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PROJECT ON ONLINE TRADING

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PROJECT ON ONLINE TRADING Powered By Docstoc
					CHAPTER-1

INTRODUCTION




     1
              INTRODUCTION TO THE STUDY


Stock exchange is an organized market place where securities are traded. These
securities are issued by the government, semi-government bodies, public sector
undertakings and companies for borrowing funds and raising resources. Securities
are defined as any monetary claims (promissory notes or I.O.U) and also include
shares, debentures, bonds and etc., if these securities are marketable as in the case
of the government stock, they are transferable by endorsement and alike movable
property. They are tradeable on the stock exchange. So are the case shares of
companies.

Under the Securities Contract Regulation Act of 1956, securities’ trading is
regulated by the Central Government and such trading can take place only in stock
exchanges recognized by the government under this Act. As referred to earlier there
are at present 23 such recognized stock exchanges in India. Of these, major stock
exchanges, like Bombay Stock Exchange, National Stock Exchange, Inter-
Connected Stock Exchange, Culcutta, Delhi, Chennai, Hyderabad and Bangalore
etc. are permanently recognized while a few are temporarily recognized. The above
act has also laid down that trading in approved contract should be done through
registered members of the exchange. As per the rules made under the above act,
trading in securities permitted to be traded would be in the normal trading hours
(10 A.M to 3.30 P.M) on working days in the


Trading ring, as spssecified for trading purpose. Contracts approved to be traded
are the following:

 Spot delivery deals are for deliveries of shares on the same day or the next day as
the payment is made. Hand deliveries deals for delivering shares within a period of
7 to 14 days from the date of contract. Delivery through clearing for delivering
shares with in a period of two months from the date of the contract, which is now
reduce to 15 days.(Reduced to 2 days in demat trading)Special Delivery deals for
delivering of shares for specified longer periods as may be approved by the
governing board of the stock exchange. Except in those deals meant for delivery on
spot basis, all the rest are to be put through by the registered brokers of a stock
exchange. The securities contracts (Regulation) rules of 1957 laid down the
condition for such trading, the trading hours, rules of trading, settlement of
disputes, etc. as between the members and of the members with reference to their
clients.




                                          2
                 OBJECTIVES OF THE STUDY


   To analyze the changes in trading after the exchange shifted from outcry to
    online trading system.
   To study the functions of SHAREKHAN through various departments.
   To know the online screen based trading system adopted by SHAREKHAN
    and about its communication facilities. The appropriate configuration to set
    the network, which would link the SHAREKHAN to individual / members.
   To know about the latest and future development in the stock exchange
    trading system.




                                      3
NEED, SCOPE
   AND
IMPORTANCE




     4
NEED FOR THE STUDY:

Online trading denotes buying and selling securities on the Internet through
provided by financial brokers like SIM s and banks online trading is the easy way to
buy and sell shares from the comfort of one’s home. Finding a company that
provides with an online trading account can be difficult. There are many companies
that will offer excellent services for online trading, but one needs to find out one that
meets their needs and requirements. The present study to review the online trading
procedure a case study of ONLINE TRADING at SHAREKHAN, as the exchange
has changed it’s trading from the outcry mode to online trading on 20th February
1997, there is need to assess the performance of the capital market.

Trading financial markets is like any other discipline; the more you study it and
become an expert in it, the better you get. Too many people want to jump into online
trading and blow their money before they even know what they are doing. They
perceive forex trading or stock market trading as a quick and easy way to riches
and figure they can jump in with minimal preparation.

This is why beginner traders are susceptible to the latest forex trading or
commodity trading “sure-fire” system that some guru out there is selling. After all,
what could be easier than forking out some cash and buying a trading system
“guaranteed” to make you big profits?

It would be nice if the world worked that way. It would be nice if money grew on
trees too. As with any other major skill, success in trading takes time, study, a fair
degree of frustration, and a lot of hard work to master.

Whether it be trading forex, stocks, bonds or commodities, you are going to have to
invest some serious time really studying your market and getting to know it as well
as you do your wife, your children, or your parents! There are really no shortcuts.




                                           5
SCOPE OF THE STUDY :

The study is confined to the past 2-3 years and the present system of trading
procedure in share khan stock exchange. (Also a comparative study is done for
SKSE with HDFC securities, Icici direct, India bulls, Kotak Street, 5 Paisa.)

Online Trading is an internet based investment activity which eliminates the
association of a broker. Anyone who has a computer, enough money to open an
account and reasonable financial history has the ability to invest in the market.
Nowadays there are many online trading companies working as portals for the
biggest stock houses like the National stock exchange and the Bombay Stock
Exchange.

The person has to get registered with the online trading portal and get into into an
agreement with the company to trade in different kinds of securities by accepting
the terms and conditions. The online trading portals are connected to the stock
exchanges and the assigned banks.

