Chankaya Institute of

Management
Village Gharuan, Tehsil Kharar
Dist. Mohali, Punjab
Email:
info@chanakyainstitute.com

1
 A

PROJECT REPORT

ON

ON-LINE TRADING
(With special reference of Ludhiana Stock Exchange)

Submitted in partial fulfillment of the Requirement for the

degree of

MASTER OF BUSINESS
ADMINISTRATION
(2008-2010)

CHANAKYA INSTITUTE OF MANAGEMENT

GHARUAN MOHALIs

2
 SUBMITTED BY:-

HARI SINGH

STUDENT DECLARATION
I hereby declare that the

Analytical study

On

OVERALL STUDY ON

ONLINE TRADING

IN

LUDHIANA STOCK EXCHANGE

Submitted in partial fulfillment of the

Requirement for the degree of

MASTER OF BUSINESS ADMINISTRATION

To Punjab Technical University, Jalandhar is my original work and not
submitted for the award of any other diploma, degree.

Place: Gharuan

Date

SIGNATURE

HARI SINGH

3
 CERTIFICATE

This is to certify that the project report entitled “ONLINE

TRADING OF LUDHIANA STOCK EXCHANGE” submitted
by Mr. Hari Singh is a bona fide piece of work conducted
under my direct supervision and guidance. No part of this
work has been submitted for any other degree of any other
university.

It may be considered for evaluation in partial fulfillment of the

degree of Masters in Business Administration.
Hari singh

Signature

ACKNOWLEDGEMENT

4
If words are considered as a symbol of approval and token of
appreciation then let the words play the heralding role expressing
my gratitude

The world of capital market war far from me but I got an

opportunity to understand the capital market at LSE. While
training I learnt many things about capital market and its
structure. So I am very thankful to Ludhiana Stock Exchange
association limited for giving me such opportunity.

First of all I thank to that Gracie god who blessed me with all
kinds of facilities that had been provided to me for completion of
my report.

I am also grateful to Miss Rizvi Garg for permitting me to learn

and gave me project on Ludhiana stock exchange Ltd.

I acknowledge my deepest sense of gratitude and sincere feeling

of in debt ness divine all my faculty members and Mr. Shami Kohli
(senior manager) under whose guidance and through their
sustained efforts and encouraging attitude IU was able to
complete my project. It would have been difficult to achieve the
results in such a short span of time.

5
 PREFACE

For management career, it is important to develop managerial

skills. In order to achieve positive and concrete results, along with

theoretical concepts, the exposure of real life situation existing in

corporate world is very much needed. To fulfill this need, this

practical training is required.

I took training in LUDHIANA STOCK EXCHANGE located in

Ludhiana. It was my fortune to get training in a very healthy

atmosphere. I got ample opportunity to view the overall working

of the stock exchange.

This report is the result of my 45 days of summer training in

LUDHIANA STOCK EXCHANGE, as a part of M.B.A. The subject

of my report is- Online trading.

6
 Contents

CHAPTER -!

1. Introduction
(A) Capital Market

(B) Stock exchange

CHAPTER -2

2. Stock Exchanges

CHAPTER -3

3. Share Trading

CHAPTER -4

4. Research Methodology

CHAPTER -5
5. On Line Trading

7
 6. Growth of On Line Trading in INDIA

CHAPTER -6

7. Analysis and Interpretation

8. Finding

CHAPTER-7

9. Conclusion

11. Suggestion
10. Limitations

CHAPTER -8

12. Bibliography

8
 11. Questionnaire

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.

9
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. Thus development of efficient
market system is necessary for creating conductive climate for
investment and economic growth.

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.
Primary

10
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, 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.
Secondary

The market where securities are traded after they azre 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.

BRIEF ABOUT THE STOCK EXCHANGES

11
 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 and securities
where trading takes place in a controlled and protected
environment.

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).

12
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.

CONCEPT OF SHARE TRADING

The concept of share broking emerged after the establishment of

the joint stock companies. The ownership of the companies was
divided into small parts and that every part was called share. So,
the term “Share” denominates some part in the ownership of the
company. The shares are freely transferable subject to the some
certain restrictions. When the need was felt to sell the shares by
the owner of the shares, it was difficult to find out the buyers of
the shares who want to buy the shares at the price the seller want
to sell. At that time a need was felt to bring the buyers and sellers
on a common platform. To solve this problem, a group of persons
came into picture, which used to bring the buyers and sellers
together for the trade of the shares. These persons are called the
share Brokers who find the persons who wish to buy or sell their
securities. The whole process of finding the buyers and sellers of
the securities by the brokers is called the Share Broking. The
origination of the Indian securities market may be traced back to
1975, when 22

13
enterprise brokers under a Banyan tree established the Bombay
Stock Exchange (BSE). Over the last 130 years, the Indian
securities market has evolved

continuously to become one of the most dynamic, modern

international standards both in terms of structure and in terms of
operating efficiency.

SETTLEMENT CYCLE SCHEDULE

SR. NO. DAY DESCRIPTION OF ACTIVITY

TRADE
1 T Trading Day
2 T+2 PAY IN BY 10.30 am.
3 T+2 PAY – OUT BY 2 pm.
4 T+3 Auction of shortage in
deliveries
5 T+5 Auction pay-in by
10.30 (1 am/ pay

Out by 2 pm.)

14
 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.
4. It promotes savings and investment in the economy by
attracting funds from the investors.
5. It facilitates take overs 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.

15
 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.

Institutional offering

Investment Banking
IL&FS Invest smart securities limited (IISL) offers you extensive
range of Investment Banking Services for equity related products
and instruments. Our team advises you on transactions like
business structuring and capital raising opportunities based on
your corporate needs and state of capital markets. Services we
specialize in include Management of:

 Initial Public Offering (IPOs)

 Follow-on Offerings
 Qualified Institutional Placements (QIPs)
 Buyback of Equities
 Open Offers
 Mergers & Acquisitions

16
  Private Equity Placements
 ESOPs

Institutional Equity:-
Company’s efficient execution, quality research, top quality
human resources and complete compliance with stock exchange
regulations, as well as business standard ethics lend towards our
exemplary services to investors, through IPOs, equities,
derivatives and mutual funds.

Company also focus on identifying undiscovered value stocks

to investors. Through it’s array of services, this division is well-
suited to corporate investors, banks, financial institutions,
insurance companies and FII’s .company’s Institutional Equity
Business (IEB) is well positioned to offer support for a complete
range of investment banking service to corporates.

17
 IISL, work closely with institutional investors, private equity
investors and corporates, have been hosting round table
conferences with leading CIOs / Fund Managers etc. Also, conduct
activities like organizing of road shows, enabling the senior
management to interact with FIIs, regular conference calls for
institutional Investors etc. This works as a pre-requisite to
investing in stocks. Company’s expertise in this area also extends
to international investors from Singapore, Hong Kong, USA and
the UK.

Institutional Debt:-
Institutional debt broking division includes, secondary market
broking, primary market debt placement & distribution and
provident fund advisory services.

Secondary debt broking is the principle service provided by

this division. The clients mainly comprise of institutional debt
players, such as banks, primary dealers, mutual funds, large
provident funds and in some cases corporate treasuries. The
division empanelled with almost all banks, primary dealers and
mutual funds, on whose behalf it acts either on the buying or

18
selling side. All types of debt papers are covered, including
government securities, treasury bills, public sector bonds,
corporate bonds etc. This desk also provides transacting and
advisory services to various provident funds and HNI clients.

The primary market services cover placement of debt paper

issued by corporates, with institutional segments covering banks,
mutual funds etc. These services cover various activities :-

 Advising the clients on the issuance including the

instrument, quantum, timing, other instrument specific
structuring such as put / call option, conversion option and
rating. Assisting in the rating exercise and suggesting
various means and options to improve rating if so desired,
through “Structured Obligations” or other mechanisms.

 Pre marketing the placement / issuance

 Selling / placing the issuance
 Assisting in any related documentation for the issuance
 Assisting in all other steps to complete the issuance for draw
down funds

19
 The debt instrument covered by this division cover both short
term as well as longer term instruments. Commercial paper and
MIBOR Linked Bonds are popular among the short-term
instruments. The division uses a proprietary online platform called
“DebtonNet” for online book building of debt issuances.

