022 International Bimonthly (Print) ISSN: 0976 – 0997

Subhramaya Nayak

 Desktop-based

Mobile-based/Mobile App
Mobile trading platform is one that can be accessed by through smartphones by the investors. In mobile trading the
broking companies provide a mobile application to the investors and they can trade through the mobile app. The
demand for mobile trading is increasing day to day due to its ease in usage, portability and no physical barriers.

Browser-based/Web-based
A browser-based trading platform is one that can be accessed by the investors on a web browser. Almost all the web
browsers like Internet Explorer, Mozilla Firefox, and Google Chrome supports this web trading. This platform helps
a lot to the investors where access to smartphones and desktops is not accessible.

Desktop-based
in this platform the software can be downloaded and installed on a desktop and laptop. This is certainly the best
trading platform in India one can use for trading purpose. In software based trading one can use some shortcut keys
like f1/+ to buy , f2/- to sell , f5 for market watch, etc. Some of the popular trading software are ODIN , Zerodha Kite,
Sharekhan Trade Tiger, Speed Pro, Trade Station, Trade Eye, Trade Racer, NSE Now , etc.

Benefits of Online Trading

The popularity for online trading is increasing day to day by the investors in this technological era due to a number
of reasons. The main reasons include:
 Convenient: Online trading is convenient and accessible from any location with limited hassle and it also saves
time.
 One can monitor the investments anytime: By using online trading one can buy and sell the shares as per their
convenient time and also can watch their holdings and their market position any time.
 Eliminates the Middleman : It allows the investors to trade virtually with no direct broker communication.
 Investors has greater control: in case of online trading the investors has more control over the trading
mechanism. In traditional methos the investors were depended on the brokers for their trading purpose. But in
online trading investors can review all their trading related activities without depending on the stock broker in
every aspect.
 Multiple options in one place: In online trading platform the investor can invest in other investments like IPO,
Bonds, Mutual funds, Gold , etc apart from trading.
 Paperless Transaction: all the transactions are done through online including share certificate get deposited in
demat account in electronic format.

Disadvantages of Online Trading

Online trading has a number of advantages for the investors. Like advantages there are also some disadvantages of
online trading available in the market like :
 Technical knowledge:
The investors should have technical knowledge to operate the online trading platform. Without having the proper
technical knowledge one can not utilize all the benefits of online trading.
 Technological Error
Sometimes the investor may face some technological error like website may run slow, the internet speed issue, the
computer hardware or software problem, the server may go down, and the trading terminus may not be convenient
to use.
 Without proper investment advice could cause big loss.
Without having proper investment knowledge, one may face some problem during investment. Another thing is that
no product knowledge and no product advice from expert could cause a big monetary loss for the investor.

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Vol.13 / Issue 72 / June / 2022 International Bimonthly (Print) ISSN: 0976 – 0997

Subhramaya Nayak

CONCLUSION

As we know that during the covid19 pandemic the general people get more acquainted with the technology. Another
thing is that most of the shares were available at a lower cost than their fare value, that means we can also say that
most of the shares were traded undervalued. So, people started more investing in the most attractive investment
alternative which leads in the growth of online trading. The demand for online trading increased during the
pandemic but we can not say that online trading was not their before pandemic. Now a days almost all broking
houses are doing their business through their own trading software. Basically the discounted brokers are providing
more attractive schemes to the investors. The number of the investors is increasing day to day in the online stock
trading platform due to its lucrative advantages. In the online trading the password play a critical role, so the
investors should change their password in a regular interval. The investors should close the trading session before
leaving the trading terminal. They should use the two step verification process to protect their account, etc. As it is
said that every coin has two sides , in online trading platform there are also some limitations like the advantages.
From the above study we can conclude that online trading platform is ease to access, transparent, flexible and other
advantages, but while dealing with this online trading world the investors should not enter without having proper
technical knowledge related to the access of trading software. Only after getting all the basic knowledge about online
trading one should enter in the online trading world.

REFERENCES

1. Advanced Research In Applied Sciences, Volume 7 Issue 3, P.No-51-57, ISSN NO: 2279-543X,Mar/2018
2. Dr.C K Gomathy, Article: A Study on the Effect of Digital Literacy and information Management, IAETSD
Journal For
3. Dr.C K Gomathy, Article: A Study on the recent Advancements in Online Surveying , International Journal of
Emerging technologies and Innovative Research ( JETIR ) Volume 5 | Issue 11 | ISSN : 2349-5162, P.No:327-331,
Nov-2018
4. Dr.C.K.Gomathy,C K Hemalatha, Article: A Study On Employee Safety And Health Management International
Research Journal Of Engineering And Technology (Irjet)- Volume: 08 Issue: 04 | Apr 2021
5. Ichael A. Goldsteina, PavitraKumarb and Frank C. Gravesb “Computerized and high frequency
trading” The Financial Review, May 2014, Vol. 49, No. 2
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Websites
 www.5paisa.com
 www.bonanzaonline.com
 www.equityblues.com
 www.outlookmoney.com
 www.statista.com
 www.stockamj.com
 www.thebeststockbroker.com

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