Such online portals offer the trader an opportunity to check live online stock prices
which they can either check through mail or the interface. Also ample amount of
research data is provided which helps the user make their own decisions as to
whether to invest in a particular stock or not.

The online trading companies allow the users to invest in a number of financial
products and services like equities, mutual funds, life insurance, loans, share
trading, commodities trading institutional trading, general insurance and financial
planning.Due to this invent, the market has become more accessible, but that
doesn’t mean that it should be taken lightly

When you trade online, you use the services of an online broker. You use actual
money, but instead of talking to the broker about which investments to make, you
yourself decide which stock to buy since you have resource to the online stock
prices.

Thus online stock company not only acts as a portal, but also as a broker and offers
you to maximize your returns in the most efficient manner.




                                          6
IMPORTANCE OF THE STUDY:

Online of the trading is no different than offline trading. It requires the same
amount of risk plus the same amount of skill. One needs to be well-disciplined and
goal oriented as these are the main skills that separate winners and losers in the
trading world.

Trading especially online trading-requires any one to put limits on what they spend
and their number of transactions. Also research is vital if one wants to uncover
important tips to greatly improve the quality of their online trading portfolio and
also to avoid getting bogged by purchasing shares from companies in the midst of a
lawsuit or poor management.

Online trading can be a good way to make a lot of money or to bring a small
residual income to supplement regular income. Of course, one needs money to get
started and even after getting started, it will still be a dangerous game loaded with
risks. If one is determined and goal oriented, then they can succeed at online
trading. If one trades emotionally and fail to be patient and analytical, they are
almost guaranteed to fail, even if they get lucky a couple of times.



 Trading at different exchanges has never been without glitches. It has made a lot of
billionaires, as well as bringing many rich people onto roads. It used to be much
more difficult in past, one of the most challenging problems was inability of the
stock traders to make up something useful of the information generated on per
second basis from the ongoing trade. This not only slowed down the trading activity,
but also resulted into huge losses. Not all the traders were in a position to make the
right decisions at the right time.


 Online trading tools have revolutionized the industry; it has made a real difference
in the investors earning ability. At the beginning when these tools came into
existence, many critics were concerned about their ability to make any impact on
the way online trade was carried out. The most important challenge to tackle was
that these trading tools were fed into and they didn’t do any real time processing. It
compromised the ability to make contributions in active trades by the traders. Now,
the new tools have changed the trend for good. These tools are connected with the
stock exchange.



                                           7
CHAPTER-2
  RESEARCH
    AND
 METHODOLOGY




     8
                    RESEARCH METHODOLOGY


Research design:-

Research design is some statement or specification of procedure for collecting and
analyzing the information required for the solution of some specific problem.
Exploratory Research has been used in this study.

Data source: - The data source utilized to undertake the project is both primary
and secondary data. The data collection methods include both primary and
secondary collection methods.

Primary data: This method includes the data collected from the personal
interaction with authorized members of Share khan Securities limited.

Secondary data: The various sources of secondary data include:

      The lecturers delivered by the superintendents of respective departments.
      The brochures and material provided by Share khan Securities limited.
      The data collected from the magazines of the NSE, economic times, etc.
      Various books relating to the investments, capital market and other related
       topics.




                                         9
          LIMITATIONS OF THE STUDY


o   The study is confined to online trading procedure only.
o   Problems of listing are not covered due to limited time and to keep the
    study in manageable limits.

o   The study confined to the past 2-3 years and present system of the
    trading

     procedure in the SHARE KHAN STOCK EXCHANGE and the
    study is                  confined to the coverage of all the
    related issues in brief.

o   The data is collected from the primary and secondary sources and
    thus is subject to slight variation than what the study includes in
    reality.




                               10
  CHAPTER-3

INDUSTRY PROFILE




       11
INDUSTRY PROFILE
The following diagram gives the structure of Indian Financial System:

                                      INDIAN
                                    FINANCIA-
                                    L SYSTEM




            MONEY                                           CAPITAL
            MARKET                                          MARKET




Organized    Unorga-   Sub-market     Gilt-edged   Industrial       Develop-           Financial
 Sector       nized                   Securities   Securities        ment              Services
             Ssector                   Market       Market           Banks




                              Call money                    Primary            IFCI            Merchant
                               Market                      New issue                           Banking
                                                            Market




                                Treasury                    Secondary          IDBI                Leasing
                                  Bill                       Market
                                 Market




                                Commer                                         ICICI           Factoring
                                 -cial
                                Market




                               Commer-                                         UTI                 Venture
                                  cial                                                             Capital
                               Paper




                               Certificate                                     LIC                 Mutual
                                   Of                                                              Funds
                                Deposits




                                             12
FINANCIAL MARKET:

Financial markets are helpful to provide liquidity in the system and for smooth
functioning of the system. These markets are the centers that provide facilities for
buying and selling of financial claims and services. The financial markets match the
demands of investment with the supply of capital from various sources.