IL&FS investsmart securities limited is facilitating the three type

of trading product to its retail customer are

SmartSTART
SmartStart is a powerful browser based trading system for
those who are relatively new to online investing. A unique
integrated account, which integrates your banking, broking, and
demat accounts. A comprehensive trading service, which allows
you to invest in equities and derivatives. SmartStart trading
platform allows you the flexibility of trading on any internet
capable system, with access to both the NSE and BSE.

20
FEATURES
 Trade on NSE & BSE

21
  Simple order entry for Equity & Derivatives

 Fully Customizable display

 User friendly Get Quote screen
 Integrated Accounts (Bank. Demat & Trading)
 Live order status
 Track your orders real-time
 Dynamic buying power
 Works behind a Proxy
 Back office access

SYSTEM REQUIREMENTS

Browser Type Microsoft Internet explorer 6.0 or higher

Internet Connection Dial-up connection (Modem at a minimum

of 28.8/33.6 Kbps)

System Pentium 3 and above. RAM 128 MB or

above

Operating System Windows 98/2000 or Windows XP

BENEFITS:-
NSE& BSE Access -

22
 Flexibility of trading on both the NSE & BSE via a single screen.

Fully Customizable display –

The save desktop option allows you to save your created

trade screen layout, so the next time you access the application
the created layout is not lost

Integrated Accounts (Bank. Demat & Trading) –

Integrates your banking, broking and demat accounts. This

enables you to trade in shares without going through the hassles
of tracking settlement cycles, writing cheques and Transfer
Instructions, chasing your broker for cheques or Transfer
Instructions etc.

Live order status –

Tracking all your orders is made easy through the order

status screen. Further drill down into all details pertaining to an
order is available in the order detail sub report

Track your orders –

Track your stock order and trades

Dynamic buying power –

23
 Reflects your credits and debits instantly on every trade
execution. No need to refresh each statement to know your latest
buying limits

Works behind a Proxy –

This platform can be accessed on any Internet enabled

network. You can access it even from your place of work

Back Office access –

View segment wise ledger bills and contract notes, trades,

positions, account contract notes, trades, positions, account
balance, realized/unrealized profit & loss, and buying power all in
real time

SmartINVEST

Smartinvest is a browser-based system designed for customers

who transact occasionally. It is ideal for investors who believe in
the Buy and Hold approach towards investment in equities.
SmartInvest's capability as a browser-based trading platform
gives you the benefit of real-time streaming data with the
flexibility of trading on any Internet capable system. With access
to both the NSE & BSE, you are in the driver's seat when routing
your order to the best price on either of

24
the exchanges. Smartinvest sophisticated yet easy to use point and
click order entry interface allows you to react more quickly to the
markets and make better decisions.

25
FEATURES
 Instant Loading
 Works behind a Proxy
 Live Streaming quotes
 Multiple Watch lists
 NSE& BSE Access
 Single order form for Cash and FnO
 Point and Click order entry
 Hot Key Functions
 Market Depth Window
 Back Office access

SYSTEM REQUIREMENT

Browser Type Microsoft Internet Explorer 6.0 or higher

(Java enabled)

Internet Connection Broadband/Dial-Up connection (Modem at a

minimum of 28.8/33.6 Kbps)

System Pentium 3 or 4 GHz or best available at market

RAM (Physical) 128 MB or better

26
Operating System Windows 98/2000 or Windows XP

BENEFITS:-
Instant Loading -

The browser-based applet system allows you instant access to

your account with no wait time, unlike other systems that take a few
minutes to load.

Works behind a Proxy -

This platform can be accessed on any Internet enabled network.
You can access it even from your place of work

Live Streaming quotes -

Keep an eye on the stocks you care about most with streaming,
real-time quotes and customizable market data. Color-coded price
changes help you to spot trends and react to them quickly

Multiple Watch lists -

The new watch list option allows you to create upto 10 watch lists.
Each watch list can be personalized by inserting securities which you
would like view as a group

NSE& BSE Access -

Flexibility of trading on both the NSE & BSE via a single screen

Single order form for Cash and FnO -

Single order form offers you the convenience of transacting in

27
various segments of the market without having to switch between
multiple windows

Point and Click order entry -

Makes order entry quick and simple with a click on the security
the same gets inserted into the order form on your trade screen

Hot Key Functions -

Using a single keystroke (Hot Key) function you can achieve
important tasks very similar to a broker's terminal. Accessing
important reports is also one keystroke away

Market Depth Window -

It gives an immediate "at a glance" info about the stock you are
following. The view provides the best 5 bid and offer quotes and the
outstanding order quantities

Back Office access -

View segment wise ledger bills and contract notes, trades,
positions, account balance, realized/unrealized profit & loss, and
buying power all in real time

SmartTRADE

28
 SmartTrade is an EXE based desktop software designed for active
traders who transact frequently to capture favorable short-term price
movements. The platform offers active traders the tools they need to
make critical decisions with confidence. SmartTrade is designed and
built from the ground up to address the needs of active traders.
SmartTrade makes the most of state-of the-art technology to deliver
power, speed and reliability. Through an easy-to-use interface, users
are provided with the same tools and advantages that the
professionals enjoy.

29
FEATURES

 Fully Customizable display

 Dynamic Charts with Indicators
 EOD Charts
 Real-Time market data
 Advanced Alert capabilities
 Live order status
 Track your orders real time
 Real time position updates
 Dynamic buying power
 Derivative chain
 Lock terminal option
 Message window docking

SYSTEM REQUIREMENT

Browser Type Microsoft Internet Explorer 6.0 or

higher (Java enabled) Internet Connection Broadband/Dial-Up

(Modem at a minimum of 28.8/33.6 Kbps)

System P 3 or 4 GHz or best available at

market RAM 128 MB or better Operating System

Windows 98/2000 or Windows XP

BENEFITS:-

30
Fully Customizable display
The save desktop option allows you to save your created
trade screen layout, so the next time you access the application
the created layout is not lost.

Dynamic Charts with Indicators

Provides you a wealth of charting capabilities and timing
indicators, which allow

you to go right into the action with real-time daily charts, and
intra-day charts. Watch price movements by minutes, days, or
weeks.

EOD Charts
SmartTrade puts up to 5 years of in-depth market history at
your command with the power to instantly back-test any trading
strategy you design, before risking one rupee of your trading
capital.

Real-Time market data

Get real time market data from both the NSE and BSE similar to
what your broker gets.

Advanced Alert capabilities

Alert Window allows you to be free from watching every tick.

31
Users can be notified once a security has reached the set
parameters. Multiple securities can be monitored using the set
parameters. These alerts can be triggered both visually and
audibly.

Live order status

Tracking all your orders is made easy through the order status
screen. Further drill down into all details pertaining to an order is
available in the order detail sub report.

Track your orders real time

Track your stock order and trades in real-time.

Real time position updates

All your positions are updated automatically and instantly. No
need to use the refresh button at all.

Dynamic buying power

Reflects your credits and debits instantly on every trade
execution. No need to refresh each statement to know your latest
buying limits.

Derivative chain
This feature provides you with a list of all derivative contracts

32
available for the selected security. To view derivative prices of a
security just right click on the symbol and click on derivative
chain.

Lock terminal option

If your system is unattended this function locks the trading
platform for you and can be accessed again only on providing the
proper login details.

Message window docking

This feature enables you to receive trading messages, intra-day

trading calls, and messages from both the exchanges flashed real time
onto your screen

These are the various product ranges for its retail customer

SMART POWER
SMART ELITE

Advance
subscription
value(Rs) 2500
1250
Default 0 25000 50000

delivery brokerage 0.50% 0.35% 0.25% 0.20% 0.15%

33
intraday brokerage
CM (1 leg) 0.05% 0.04% 0.03% 0.03% 0.02%
intraday brokerage
CM (2 leg 0.05% 0.04% 0.03% 0.03% 0.02%
intraday brokerage
F&O (1 leg) 0.05% 0.04% 0.03% 0.03% 0.02%
intraday brokerage
F&O (2 leg) 0.05% 0.04% 0.03% 0.03% 0.02%
option
brokerage(which is 2.5% or 2.5% or 1% or .75% or .60% or
high) Rs.100 Rs 90 Rs.60 Rs.40 Rs.30

ONLINE FUND TRANSFER

IISL have tie up with 5 banks, which are. HSBC, HDFC, IDBI, CITI, AXIS
bank , for online money transfer

4. LITERATURE REVIEW

34
ONLINE TRADING INFRASTRUCTURE

The emergence of online exchanges has facilitated faster

transactions by providing online trading portals and brokerage houses
ease and flexibility. The Internet has indeed opened up new
opportunities for conducting the business. The worldwide stock
exchanges has made a major shift from the traditional method of
trading and now conduct a bulk of its business online through its
brokers and partners.

In the developed countries majorly all the exchange

transactions are conducted online. The trend took off slowly in India
and the National Stock Exchange (NSE) and the Bombay Stock
Exchange (BSE) two of the largest exchanges in India have been
conducting online trade successfully for some time.

WHY ONLINE TRADING ENTERED LATE IN INDIA?

The Indian exchanges and brokering houses have been very

slow in moving their transactions online and the major reason has
been the lot government regulations. The initial delay was due to
laying down the specifications for creating Closed User Groups (CUGs).
This issue was resolved between the Department of

35
Telecommunications (DoT) and the Finance Ministry around 1998 and
after that soon came the online trading portals like IL&FS investsmart,
ICICIDirect.com, motilaloswal.com, sharekhan.com etc. Connectivity
related issue was perhaps the most important technological factor.RBI
made regulation that it is mandatory for company to store at least 7
year financial and transactional data.

In the non-stop, 24 hours a day, seven days a week world of

investing, we are able to

 Obtain investment news around the clock

 Check quotes on exchanges all over the world – day or
night
 Easily compare one investment to another via
numerous ratios, charts, graphs, and tables
 Screen for the best investments to fit our individual
goals and requirements
 Trade stocks as easily and quickly as professional
traders
 Calculate retirement needs based on various scenarios
 Regularly monitor portfolios and make necessary
changes quickly and almost effortlessly

 Control the routing of individual trades for the best

possible price and execution

36
 Even many years after the launch of the first online
brokerage firm, there remain a large contingent of individual
investors who still pick up the phone and call their stock broker to
buy and sell investments. However, every year a growing number
of investors are placing their trades using online brokers.

s OBJECTIVES OF THE STUDY

1. To understand the appropriate organizational

structure of the LUDHIANA STOCK EXCHANGE LTD
and LUDHIANA STOCK EXCHANGE securities
LIMITED.And Growth of Online Trading in India

2. To analyse the online trading and its process.

37
On Line Trading

38
 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 a the account is the actual
investor. Furthermore, the internet investor can never become a
victim of excessive trading (where for the broker) since the

39
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.

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

40
investor will have little, if any, resource against the brokerage
firm for the breach of security.

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.

ONLINE TRADING BY NSE & BSE

The central computer located at the Exchange is connected to the
workstations of the Brokers through satellite using Very Small
Aperture Terminals (VSATs). Orders placed at the Brokers'
workstations reach the central computer and are matched by the
computer based on price and time priority.

41
Both the exchanges have switched over from the open outcry
trading system to a fully automated computerized mode of
trading known as BOLT (BSE On Line Trading) and NEAT (National
Exchange Automated Trading) System. It facilitates more efficient
processing, automatic order matching, faster execution of trades
and transparency. The scrips traded on the BSE have been
classified into 'A', 'B1', 'B2', 'C', 'F' and 'Z' groups. The 'A' group
shares represent those, which are in the carry forward system
(Badla). The 'F' group represents the debt market (fixed income
securities) segment. The 'Z' group scrips are the blacklisted
companies. The 'C' group covers the odd lot securities in 'A', 'B1'
& 'B2' groups and Rights renunciati

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

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

Broker’s site.

42
be required to open account with a depository participant
because only dematerialized shares can be traded on Internet.

The broker accepts and executes the order and

places it with the exchange

The exchange accepts the order after checking the share

limit for the day.

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

settlement.

The client is intimated about the settlement

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

Step-I:

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.

43
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.

Step- 7:

44
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.

THE MECHANICS OF ONLINE TRADING

45
 CLIENT BROKER STOCK EXCHANGE

Accepts the Accepts the order

Places an order on
order, Checks after checking the
the net on the
the client’s scrip limit of the
broker’s website
Identity and broker for the day
through the
places the
distinctive I.D.
order with the
code
stock exchange Executes the order
The settlement of
the deal (buy/sell
order) gets
reflected in his
Demat account.
Pays the

Exchange
The client is
though his owns
intimated about Receives the
account and
the execution of money and
receives it from
the deal by e-mail. completes the
the client
Pays the broker settlement
account.
pending physical
delivery.

DEFINITIONS AND EXPLANATIONS

1. Shares:-

46
 In everyday language, when we talk of shares we normally
refer to equity shares or ordinary shares of a company. The
terms shares and stock essentially means the same things, the
letter being a more common American usage.

An equity share is evidence of ownership in a company. The

physical evidence of this ownership of this document is called
the Share Certificate. Now days, shares are usually kept in
electronic, or dematerialized, form with a depository participant
(Banks, brokers, financial institutions) of the National Securities

Depository Limited (NSDL). However, if one wants one can still

hold the share in the physical form which has your name
endorsed on it, and is proved that you are a part owner of the
company. Your ownership rights are proportionate to the
number of share you own.

Companies issue shares of a certain fixed denomination, called face

value or par value of that share, which is clearly indicated on a share
certificate in the physical form.

2. Investment: -

Investment essentially refers to what you do with your

savings in order to preserve them and make them grow or yield an income.
If you keep your savings in the form of cash, they are certainly going to

47
diminish in value because the purchasing power of money is constantly
going down as a result of inflation. (The value of money is judged by the
quantity of goods and services you can buy with it). Therefore, if you want
to maintain or increase the value of your savings, you have to keep them in
forms other than cash. This is what investment is all about, deployment of
your saving with the intentions of preserving or increasing their value. This
deployment can be done by using your savings to buy land, residential
properties, commercial properties, gold, jewelry, works of art, fixed deposits
in banks and companies, shares, bonds, infact, anything whose value is
likely to either remain constant or appreciate with time. Investment also
refer to using one's savings with the intention of earning an income.

3. Demate A/c:-

On doing an online business ever customer has to open and

demate account in any bank whichever he likes. Demate
account is the account in which the trading done by the
customer is mentioned. If the customer sales or purchases any
share the details of this sale and purchasing are in demate
account. This account contents the name of the shares and
also the number of shares held

or sold and also the rate of the share with this demate account.
It is also compulsory for every customer to open a saving
account in the bank because the amount which is to be
received when the customers sales the shares are transferred
from the demate account to the saving account.

48
 It is the responsibility of the customers that the share which he
purchased or sales are properly transferred in demate account
from the stock exchange whichever he deals. The amount of
dividend whichever to be received on the shares when held for
one or more year are also transferred in this demate account. It
is compulsory for every customer to have a PAN no. For
opening an demate account. If PAN no. Is not there is no
chance for the customer to do any trading on line. There is no
limit of amount to deal in this account.

4. Circuit Limit:-

While issuing the shares to the public the company has to fix a
particular limit of the rate of the per share this limit is called as
circuit limit. This circuit limit is generally fixed on the
percentage basis. This circuit limit is applied to both the ends
of the share. That is to the upper limit also and also to the
lower limit actually circuit limit is of two types

1) Upper limit

2) Lower limit

It is compulsory for every company to fix the circuit limit. This limit is

49
beneficial to both. The customer and also to the company generally every
company fix below 10%of the rate of per share.

5. Upper Limit: -

While issuing the shares to the public the company has to fix
the upper limit this limit is also calculated in percentage the limit
is also beyond which the rate of the shares cannot exceed nor
that the customer doing the trading can sell above the level.

For ex. Customer wants to sell a share which is of

Rs10 and its upper limit is fixed at 10% so in this case the person
will have to sell it at Rs11 or the rate which ever he

wants but the person cannot sell it beyond this Rs 11

because by addition of upper limit to the rate of share the
maximum amount of the shares is Rs 11 only and not above.