According to functional basis financial markets are classified into two types.

They are:

      Money markets (short-term)
      Capital markets (long-term)

       According to institutional basis again classified in to two types. They are

      Organized financial market
      Non-organized financial market.

       The organized market comprises of official market represented by
       recognized institutions, bank and government (SEBI) registered/controlled
       activities and intermediaries. The unorganized market is composed of
       indigenous bankers, moneylenders, individual professional and non-
       professionals.

MONEY MARKET:

Money market is a place where we can raise short-term capital.

Again the money market is classified in to

      Inter bank call money market
      Bill market and
      Bank loan market Etc.
      E.g.; treasury bills, commercial papers, CD's etc.




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CAPITAL MARKET:

Capital market is a place where we can raise long-term capital.

Again the capital market is classified in to two types and they are

       Primary market and
       Secondary market.

          E.g.: Shares, Debentures, and Loans etc.

PRIMARY MARKET:

Primary market is generally referred to the market of new issues or market for
mobilization of resources by the companies and government undertakings, for new
projects as also for expansion, modernization, addition, and diversification and up
gradation. Primary market is also referred to as New Issue Market. Primary market
operations include new issues of shares by new and existing companies, further and
right issues to existing shareholders, public offers, and issue of debt instruments
such as debentures, bonds, etc.

The primary market is regulated by the Securities and Exchange Board of India
(SEBI a government regulated authority).


Function:
The main services of the primary market are origination, underwriting, and
distribution . Origination deals with the origin of the new issue.Underwriting
contract make the shares predictable and remove the element of uncertainty in the
subscription. Distribution refers to the sale of securities to the investors.

The following are the intermediaries associated with the money market:

   1.   Merchant banker/book building lead manager
   2.   Registrar and transfer agent
   3.   Underwriter/broker to the issue
   4.   Adviser to the issue
   5.   Banker to the issue
   6.   Depository
   7.   Depository participant




                                          14
Investors’ protection in the primary market:
To ensure healthy growth of primary market, the investing public should be
protected. The term investor protection has a wider meaning in the primary market.
The principal ingredients of investors’ protection are:

       Provision of all the relevant information
       Provision of accurate information and
       Transparent allotment procedures without any bias.



SECONDARY MARKET:


The primary market deals with the new issues of securities. Outstanding securities
are traded in the secondary market, which is commonly known as stock market or
stock exchange. “The secondary market is a market where scrip’s are traded”. It is
a market place which provides liquidity to the scrip’s issued in the primary market.
Thus, the growth of secondary market depends on the primary market. More the
number of companies entering the primary market, the greater are the volume of
trade at the secondary market. Trading activities in the secondary market are done
through the recognized stock exchanges which are 23 in number including Over the
Counter Exchange of India (OTCE), National Stock Exchange of India and
Interconnected Stock Exchange of India.Secondary market operations involve
buying and selling of securities on the stock exchange through its members. The
companies hitting the primary market are mandatory to list their shares on one or
more stock exchanges in India. Listing of scrip’s provides liquidity and offers an
opportunity to the investors to buy or sell the scrip’s.



The following are the intermediaries in the secondary market:

   1.   Broker/member of stock exchange – buyers broker and sellers broker
   2.   Portfolio Manager
   3.   Investment advisor
   4.   Share transfer agent
   5.   Depository
   6.   Depository participants.




                                         15
FUNCTION OF CAPITAL MARKET:

      It acts as a link between investors and savers.
      Encouragement to savings
      Promotes economic growth
      Encouragement to investment
      Stability in security prices
      Benefits to investors
   

STOCK MARKETS IN INDIA:

Stock exchanges are the perfect type of market for securities whether of government
and semi-govt bodies or other public bodies as also for shares and debentures issued
by the joint-stock companies. In the stock market, purchases and sales of shares are
affected in conditions of free competition. Government securities are traded outside
the trading ring in the form of over the counter sales or purchase. The bargains that
are struck in the trading ring by the members of the stock exchanges are at the
fairest prices determined by the basic laws of supply and demand.