6.Lower Limit: -

At the time of issuing share the company has to fix

the lower limit also. This lower limit is calculated on the basis of
the rate of the shares. This limit bears the same percentage,
which is mentioned for the upper limit of the share. Like upper
limit in this limit also the share minimum rate of the share is

fixed the customer who wants to see; the holding shares has to
first consider the

50
upper& lower limit of the share he cannot sell the share below the
lower limit and

not above the upper limit like the upper limit Percentage
generally in this limit also the percentage is below 10% of the
face value of the shares the percentage is below 10% of the face
value of the shares the percentage of the upper &lower limit is
equal to every type of share

For ex. Suppose the person wants to sell the

shares and the rate of the share is Rs. 10/- and the lower limit
percentage is 10% of the rate. So in this case the person cannot
sell the share at below Rs. 9/-. He will have to sell at above Rs. 9/-
or up to the upper limit of the share.

7. Sensex:-

When the shares are issued to the public the stock exchange
gives a particular group to the company. For ex. The Reliance
Group is given the group “A” like this there are several
companies which fall in “A” Group. The weightage mean is
calculated according to its equity when all the companies of
Group “A” has calculated this weightage mean they are added
all together when this addition is done the result which comes
down is known as “Sensex”.

51
 The trading of shares of “A” group is totally depended on this
sensex value. The price of the share rises this sensex value
also rises and when the price of this share comes down the
sensex value also comes down. With the sensex

8. Scripts:-
The company, which has more than one working area, it has to
issue the share separately than that company is the company
which has the script of its name.

For Ex. The Reliance this company has its several

working area Namely Reliance, Capital Reliance, Infocom Reliance Energy,
Reliance Industry. So reliance company issues separate share for separate
working area but the bold name which is given to the working area is
“Reliance”. So in this case Reliance has its own scripts. Other example
Ambuja, Birla, Etc.

9. Groups:- When the shares are issued by the company they

are given the particular group by the Stock exchange according to its
demand in the market. There are mainly 7 groups .

52
 BUYING AND SELLING

The first step is to open a demat account with your selected

Depository Participants (DP). All transactions on both the BSE and
NSE are done in demate securities.

When you buy shares, you are required to pay money to your
broker or sub-broker immediately upon getting the contract
note/confirmation memo for the purchase of shares. The broker
issue as contract note, whereas sub-broker issues a confirmation
memo. Similarly, when you sale shares you are required to give
delivery of your shares by transferring them to the demate
account of your broker/sub-broker immediately upon getting the
contract note or confirmation memo. When you buy the shares
then the share you have purchased will come first to demate
account of your broker/sub-broker. Once this happens, you can
instruct your broker/sub-broker to transfer those shares to your
demate account for receiving shares in your demate account you
will have to give your broker or sub-broker the details regarding
your demate account.

53
When you sale shares you are required to give delivery of share
from your demate account by instructing your DP to transfer the
number of shares that you have sold from your account to the
demate account of your broker. In this regard, you will be
required to include the details of the demate account of your
broker in the instruction slip that you give to your DP. Your broker
or sub-broker will help you to fill in the delivery instructions.
These instructions are of a technical nature and the delivery
instruction forms and procedures differ from DP to DP.

DIFFERENCE BETWEEN ON LINE AND

OFF LINE TRADING

Nevertheless, with all the convenience of online trading

there are still investors who prefer the old fashion way of offline
trading. Offline trading has lost some popularity but it is still the
main form of investing. Offline trading offers many benefits as
well.

1. The one benefit that an investor appreciates the most is that

they are not alone when making investment decisions.

2. There are experienced and professional brokerage companies

that handle their investments for them.

3. Investors are not faced with the challenge of making these vital
investment decisions; especially, if they do not have the
experience necessary to make the appropriate investments.

54
4. Also, there is someone there to answer any questions that may
cause concerns. sNot to mention, with offline trading mistakes are
less likely to take place. No one wants to throw their money away
or stand by and watch someone else throw their money away. It
may be wise to hire a professional to assist you in making the
correct investment decisions if you feel you lack the knowledge
necessary.

sPoints of difference between online

trading and off line trading are as follows:
1. Online trading is very expensive as compare to manual trading
or offline trading.

2. Online trading consumes less time as compare to manual

trading.

3. Online trading has very helpful to finding the records easily but
offline trading takes more time to finding the records.

4. In the help of online trading, there is no chance of any errors

while doing the trading. in offline trading there are some errors
exist like barriers of communication .

5. With the help of online trading, we know the international

market rate of share very easily.

55
 DEMATERIALISATION OF SHARES

Dematerialization is the process wherein shares certificates or

other securities held in physical form are converted into electronic
form and credited to demat account of an investor opened with a
depository participant. SEBI has made compulsory trading of
shares of all the companies listed in stock exchanges in demat
form with effect from 2nd January 2002.The procedure of opening
a demat account with DP is similar to opening an account with a
bank.s

ELECTRONIC SETTLEMENT OF TRADE

A. Procedure for purchasing dematerialized

ssecurities :-
The procedure for purchasing dematerialized securities is also
similar to the procedure for buying physical securities.
1. Investor instructs DP to receive credits into his account in
the prescribed form. There may be one time standing
instruction or separate instruction each time to receive
credits.

56
 2. Investor purchases securities in any of the stock
exchanges linked to depository through a broker.

3. Broker receives payment from investor and arranges

payment to clearing corporation.
4. Broker receives credit to securities in clearing account on
the payout day.
5. Broker gives instructions to DP to debit clearing account
and credit client’s account. Investor receives shares into
his account by way of book entry.

B. Procedure of selling dematerialized

securities
The procedure for selling dematerialized securities in stock
exchanges is similar as selling physical securities. The only major
difference is that instead of delivering physical securities to the
broker, the investor instructs his DP to debit his demat account
with the number of securities sold by him and credit the brokers
clearing account. The procedure for selling dematerialized
securities is given below:

57
 1. Investor sells securities in any of the stock exchange
linked to depository through a broker.
2. Investor instructs his DP to debit his demat account with
the number of securities sold and credit the broker’s
clearing account.
3. Before the pay-in-day, broker of the investor transfers
the securities to clearing corporation.
4. The broker receives payment from the stock exchange.

5. The investor receives payment from the broker for sale

of securities in the same manner as received in case of
sale of physical securities.

REMATERILISATION OF SHARES

Rematerialization is the process of conversion of electronic

holdings of securities into physical certificate form. For
rematerilisation of scrip’s, the investor has to fill up a remat
request form (RRF) and submit it to the DP. The DP forwards the

58
request to depository after verifying the investor’s balances.
Depository in turn initiates the registrars and transfer agent or
the issuer company. RTA/ Company prints the certificates and
dispatches the same to the investor.
s

Market timings:

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

59
Internet Based Trading through Order Routing
Systems

Internet based trading on conventional exchanges, uses the

Internet as a medium for communicating client orders to the
exchange, through broker web sites. Broker’s web sites may
serve a variety of functions. These may include;

• Allowing the clients to directly trade through investors;

• Advertise the broker dealers’ services to potential
investors;
• Offer market information and investment tools similar
to those offered by information vendor or SRO web
sites;
• Offer real-time or delayed quote information,
continuously update quotes while the user visits other
sites, or allow investors to create a personal stock
ticker;
• Provide market summaries and commentaries, analyst
reports and trading strategies and market data on
currencies, mutual funds, options, market indices and
news; and
• Offer investors access to portfolio management tools
and analytic programs;
• Information on commission and fees; and

60
 • Account information and research reports.

In an Order Routing system, a broker offering Internet trading

facility provides an electronic template for the customer to enter
the name of the security, whatever it is to be bought or sold, the
quantity and whatever the order is a market or limit order. Once
the broker’s system receives this information.

Use of Internet as Alternative Trading Systems

(Provision for price discovery and matching outside
conventional exchanges)

In foreign jurisdiction, Alternative trading systems have been

developing outside conventional securities markets, which
provide investors with additional proprietary electronic trading
facilities for securities that are traded principally on securities
exchanges, or other organized markets. They have price
discovery functions, matching systems and crossing systems. The
systems that are currently in use in outside jurisdictions are
closed systems and are not accessible to the general public
through the Internet. The securities markets regulators abroad
the maintained flexible and open policies designed to encourage
innovation in the secondary securities markets. As a result, a
number of market participants, usually broker-dealers, have

61
developed computerized “alternative trading systems” by which
the system centralize, display, match, cross or otherwise execute
trading interest.

Use of Internet for making Initial Public

Offerings

Issues of securities of using the Internet to communicate directly

with their shareholders, potential investors and analysts by
disseminating corporate information. In foreign jurisdiction, they
are also using the Internet to communicate to the public for the
following:

• Public offerings;
• Private offerings; and
• Disclosure and communication
Issuers are using the Internet to market themselves to potential
investors. The Internet is also being used for fulfilling necessary
disclosure requirements, for disseminating the prospects in
electronics form and even for receiving share applications in
public issues electronically. In India, SEBI has taken initiative in

62
permitting use of the network of stock exchange for collection of
investor applications in public offerings by the issuer companies

Investment Advisory Services

Brokers as well as other service provides such as investment
firms, research outfits etc. are using the Internet for marketing
and advertising purposes, for presenting information on portfolio
analysis and market information, and for communicating with and
receiving orders from potential investors. The services offered by
the service providers to the investors are generally the following:

• Advertising
• Providing investment information and investment
advice;
• Underwriting
• Communicating with the investors;
• Customer orders; and
• Record keeping

63
 Working Groups set up by the Committee

Considering the present state of capital markets in India and

keeping in view the ongoing developments in Internet based
securities business, it was felt that SEBI as a regulator could strive
to identify areas where use of Internet in the capital market is
possible within the existing legal framework. One such area
identified by the Committee, which is also the central within the
existing legal framework. One such area identified by the
Committee, which is also the central

theme of this report, is the area of Internet trading on existing

electronic exchange. In this area, through early introduction of
Cyber Laws would be highly describe but their existence is not a
necessary precondition. To look into the existing regulatory
scenario and to bring out some ground rules for use of the
medium of Internet, the Committee therefore constituted the
following two working groups to look into the area of:

i. Security protocols and standardization of interfaces for

Interest based securities trading, chaired by Prof. Deepak
B. Phatak, IIT, Pawai, Mumbai

64
 ii. Surveillance and monitoring related issues arising due to
Interest based securities trading, chaired by Shri. L.K.
Singhvi, Sr. ED, SEBI
The committee also requested Ms D N Raval, Executive
Director, SEBI to examine the legality of introduction of
Internet trading and issue of Alternative trading systems.
This report of the standing committee examines the
regulatory and security requirements Internet Based
Trading on Conventional Exchanges. Separate reports (s)
will cover the other areas related to Internet applications
in the securities markets.

The report of the first working group on security protocols and

standardization of interfaces has since been submitted and
incorporated in the report. The committee would like to place on
record its sincere thanks to Dr. D.B. Phatak, Ms. D.N. Raval and
their team members. The global financial market is undergoing a
transformation due to rapid technological developments. It thus
becomes

imperative that for developing in effective regulatory framework

developments in other parts of the world should be studies and
analyzed.

65
With nearly who million on-line investors, Internet trading in the
United States is growing by leaps and bounds. Internet trading is
being facilitated by large brokerage houses, thus changing the
total concept of securities trading. A team comprising of members
from stock exchanges and SEBI visited the United states to these
development and had interactions with brokerages houses,
Internet service providers and other agencies involved in
facilitating Internet trading. The

team also discussed the developments in the emerging regulatory

and supervisory framework in United States with the Securities
and Exchange

Commission officials. They were also tripped of the various

initiatives taken by SEC in this regard. These inputs have been
utilized while drafting this report.

Recommendations of the Committee

Application for Permission by Brokers

SEBI registered Stock Brokers interested in providing Internet

based trading services will be required to apply to the respective
stock exchange for a formal permission. The stock exchange
should grant approval or reject the application as the case may
be, and communicate its decisions to the number within 30

66
calendar days of the date of completed application submitted to
the exchange. The stock

Exchange, before giving permission to brokers to start Internet

based services shall ensure the fulfillment of the following
minimum conditions.

Net worth Requirement

The broker must have a minimum net worth of Rs. 50 lacs if the
broker is providing the Internet based facility on his own.
However, if some brokers collectively approach a service provider
for providing the interest trading facility, net worth, criteria as
stipulated by the stock exchange will apply. The net worth

will be computed as per the SEBI circular no FITTC/DC/CIR-1/98

dated June 16, 1998.s

Operational and System Requirements:

Operational Integrity:

The stock Exchange must ensure that the system used by the
broker has provision for security, reliability and confidentiality of
data through use of encryption technology. This stock exchange
must also ensure that records encryption technology. The stock
Exchange must also ensure the records maintained in electronic
from by the broker are not susceptible to manipulation.

67
System Capacity

The stock Exchange must ensure that the brokers maintain

adequate backup systems and data storage capacity. The stock
Exchange must also ensure that the

workers have adequate system capacity for handling data

transfer, and arranged for alternative means of communications
in case of Internet link failure.

Qualified Personnel:

The stock Exchange must lay down the minimum qualification fro
personnel to ensure that the broker has suitably qualified and
adequate personnel to handle communication including
instructions as well as other back office work which is likely to
increase because of higher volumes.

Written Procedures:

Stock Exchange must develop uniform written procedures to

handle contingency

tuations and for review of incoming and outgoing electronic

correspondence.

Signature Verification/ Authentication:

68
It is desirable that participants use authentication technologies.
For this purpose is should be mandatory for participants to use
certification agencies as and when notified by Government/SEBI.
They should also clearly specify when manual signatures would
be required.

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

Investor Information:

The broker web site providing the internet based trading facility
should contain information meant for investor protection such as

69
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 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.

70
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

71
allowed to cross trades of their clients with each other. All orders
must be offered to the market for matching.

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.

FEATURES OF ONLINE TRADING:

72
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:

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

73
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
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.

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.

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.

74
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.

Online trading integrates your bank account, your trading

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

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.

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.

75
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

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.

Your Bank, Depository and online account are integrated for

your convenience. Various broking houses provide access to
many of the popular banks.

76
 BENEFITS OF ON LINE BROKING

1) 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. 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.

2) 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.

3) Keeping Records:

77
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.

4) 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.

5.) 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.

6.) Unparalleled Safety:

Most sites are secure using 128-bit algorithms -highest available

commercially anywhere in the world. Moreover even if somebody

78
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.

7.) 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.

8.) 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

79
 subject to inspection, thus bringing in transparency into the
system.

9.) 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.

80
 PROBLEMS OF ONLINE BROKING

There is a flip side to everything and online trading is no

exception.

81
Chart

4%
14% 21%

More Costly
Lack Of Know ledge
11% Loyalty to Traditional Broker
Lack of Trust
Slow Speed
23%
Other

27%

Source:- www.lse.co.in

27% Loyality is of traditional broker

23% people says that online trading is more costly than manual
trading.

21% people not prefer online trading because of lack of

knowledge.

So, the main problems of online trading are as follows:

82
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 halfhours 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

83
this interface before selecting an online brokerage. The faster the
orders are processed the more seamless is the interface.

5.) Non- availability of personalized advice:

If one like to ask his broker "Aaj kya achcha lag raha hai" he may
not be able to do so. If he want 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

84
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.

WHY PEOPLE ARE BENDING TOWARDS ONLINE TRADING

85
Several broking houses now offer online trading facilities. You can
trade online with e-brokerages such as 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

86
provide a new sense of control over your financial future. The
amount of investment information available online is truly
astounding. Its 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.
• Conduct extensive financial research on any company
• Talk with other investors around the world

At investsmart 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

87
(NRI), trading online is perhaps their easiest option to invest in
the Indian stock markets.

What is more, the time difference, in some cases, can work to

their advantage .Antony, an NRI-based in New York, places his
order in the evening after work, when it is day time India and the
markets are open. We also have access to considerable
information online. By just logging on to ICICI direct online, for
instance, we can get the latest news, market information and
company research.