Definition of a stock exchange:

“Stock exchange means any body or individuals whether incorporated or not,
constituted for the purpose of assisting, regulating or controlling the business of
buying, selling or dealing in securities.” The securities include:

      Shares of public company.
      Government securities.
      Bonds



History of Stock Exchanges:

The only stock exchanges operating in the 19th century were those of Mumbai setup
in 1875 and Ahmedabad set up in 1894. These were organized as voluntary non-
profit-marking associations of brokers to regulate and protect their interests. Before
the control on securities under the constitution in 1950, it was a state subject and the
Bombay securities contracts (control) act of 1925 used to regulate trading in
securities. Under this act, the Mumbai stock exchange was recognized in 1927 and




                                          16
Ahmedabad in 1937. During the war boom, a number of stock exchanges were
organized. Soon after it became a central subject, central legislation was proposed
and a committee headed by A.D.Gorwala went into the bill for securities regulation.
On the basis of the committee’s recommendations and public discussion, the
securities contract (regulation) act became law in 1956.

Functions of Stock Exchanges:

Stock exchanges provide liquidity to the listed companies. By giving quotations to
the listed companies, they help trading and raise funds from the market. Over the
hundred and twenty years during which the stock exchanges have existed in this
country and through their medium, the central and state government have raised
crores of rupees by floating public loans. Municipal corporations, trust and local
bodies have obtained from the public their financial requirements, and industry,
trade and commerce- the backbone of the country’s economy-have secured capital
of crores or rupees through the issue of stocks, shares and debentures for financing
their day-to-day activities, organizing new ventures and completing projects of
expansion, diversification and modernization. By obtaining the listing and trading
facilities, public investment is increased and companies were able to raise more
funds. The quoted companies with wide public interest have enjoyed some benefits
and assets valuation has become easier for tax and other purposes.

Various Stock Exchanges in India:

At present there are 23 stock exchanges recognized under the securities contracts
(regulation), Act, 1956. Those are:

Ahmedabad Stock Exchange Association Ltd.

Bangalore Stock Exchange

Bhubaneshwar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchange Ltd.


Coimbatore Stock Exchange


Delhi Stock Exchange Association




                                         17
Guwahati Stock Exchange Ltd

Hyderabad Stock Exchange Ltd.

Jaipur Stock Exchange Ltd

Kanara Stock Exchange Ltd


Ludhiana Stock Exchange Association Ltd

Madras Stock Exchange

Madhya Pradesh Stock Exchange Ltd.


Magadh Stock Exchange Limited

Meerut Stock Exchange Ltd.


Mumbai Stock Exchange

National Stock Exchange of India

OTC Exchange of India

Pune Stock Exchange Ltd.


Saurashtra Kutch Stock Exchange Ltd.


Uttar Pradesh Stock Exchange Association

Vadodara Stock Exchange Ltd.



Out of these major stock EXCHANGES WERE:




                                       18
NSE:
The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions
(FI’s) to provide access to investors from all across the country on an equal footing.
Based on the recommendations, NSE was promoted by leading Financial
Institutions at the behest of the Government of India and was incorporated in
November 1992 as a tax-paying company unlike other stock exchanges in the
country. On its recognition as a stock exchange under the Securities Contracts
(Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale
Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment
commenced operations in November 1994 and operations in Derivatives segment
commenced in June 2000

NSE's mission is setting the agenda for change in the securities markets in India.
The NSE was set-up with the main objectives of:

      Establishing a nation-wide trading facility for equities and debt instruments.

    Ensuring equal access to investors all over the country through an
     appropriate communication network.
    Providing a fair, efficient and transparent securities market to investors
     using electronic trading systems.
    Enabling shorter settlement cycles and book entry settlements systems, and
    Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology, have
become industry benchmarks and are being emulated by other market participants.

NSE is more than a mere market facilitator. It's that force which is guiding the
industry towards new horizons and greater opportunities.



BSE:
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875
as "The Native Share and Stock Brokers Association". It is the oldest one in Asia,
even older than the Tokyo Stock Exchange, which was established in 1878. It is a
voluntary non-profit making Association of Persons (AOP) and is currently engaged
in the process of converting itself into demutualised and corporate entity. It has




                                          19
evolved over the years into its present status as the premier Stock Exchange in the
country. It is the first Stock Exchange in the Country to have obtained permanent
recognition in 1956 from the Govt. of India under the Securities Contracts
(Regulation) Act 1956.The Exchange, while providing an efficient and transparent
market for trading in securities, debt and derivatives upholds the interests of the
investors and ensures redresses of their grievances whether against the companies
or its own member-brokers. It also strives to educate and enlighten the investors by
conducting investor education programmers and making available to them
necessary informative inputs.

A Governing Board having 20 directors is the apex body, which decides the policies
and regulates the affairs of the Exchange. The Governing Board consists of 9 elected
directors, who are from the broking community (one third of them retire ever year
by rotation), three SEBI nominees, six public representatives and an Executive
Director & Chief Executive Officer and a Chief Operating Officer.
The Executive Director as the Chief Executive Officer is responsible for the day-to-
day administration of the Exchange and the Chief Operating Officer and other
Heads of Department assist him.