Moreover, if our connection is maddeningly slow and we want to

get your order executed immediately, most e-brokerages also
provide a facility to trade offline by placing our order via the
phone

Rolling Settlement Cycle :

In a rolling settlement, each trading day is considered as a trading period and trades
executed during the day are settled based on the net obligations for the day. At
NSE and BSE, trades in rolling settlement are settled on a T+2 basis i.e. on the 2nd
working day. For arriving at the settlement day all intervening holidays, which

88
include bank holidays, NSE/BSE holidays, Saturdays and Sundays are excluded.
Typically trades taking place on Monday are settled on Wednesday, Tuesday's
trades settled on Thursday and so on.

Concept Of Buying Limit

Suppose you have sold some shares on NSE and are trying to figure out that if you
can use the money to buy shares on NSE in a different settlement cycle or say on
BSE. To simplify things for ICICI Direct customers, we have introduced the
concept of Buying Limit (BL). Buying Limit simply tells the customer what is his
limit for a given settlement for the desired exchange. Assume that you have
enrolled for a ICICI Direct account, which requires 100% of the money required to
fund the purchase, be available. Suppose you have Rs 1,00,000 in your Bank A/C
and you set aside Rs 50,000 for which you would like to make some purchase.
Your Buying Limit is Rs 50,000. Assume that you sell shares worth Rs 1,00,000
on the NSE on Monday. The BL therefore for the NSE at that point of time goes
upto Rs 1,50,000. This means you can buy shares upto Rs 1,50,000 on NSE or

BSE. If you buy shares worth Rs 75,000 on Tuesday on NSE your BL will
naturally reduce to Rs75,000. Hence your BL is simply the amount set aside by
you from your bank account and the amount realized from the sale of any shares
you have made less any purchases you have made. Your BL of Rs 50,000, which
is the amount set aside by you from your Bank account for purchase is available
for BSE and NSE. As you have made the sale of shares on NSE for Rs.100000, the

89
BL for NSE & BSE rises to 1,50,000. The amount from sale of shares in NSE will
also be available for purchase on BSE. ICICI Direct

Future Agenda:

Under the existing legal and regulatory framework, SEBI

registered brokers can offer trading on Internet through order is
routing systems. However, with the rapid development of the
technology, we have to evolve fisher steps in this direction it is
therefore proposed that as the next step link between the
depositories and banks shall be established after the necessary
regulations have been passed. This would reduce the clearing and
settlement time and would also minimize the risk of all the
participants involved in the transactions. We have to look forward
towards achieving an ideal scenario where all the services related
to securities markets including marketing of initial public offers on
internet, providing investment advisory services to the clients,
broking, clearing .

7. GROWTH OF ONLINE TRADING

90
 According to an article by Krishnamurthy B in 2005 after
inception of online trading in India in the year 2000 online trading
is gained momentum with trading volumes growing by 150 per
cent per annum in the years 2003-2005 and it was more than
approx. 200% in the year 2008 The volume of all trades executed
through the Internet on the National Stock Exchange had grown
from less than Rs 100 crore (Rs 1 billion) in June 2003 to over Rs
700 crore (Rs 7 billion) in July 2005 which was a handsome growth
in the year 2005in the starting of 2008 the growth of online share
was good but at the mid of the year when subprime crisis affected
India including all over the world, market of online trading got
shrunk by more than 50%

Now the growth of online trading is on its right track ,Indian

stock market has been announced the one of the Safe and stable
market of the world, so here in India the online trading is growing
like anything in comparison to the whole world

At the end of July 2008, there were more than 168 registered
brokers on the NSE and the number of Internet trading
subscribers to about 2.024 million. In the year 2007 India has 8
crore (80 million) internet user, the % of internet user is growing
in each year

91
 At the same time the number of subscribers trading through
the portal of Kotak Securities had gone up significantly by 150 per
cent and the number of online trading customers had grown from
30,000 to 75,000. And the company expected to have at least
130,000 customers by the end of that fiscal. In the recent past
years of 2005

ICICIDirect and Indiabulls recorded an annual volume growth of

100 per cent and Indiabulls had about 30 per cent of India's online
trading volumes.

Today the total volume of online trade in India is about 29-

31% of total trades.

According to brokers the better broadband connectivity across

the country and wider awareness of equity as an asset class will
raise the online trade volumes to over 50% of total trade.In India
the demography is such that 75% of the population is under the
age of 36 and more than 50% of the 75% is under age of 25 and
this is another supporting factor

The Chief Executive of Reliance Money Ltd says that online

investing is still at a nascent stage in India and expects that
Internet-based trading will eventually take about half of the total
stock market trading as like with developed markets such as the
US. Philippines has the highest online trade with about 55-60%
execution of trade is online. The reason is because they had wider
Internet connectivity years before India. The biggest challenge in

92
India remains better Internet connectivity. The earlier Web-based
technology used for Internet trading

has been replaced by specialized software which gives real-time

global data streaming rates to trader helping investors to analyze
the market trends and helps in faster execution of trades. Earlier
the investors made trade calls over the phone which sometimes
led to the delays.

Online share trading in India was at a boom in the end of

2006 with daily-traded volumes more than tripling from Rs 1,500
crore to Rs 5,000 crore in the last one year and terminals was set
up in small towns such as Rajkot, Hubli and Vijayawada .In that

year the share of online trading rose dramatically from 7% last

year to 20% as a percentage of overall traded volumes. Due to
this factor the top five US brokerage firms decided to make a
foray into India in the next year driven by strategic interest. Also
at that time non-metros accounted for half of the daily turnover of
online trading.

Graph is showing the declining in the turnover of online

trading in Indian stock exchange during slowdown in economy
due to subprime mortgage crisis.

93
 A crash of the market in the early February 2008 the
investors remained away from online trading the turnover of the
NSE from internet-based trading dipped to a daily average of Rs
1,648 crore between February 1 and February 8 as compared with
Rs 3,450 crore in January 2008 Rs 3,587 crore in December 2007
and Rs 4,417 crore in November 2007 in the exchange’s cash
market segment. In the mid February 2008 it

accounted for just 12% of NSE’s total cash turnover as compared

with a high of 24% in November last year.

94
 "Issues that need to be addressed are education on cyber
crime and the security solutions around it," says Vinesh Menon,
Deputy CEO & Head for Online Investment & Branch Channel,
Bajaj Capital

"It's a matter of time when we will see exponential growth in

the online trading segment, not just through the computer but
also through our mobile phones," adds Menon. With over 20
million investors,

India boasts of the third highest investor base in the world,

unthinkable till a few years ago. The most online stock broking
companies started from 2000 onwards because of development of
global Internet economy and for years 2000 to 2003 the stock
market was under a bear hug. The intense competition among a
new wave of online brokerage companies hammered down
brokerage rates from 1% (in 2000) to 0.25 %, or even lower to 5
paisa

The number of investors opting for online trading has

gone up manifold, according to the recently published 'India’s
Leading Equity Broking Houses, 2008' by Dun & Bradstreet (D&B).
The publication says that less than 10% of the 191 broking firms

95
surveyed reported huge growth in opening of e-broking accounts
and some firms saw a surge in value of up to 400% in e-broking
during 2007

96
According to the report, numbers of e-broking accounts registered
in 2007 have grown exponentionally. Indiabulls Securities Ltd
added 4,51,611 accounts while a relatively new firm in the
industry, Reliance Money added 2,15,678 accounts during the
same time period. Motilal Oswal

Securities Ltd managed to add 19,065 accounts while Unicon

Financial Intermediates Pvt Ltd could increase their e-broking
accounts by 13,787

According to market watchers, the rise in the value of on

line transactions is also because of sustained bull run witnessed in
2007, when the 30-share Sensex of the Bombay Stock Exchange
(BSE) gained from 13,842 points to 20,207 points, a gain of 6,365
points (up 47%).

97
 E-broking is contributing a sizeable portion to the trading
volumes and also to the revenue generated for leading stock
broking firms. Some examples of the percentage contribution to
trading volumes contributed by e-broking are 91% in case of
Reliance Money, 62% for India Bulls, 20% each for ASL Capital
and Shreyas Stock, 19% Angel Broking, and 15% Farsight Capital.
In respect of revenues generated from e-broking, India Bulls
(63%), Reliance Money (54%), Unicon Financial (30%) and
Shreyas Stock (20%) reported higher shares in 2007. Ashika
reported 98% growth in e-broking business in the first 10 months
of 2007.