The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to
constitution of the Executive Committee of the Exchange. Accordingly, an Executive
Committee, consisting of three elected directors, three SEBI nominees or public
representatives, Executive Director & CEO and Chief Operating Officer has been
constituted. The Committee considers judicial & quasi matters in which the
Governing Board has powers as an Appellate Authority, matters regarding
annulment of transactions, admission, continuance and suspension of member-
brokers, declaration of a member-broker as defaulter, norms, procedures and other
matters relating to arbitration, fees, deposits, margins and other monies payable by
the member-brokers to the Exchange, etc.



REGULATORY FRAME WORK OF STOCK EXCHANGE

A comprehensive legal framework was provided by the “Securities Contract
Regulation Act, 1956” and “Securities Exchange Board of India 1952”. Three tier
regulatory structure comprising

      Ministry of finance
      The Securities And Exchange Board of India
      Governing body




                                         20
Members of the stock exchange:

The securities contract regulation act 1956 has provided uniform regulation for the
admission of members in the stock exchanges. The qualifications for becoming a
member of a recognized stock exchange are given below:

          o   The minimum age prescribed for the members is 21 years.
          o   He should be an Indian citizen.
          o   He should be neither a bankrupt nor compound with the creditors.
          o   He should not be convicted for fraud or dishonesty.
          o   He should not be engaged in any other business connected with a
              company.
          o   He should not be a defaulter of any other stock exchange.
          o   The minimum required education is a pass in 12th standard
              examination.



SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

The securities and exchange board of India was constituted in 1988 under a
resolution of government of India. It was later made statutory body by the SEBI act
1992.according to this act, the SEBI shall constitute of a chairman and four other
members appointed by the central government.

With the coming into effect of the securities and exchange board of India act, 1992
some of the powers and functions exercised by the central government, in respect of
the regulation of stock exchange were transferred to the SEBI.



OBJECTIVES AND FUNCTIONS OF SEBI

          o   To protect the interest of investors in securities.
          o   Regulating the business in stock exchanges and any other securities
              market.
          o   Registering and regulating the working of intermediaries associated
              with securities market as well as working of mutual funds.
          o   Promoting and regulating self-regulatory organizations.
          o   Prohibiting insider trading in securities.




                                         21
           o   Regulating substantial acquisition of shares and take over of
               companies.
           o   Performing such functions and exercising such powers under the
               provisions of capital issues (control) act, 1947and the securities to it by
               the central government.



SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK
EXCHANGES):

      Board of Directors of Stock Exchange has to be reconstituted so as to include
       non-members, public representatives and government representatives to the
       extent of 50% of total number of members.
      Capital adequacy norms have been laid down for the members of various
       stock exchanges depending upon their turnover of trade and other factors.
      All recognized stock exchanges will have to inform about transactions
       within 24 hrs.



TYPES OF ORDERS:

Buy and sell orders placed with members of the stock exchange by the investors.
The orders are of different types.

Limit orders: Orders are limited by a fixed price. E.g. ‘buy Reliance Petroleum at
Rs.50.’Here, the order has clearly indicated the price at which it has to be bought
and the investor is not willing to give more than Rs.50.

Best rate order: Here, the buyer or seller gives the freedom to the broker to execute
the order at the best possible rate quoted on the particular date for buying. It may
be lowest rate for buying and highest rate for selling.

Discretionary order: The investor gives the range of price for purchase and sale.
The broker can use his discretion to buy within the specified limit. Generally the
approximation price is fixed. The order stands as this “buy BRC 100 shares around
Rs.40”.

Stop loss order: The orders are given to limit the loss due to unfavorable price
movement in the market. A particular limit is given for waiting. If the price falls
below the limit, the broker is authorized to sell the shares to prevent further loss.
E.g. Sell BRC limited at Rs.24, stop loss at Rs.22.



                                           22
Buying and selling shares: To buy and sell the shares the investor has to locate
register broker or sub broker who render prompt and efficient service to him. The
order to buy or sell specifying the number of shares of the company of investors’
choice is placed with the broker. The order may be of any type. After receiving the
order the broker tries to execute the order in his computer terminal. Once matching
order is found, the order is executed. The broker then delivers the contract note to
the investor. It gives the details regarding the name of the company, number of
shares bought, price, brokerage, and the date of delivery of share. In this physical
trading form, once the broker gets the share certificate through the clearing houses
he delivers the share certificate along with transfer deed to the investor. The
investor has to fill the transfer deed and stamp it. The stamp duty is one of the
percentage considerations, the investor should lodge the share certificate and
transfer deed to the register or transfer agent of the company. If it is bought in the
DEMAT form, the broker has to give a matching instruction to his depository
participant to transfer shares bought to the investors account. The investor should
be account holder in any of the depository participant. In the case of sale of shares
on receiving payment from the purchasing broker, the broker effects the payment to
the investor.

Share groups: The scrips traded on the BSE have been classified into
‘A’,’B1’,’B2’,’C’,’F’ and ‘Z’ groups. The ‘A’ group represents those, which are in
the carry forward system. The ‘F’ group represents the debt market segment (fixed
income securities). The Z group scrips are of the blacklisted companies. The ‘C’
group covers the odd lot securities in ‘A’, ‘B1’&’B2’ groups.

ROLLING SETTLEMENT SYSTEM:

Limit and the additional changes for the exception window are dedicated by the
exchange.

The exchanges/clearing house/ clearing corporation would process and download
the obligation files to the broker’s terminals Under rolling settlement system, the
settlement takes place n days (usually 1, 2, 3 or 5days) after the trading day. The
shares bought and sold are paid in for n days after the trading day of the particular
transaction. Share settlement is likely to be completed much sooner after the
transaction than under the fixed settlement system.

The rolling settlement system is noted by T+N i.e. the settlement period is n days
after the trading day. A rolling period which offers a large number of days negates
the advantages of the system. Generally longer settlement periods are shortened
gradually.




                                         23
SEBI made RS compulsory for trading in 10 securities selected on the basis of the
criteria that they were in compulsory demat list and had daily turnover of about
Rs.1 crore or more. Then it was extended to “A” stocks in Modified Carry Forward
Scheme, Automated Lending and Borrowing Mechanism (ALBM) and Borrowing
and lending Securities Scheme (BELSS) with effect from Dec 31, 2001.

SEBI has introduced T+5 rolling settlement in equity market from July 2001 and
subsequently shortened the cycle to T+3 from April 2002. After the T+3 rolling
settlement experience it was further reduced to T+2 to reduce the risk in the market
and to protect the interest of the investors from 1st April 2003.

Activities on T+1: conformation of the institutional trades by the custodian is sent to
the stock exchange by 11.00 am. A provision of an exception window would be
available for late confirmation. The time late by 1.30 p.m on T+1. Depository
participants accept the instructions for pay in securities by investors in physical
form upto 4 p.m and in electronic form upto 6 p.m. the depositories accept from
other DPs till 8p.m for same day processing.

Activities on T+2: The depository permits the download of the paying in files of
securities and funds till 10.30 a.m on T+2 from the brokers’ pool accounts. The
depository processes the pay in requests and transfers the consolidated pay in files
to clearing House/clearing Corporation by 11.00am/on T+2. The exchange/clearing
house/clearing corporation executes the pay-out of securities and funds latest by
1.30 p.m on T+2 to the depositories and clearing banks. In the demat mode net basis
settlement is allowed. The buy and sale positions in the same scrip can be settled and
net quantity has to be settled.




                                          24
                              SHAREKHAN
SHARE KHAN, a professionally managed Investment advisory services company,
developed in the year 1985 by three young entrepreneurs with an intension to
Minimization of Risk and Maximization of Return in the field of Indian Capital
markets by extensive research work.

As a sub member of NSE, BSE, MCX, NCDEX, NSDL and CDSL, which are
pioneers in the respective operations, SHARE KHAN is having more than 500
branches in all over India.

Share khan, India’s leading stock broker is the retail arm of SSKI, an organization
with over eighty years of experience in the stock market with more than 280 share
shops in 120 cities and big towns, and premier online trading destination
www.sharekhan.com. Share khan offers the trade execution facilities for cash as
well as derivatives, on BSE and NSE, depository services, commodities trading on
the MCX(Multi Commodity Exchange of India Ltd) and NCDEX (National
Commodity and Derivative Exchange) and most importantly, investment advice
tempered by eighty years of broking experience.

Share khan provides the facility to trade in commodities through Share khan
Commodities Pvt.Ltd-a wholly owned subsidiary of its parent SSKI. Share khan is
the member of two major commodity exchanges MCX and NCDEX.



SSKI :
Apart from Share khan, the SSKI group also comprises of institutional broking and
corporate finance. The institutional broking division caters to domestic and foreign
institutional investors, while the corporate finance division focuses on niche areas
such as infrastructure, telecom and media. SSKI owns 56% in Share khan and the
balance ownership is HSBC, First Caryl and Intel Pacific. SSKI has been voted as
the top domestic brokerage house in the research category, twice by Euro money
survey and four times by Asia money survey.