Another significant trend is the growth in international

business of broking firms. Firms that reported presence of offices
outside India include Reliance

Money, Motilal Oswal, Karvy Stock Broking, JRG securities, Vogue

and Bonanza Portfolio.

HDFC Securities have 500,000 online customers’ deals in daily

online trades worth Rs 250-300 crore is also in the black. The
revenues it had in 2007-08 is Rs 100 crore. HDFC Securities had

98
revenues of Rs 67 crore and a net profit of Rs 7.21 crore in 2006-
07. ICICIdirect has 1.5 million online broking accounts and parent
ICICI Securities reported revenues of Rs 750 crore for March 2008.
The new player Reliance Money has 2 million online accounts
trades worth Rs 2,000 to Rs 3,000 crore per day.

99
 RESEARCH METHODOLOGY

The basic task of research is to generate accurate information

for use in decision making. Research can be defined as the

systematic and objective process of gathering, recording and

analyzing data for aid in making business decisions.

There are basically two techniques

adopted for obtaining information:

1. Primary Data.

2. Secondary Data.

Primary Data is gathered specifically for the project at hand

through personal interviews with the accounts officers.

Secondary data is previously collected and assembled for

some project other than the one at hand. It is gathered and

recorded by someone else prior to current needs of the

researcher. It is less expensive than the primary data.

100
SECONDARY DATA

Secondary data was collected from Ludhiana Stock Exchange

Scope of study:

The study is limited to Ludhiana Stock Exchange , Firoz Gandhi

Market Ludhiana

Data Collection:

Data is collected from secondary sources.

Sources of data collection are:

1) Ludhiana Stock Exchange

2) www.nseindia.com

3) www.bseindia.com

4) www.on-linetrading.com

For the successful research the manipulation of certain things,

concepts, and
symbols for the purpose of generalization is inevitable. Research
is simply the pursuit of truth.

101
Analysis and Interpretation
Ans.1 What is your education qualification?

To invest in the stock market minimum 100000 or more than this

should be the annual income level of the people. In India the per capita
income in also increasing so we can say that there is a good
opportunity for the online trading market.

1. For how long you have been trading with on line-trading?

(a)1 year (b) 2 year
(c) 3 year (d) 4 year
Sample size 100

102
 45
40
35
30 1 year
25 2 year
20
3 year
15
10 4 year
5
0
YEAR

According to this survey we find that 44% people says

that we are investing the money online from one year
and 26% people says that we are investing the money
online from 2 years and 19% to 11% people says that
we are investing money online from 3 to 4 year. so we
can say that now online trading is very popular in the
modern market.
2. How will you describe your experience with on-line trading
till date?
(a) very easy to operate
(b) very difficult to operate
(c) not secure
(d) Any other
Sample size 100

103
 60

50 I find it very easy to operate

40
I find it very difficult to
30 operate

20 I feel it is not secure

10 Any other
0
Experience

According to this survey we find that 60% of people find very

easy to operate and 15% people find difficult two operate
and 10% and 15% people find no secure and any other. so
we can say that online trading is very simple to operate and
easy to under
3. what amount of money you invest normally ?
(a) 50000 (b) 100000 to 150000
(c) 150000 to 2000000 (d) Any other amount
Sample size 100

35
30
25
50000
20
100000to150000
15
150000to200000
10 Any Other
5
0
Money
104
 According to this survey we find that 35% of people
invest money normally 50000 and 28% of people invest
money 100000to150000 and 23% and 14% of people
invest money between 150000to200000 and any other.
So we can say that the people are not invest more
money in the share market because there is a great risk
involved while doing the trading.

4 . How often do you trade?

(a)Daily (b) Weekly
(c) Monthly (d) More than one month
Sample Size 100

40
35
30
25 daily
20 weekly
15 monthly
10 more than 1 month

5
0
Time

According to this survey we find that 10% of people do

trade Daily and 40% people do trade weekly and 32% and
18% people do trade month and more than month. So we
can say that people are generally invest in stock market
weekly basis.

105
 5. which trading you prefer?
(a) On line trading (b) Manual trading
(c) Both

Sample Size 100

50

40

30 On line trading
Offline trading
20
Both
10

0
Relationship

According to this survey we find that 20% people prefer

online trading and 32% people prefer offline trading
rest of 48% people prefers both. So we can say that
mostly people are awareness about the on line trading
and because of this reason the mostly people are
optimizing offline trading.

6. Whether online trading settled in Indian investor psyche

(a) Yes (b) No
Sample Size 100

106
 70
60
50
40 Yes
30 No
20
10
0
Settleled

According to this survey we find that 30% people says yes

and 70% people says no. so we can find that on line
trading is not settled in the Indian psyche because some
people are not experience towards online trading.

7. What shortcomings do you feel in Indian On-Line trading ?

(a) Lack of awareness the investors about on-line
trading
(b) Shortage of domestic technical expertise
(c) Shortage Of Infra structure
(c) any other
Sample Size 100

107
 50

40 Lack of awareness

30 Shortage of
expertise
20 Shortage Of Infra
structure
10 any other

0
Shortcomings
According
to this survey we find that 15% of people says lack of
awareness 49% says Shortage of expertise and 14% people
says Shortage Of Infra structure and 22% says any other. So
we can say that mostly people are shortage of experience
about the Indian derivatives market or share market.

8. Which media would you prefer the most for investment?

(a) T.V (b) Newspaper
(c) Magazines (D) Journals

108
 60

50

40 T.V
30 Newspaper
Magazines
20
Journals
10

0
Media

According to this survey we find that 55% people Prefer T.V

and 25% people prefer newspaper and 10% people prefer
magazines and 10% people prefer journals. So we can
suggest that mostly people are very easily grapped the
knowledge through T.V.

9.What is your annual income?

109
INTERPRETATION

58%respondent are having the income level of 100000-

200000 ,21% is having 200000-300000 , 12% in having300000-400000
, 7% of the total respondent are having income more than 400000 per
annum and only 2% are having less than 100000 per annum.

To invest in the stock market minimum 100000 or more than

this should be the annual income level of the people. In India the per
capita income in also increasing so we can say that there is a good
opportunity for the online trading market.

10.What percentage of your monthly household income could be

available for investment?

110
INTERPRETATION

According to the data 23% of the total respondent invest

less than 5% of their income,

41% respondents are saying that they invest 5%-10% of their monthly
income (which is highest)

Whereas the 21% investor do the investment 10%-15% of their total

monthly income,13 invest between 15%-20% of the total income and
only 2% does more than 20% of their income invest in the market

We can easily understand that 75% of the total population is having a

good amount of investment, so the investment is their in the market,
good number of people are ready to invest a good amount in the
market

111
91% of respondent is in the income level of 100000 – 300000
(according to the last question analysis).

So we can say that stock brokerage houses will have to do a

good business with the help of Online trading system with few value
addition services

10.Where do you often invest your money?

112
INTERPRETATION

Highest number of respondent is having their investment in the

equity that is 65% whereas the investment available for the mutual
fund, term deposit and insurance is 14% ,12% and 9%

So the investor for equity is high which is again showing the n number
of opportunity for online trading

11.what is the primary objective of your investment?

113
INTERPRETATION

13% of the respondent invest the money for the reason capital
appreciation but most of the investor is having same motive that is
source of income and retirement plan, wealth preservation and
education funding for children or other are only 10%

From the analysis we can have idea that the main objective of the
investor to earn the money through trading in stock market77% of the
respondent achieve their objective with the help of investment in the
equity market, because most of the investment take place in the form
of equity (explanation of 4th ans. ) So we can say that there is a huge
potential in the market for the trading in the stock market

114
12.Do you owe a Computer?

INTERPRETATION

78% of the total respondent who are dealing with the stock
market is having computer in their house and only 22% is not having
computer in their house

The people who is having computer that is 78% can also go for
online trading which can be a large number of people who will go for
online trading. they don’t need to do a additional investment for
computer to go for online trading

115
13. To operate a computer is easy for me

INTERPRETATION

76% (26+51) of the total respondent believe that operate a

computer is easy for me whereas 20%(13+7) of the respondent is
having problem to operate a computer out of that 20% , 75 believe
that they can’t go for computer

116
 So ,if 78% of the people who are dealing with the stock market is
having computer at their house and around 76% of the same
population don’t have any problem to operate

a computerSo around 60 % is their who is having computer and they

don’t have problem to operate a computer.