SHARE KHAN is on-par with the investor expectations in providing professional
services, namely Online Trading in Equity, Commodities and F&O

      Framing of Derivative strategies
      Depository Services (D-MAT)
      Initial Public Offers (IPO) and Book Buildings
      Distribution of Mutual Funds
      Portfolio Management Service (PMS) etc., through its member




                                         25
      Corporate training for executives on NCFM (National Stock Exchange
       Certificate inn Financial Markets)

SHARE KHAN is in market because of:

          o   Investor care is of paramount importance at SHARE KHAN.
          o   SHARE KHAN offers large avenues of investment solutions for all
              classes of investors under one roof.
          o   SHARE KHAN experience is one of prized possession. SHARE
              KHAN has an experience of more than 20 years wherein grown
              phenomenally.
          o   One of the most competitive brokerage structure.
          o   Hassle free trading experience.
          o   Timely advice along with research support to the clients through SMS
              and E-MAILS on EQUITIES, DERIVATIVES, COMMODITIES,
              IPOs and Mutual Funds.

VALUE FOR INVESTOR'S TRUST

INTEGRITY AND HONESTY

SHARE KHAN approach:

      UN BIASED INVESTMENT ADVISORY
      PERSONALIZED ATTENTION
      RESEARCH BASED ADVISORY SERVICES


Share khan won the award by the vote of consumers around the country, as part of
India’s largest consumer study cover 7000 respondents – 21 products and services
across 21 major cities. The study, initiated by Awaaz – India’s first dedicated
Consumer Channel and member of the worldwide CNBC Network, and AC Nielsen
– ORG Marg, was aimed at understanding the brand preferences of the consumers
and to decipher what are the most important loyalty criteria for the consume in
each vertical.

          In order to select the award recipient, spontaneous responses, rather than
prompted responses were garnered, with an intention to glean unbiased preferences.
Opinions were garnered from owners of each of the categories, to get experiential
responses, which are likely to be more realistic and grounded in nature. Further,
preference also indicates future intentions of repeat purchases.

     The reasons behind the preferences for brands were unveiled by examining the
following:

      Tangible features of product / service


                                         26
      Softer, intangible features like imagery, equity driving preference
      Tactical measures such as promotional / pricing schemes

“Share khan is honored to be voted as the Most Preferred Stock Broking Brand in
India. Our focus has always been to demystify the stock market and empower the
investors to take informed decisions,” said Jaideep Arora, Director, Share khan.
“The Award increases Share khan’s responsibility to persistently delight our
customers with user-friendly trading experience and we shall continue our focus to
evolve business strategies that keep us aligned with our customers’ needs.”



 VISION:To Become Successful Investment Advisors by developing the strategies
which are implement able and leads to provide better returns than Bench mark
portfolios.




                                         27
CHAPTER-4

THEORY FRAME
   WORK




     28
INTRODUCTION TO ONLINE TRADING

Gone are the days of trading on the floor. Technology has changed the landscape of
the stock markets. The look of the stock exchanges has undergone metamorphic
changes in the recent years. Prior to online trading, regional stock exchange was
playing a very important role in capital markets, as they were local investors.
Regional SE, which was unable to interact with other SEs started developing this
own screen based trading and connecting to other scrip’s which were not available
with them. This also helped in accessing the quotes and other market information
from other stock exchange which proved vital in the functioning of the system as a
whole. The trading network is depicted in given below NSE has main computer
which is connected through Very Small Aperture Terminal (VSAT) installed at its
office. The main computer runs on a fault tolerant STRATUS mainframe computer
at the Exchange. Brokers have terminals (identified as the PCs in the given picture)
installed at their premises which are connected through VSATs/ leased
lines/modems. An investor informs a broker to place an order on his behalf. The
broker enters the order through his PC, which runs under Windows NT and sends
signal to the satellite via VSAT/leased line/modem. The signal is directed to
mainframe computer at NSE via VSAT at NSE’s office. A message relating to the
order activity is broadcast to the respective member. The order confirmation
message is immediately displayed on the PC of the broker. This order matches with
the existing passive order(S) otherwise it waits for the active orders to enter the
system. On order matching, a message is broadcast to the respective member.

TRADING: The operation of buying and selling securities on the market. On-line
trading denotes buying and selling on the Internet through sites provided by
financial brokers like SIMs and banks



OUTCRY SYSTEM

The broker has to buy or sell securities for which he has received the orders. For
this, the broker or his authorized representatives goes to the stock exchange. This
method is called the open outcry system. Basically the brokers shout while buying or
selling the securities. The floor of the stock exchange is divided into a number of
markets also known as ‘post pit’ or wing based on particular securities dealt there.

In the post pit or wing, the broker using ‘open outcry’ method makes an offer or bid
price. For making the necessary bargain, he quotes his purchase or sale price, also


                                         29
known as offer or bid price. The dealer, to whom the price is quoted, quotes his own
price when the quotation of the dealer suits the broker, he may loose the bargain. If
he is not satisfied with the quote price, he may turn to some other dealer. On the
close of the bargain, the dealer as well as the broker makes a brief note of the
particulars of the deal. Such notes are made on some pad and on it the number of
shares, the price agreed upon, the name of the party, what membership number etc.,
are noted.