14. Online trading is a secure way of trading

INTERPRETATION

71% of the respondent is having a positive thinking that online

trading is a secure way of trading whereas 185 of the respondent
believes that online trading is not a secure way of trading

Satisfaction about the process, by which they will be going to do a

trading that is online trading, should be there in the mind of the

117
customer. If they believe that their is no risk over the money which
they are going to invest in the market with the help of online trading,
there will be a perception to go for online trading at least one time

15,online trading is easy and fast way of trading?

INTERPRETATION

51% of the total respondent believe that online trading is a easy

task Whereas 41% of the respondent believes that to deal with online
Trading is not a easy task and 85 was confused to anything about that
the trading via internet is a easy task or not

118
 There is a difference between the people who believe and who
don’t believe is not very big that is only 10% , the reason of this
problem can be if a person is doing its investment on its own he or she
think of the problem of being mistaken in the transaction. So there is a
need of proper training to do trading online

16. Introduction of online trading helped to attract the new

Investors thus increasing the trading volumes at Stock Market?

119
FINDINGS

1. For how long you have been trading with on line-trading?

According to this survey we find that 44% people says
that we are investing the money online from one year.
11% people says that we are investing money online
from 4 year. so we can say that now online trading is
very popular in the modern market.

120
2. How will you describe your experience with on-line trading
till date?
According to this survey we find that 60% of people find
very easy to operate. and15% people find no secure.
so we can say that online trading is very simple to
operate and easy to understand

3. What amount of money you invest normally?

According to this survey we find that 35% of people
invest money normally 50000. 14% of people invest
money between 150000to200000. So we can say that
the people are not invest more money in the share
market because there is a great risk involved while
doing the trading.

4. How often do you trade?

According to this survey we find that 10% of people do
trade Daily. 18% people do trade more than month. So
we can say that people are generally invest in stock
market weekly basis.
5. which trading you prefer?
According to this survey we find that 20% people prefer
online trading and 32% people prefer offline trading. So
we can say that mostly people are awareness about the
on line trading and because of this reason the mostly
people are optimizing offline trading.

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6. Whether online trading settled in Indian investor psyche
According to this survey we find that 30% people says yes
and 70% people says no. so we can find that on line
trading is not settled in the

Indian psyche because some people are not experience

towards online trading.
7. What shortcomings do you feel in Indian derivatives
market?
According to this survey we find that 37% of people says
lack of awareness 49% says Shortage of expertise and
14% people says any other. So we can say that mostly
people are shortage of experience about the Indian
derivatives market or share market.
8. Which media would you prefer the most for investment?
According to this survey we find that 41% people Prefer T.V
and 39% people prefer newspaper and 20% people prefer
magazines. So we can
suggest that mostly people are very easily grapped the
knowledge through T.V

CONCLUSION

Online trading is the new concept in the stock market. In India,

online trading is still at its infancy stage. Online trading has made

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it easy to trade in the stock market as now people can trade while
sitting at their home. Now stock market is easily accessible by the
people. There are some problems while doing the trade through
the internet. Major problem faced by online trader is that the
investors are loyal to their traditional brokers, they rely upon the
suggestions given by their brokers. Another major problem is that
the people don't have full knowledge regarding online trading.
They find it difficult to trade themselves, as a wrong entry made
by them, can bring them huge losses.

Nevertheless to say that online trading has the bright future as

the percentage of the trade done through online trading is
increasing day by day.

LIMITATIONS

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Despite of the training my level best, there were still some
limitation which I think remains there to draw fruitful
conclusion. There were some practical problem which come
across and could not be properly death with

 The advisory services being promised by the brokers

would be of little use to investors looking for an insight into
the market.

 As a client one will access the NSE through a server of

the online brokerage and this may involve queuing delays

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

Suggestions

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The introduction of the Internet has surprisingly changed our way
of life as a society. It has defined the way we do business and the
way we correspond. The Internet has opened many opportunities
for online trading. The financial industry revolves around the
Internet. Every thing is just a few clicks away. This makes online
trading most convenient. But there are still investors who prefer
the old fashion way of offline trading and they mainly prefer
offline trading for security reasons.

Internet has introduced a way for consumers to manage their

money online. Not to mention, Internet has transformed the way
investment companies operate their business and has made it
easy for private investors to gain straight access to a range of
different markets and online tools that were at one point only
reserved by the use of investment professionals. Consumer
investing and online trading has dramatically changed over the
last decade. Online trading dynamically continues to be redefined.
Services have expanded to include integrated management of
additional financial accounts. Not to mention, it has subsequently
expanded in conjunction with ground-breaking improvements to
the traditional trading interface, such as telephone interface
systems.

Of course, online trading has many pros. There are several

wonderful reasons to invest online and consider online trading.

Money saving opportunities The amount of money you save

depends primarily on the online brokerage firm that you choose.
No two firms are the same. There may be different regulations,
similar to bank regulations. There are minimum deposits required
that must be maintained. As mentioned above, this will depend
on the online brokerage firm.

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2. Instant online access You can gain instant access to your
account, the value of your portfolio updates immediately before
your eyes.

3. Enter online trades at anytime You can enter online trades at

anytime and from anywhere. This is very convenient if you live in
a different time zone than the country you are trading in. Not to
mention, it is especially fit for investors with busy schedules.

4. With online trading you are in charge You are in control of your
investments. No sales pitches and no hassle. You decide where to
invest your money.

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 Questionnaire

Dear respondent,

I am student of MBA. I am working on the

project of “On-Line trading”. You are requested
to fill the questionnaire to enable, to undertake
the study on the said Project.
Name……………………….
Occupation………………
Address ……………………
Phone no………………….

1. For how long you have been trading with on line-

trading?
(a)1 year (b) 2 year
(c) 3 year (d) 4 year

2 .How will you describe your experience with on-line

trading till date?
(a) very easy to operate
(b) very difficult to operate
(c) not secure

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 (d) Any other

3. What amount of money you are invested normally?

(a) 50000 (b) 100000 to 150000
(c) 150000 to 2000000 (d) Any other amount

4. How often do you trade?

(a)Daily (b) Weekly
(c) Monthly (d) More than one month

5. In which trading you will prefer?

(a) Online trading (b) offline trading
(c) Both

6. According to you online trading settled in Indian investor

psyche
(a) Yes (b) No

7. What shortcomings do you feel in Indian On-line Trading ?

(a) Lack of awareness the investors about on-line
trading
(b) Shortage of domestic technical expertise
(c) Shortage Of Infra structure

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 (d) If any other

8. Which media would you prefer the most for investor?

(a) T.V (b) Newspaper
(c) Magazines (d) Journals

9. What is your annual income?

(a) Below 100000 (b) 1,00,000 –

2,00,000

(c) 2,00,000 – 3,00,000 (d) 3,00,000 –

4,00,000

10. What percentage of your monthly household income could be

available for m investment?

(a) Less than 5% (b) 5% to

10%

(c) 10% to 15% (d) 15% to

20%

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11. Where do you often invest your money?

(a) Equity (b)

Mutual fund

(c) Insurance (d)

Term deposits

(e) Others

12. What is the primary objective of your investment?

(a) Capital appreciation (b) Source

of income

(c) Retirement planning (d) Wealth

preservation

(e) Education funding /others

13. Do you owe a Computer?

(a) Yes

(b) No
14. online trading is a secure way of trading

(a) Strongly agree (b) Agree

(c) Can’t say (d) Disagree

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15. online trading is easy and fast way of trading?

(a) Strongly agree (b) Agree

(c) Can’t say (d) Disagree

16. Introduction of online trading helped to attract the new

Investors thus increasing the trading volumes at Stock Market?

(a) Strongly agree (b) Agree

(c) Can’t say (d) Disagree

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BIBLIOGRAPHY

BOOKS
• C. R. Kothri, Research Methodology, Vishwa
Prakshan

• MAGAZINES
• Business World
• LSE’s Magazine

INTERNET SITES
• www.nseindia.com
• www.bseindia.com
• www.on-linetrading.com
• www.sebi.gov.in

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• www.lse.co.in

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