DISADVANTAGES OF OUTCRY SYSTEM:

      It lacks transparency.
      The scope of manipulation, speculation and mal practice is more.
      Signal were more important in the outcry system any member who could not
       interpret the buy/sell signal correctly often landed himself in disaster
       situation.
      In audibility was another disadvantage of the outcry system.
      Due to the above disadvantages of the outcry system the SHAREKHAN has
       shifted from outcry system to online trading from February 29th 1997.



MANUAL TRADING

Trading procedure before introduction TO online trading

Trading on stock exchanges is officially done in the trading ring. In the trading ring
the space is provided for specified and non-specified sections, the members and their
authorized assistants have to wear a badge or carry with them an identity card
given by the exchange to enter the trading ring. They carry a sauda book or
confirmation memos, duly authorized by the exchange and carry a pen with them.
The stock exchanges operations are floor level are technical in nature .Non-
members are not permitted to enter in to stock market. Hence various stages have to
be completed in executing a transaction at a stock exchange.

The steps involved in this method of trading have given below:




                                         30
Choice of broker:

Sell shares and transact business, have to act through member brokers only. They
can also appoint their bankers for this purpose as per the present regulations.


Placement of order:

The next step is the prospective investor who wants to buy shares or the investors,
who wants to placing order for the purchase or sale of securities with a broker. The
order is usually placed by telegram, telephone, letter, fax etc or in person. To avoid
delay, it is placed generally over the phone. The orders may take any one of the
forms such as At Best Orders, Limit Order, Immediate or Cancel Order, Limited
Discretionary Order, and Open Order, Stop Loss Order.

Execution of order or contract:

Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30
P.M on all working days Monday to Friday, and a special one-hour session on
Saturday. The members or the authorized assistants have to wear a badge given by
the exchange to enter into the trading ring. They carry a sauda Block Book or
conformation memos, which are duly authorized by the exchange when the deal is
struck; both broker and jobber make a note in their sauda block books. From the
sauda book, the contract notes are drawn up and posted to the client. A contract
note is written agreement between the broker and his clients for the transaction
executed.

Drawing Up and Bills:

Both sale and purchase bills are prepared along with the contract note and it is
posted on the same day or the next day. This in a purchase transaction, once the
shares are delivered to the client effects payment for the purchases and pays the
stamp fees for transfer, a bill is made out giving the total cost of purchase, including
other expenses incurred by the broker in the price itself. With this, the process ends.

DEMATERLIZATION:

Dematerialization is the process by which physical certificates of an investor are
converted to an equipment number of securities in electronic from and credited in
the investor account with his DP. In order to dematerialize the certificates, an
investor has to first open an account with a DP and then request for the
Dematerialization Request Form, which is DP and submit the same along with the


                                          31
share certificates. The investor has to ensure that he marks “Submitted for
Dematerialization” on the certificates before the shares are handed over to the DP
for demat. Dematerialization can only be done to those certificates, which are
already registered in your name and belong to the list of securities admitted for
Dematerialization at NSDL.

Most of the active scrip’s in the market including all the scrip’s of S&P CNX
NIFTY and BSE SENSEX have already joined NSDL. This list is steadily
increasing.

Briefly, the process is as follows: after completion of transfer, the investor gets the
option to dematerialize such shares. Investor’s willing to exercise this option sends a
Demat request along with the option letter sent by the company to his DP. The
company or its R&T agent would confirm the Demat request on its receipt from the
DP to reduce risk of loss in transit.

Dematerialized shares do not have any distinctive or certificate numbers. These
shares are fungible-which means that 100 shares of a security are the same as any
other 100 shares of the security. Odd lot shares certificates can also be
dematerialized. Dematerialization normally takes about fifteen to thirty days. To get
back dematerialized securities in the physical form, request DP for
Rematerialization of the same is made.Rematerialization is the process of converting
electronic shares in to physical shares.



Benefits of Demat:

          o   It reduces the risk of bad deliveries, in turn saving the cost and
              wastage of time associated with follow up for rectification. This has
              lead to reduction in brokerage to the extent of 0.5% by quite a few
              brokerage firms.
          o   In case of transfer of electronic shares, you save 0.5% in stamp duty.
              You avoid the cost of courier / notarization.
          o   You can receive your bonuses and rights issues into your DA as a
              direct credit, this eliminating risk of loss in transit.
          o   You can also expect a lower interest charge for loans taken against
              Demat shares as compared to loans against physical shares.
          o   There is no lost in transit, thus the overheads of getting a duplicate
              copy in such circumstances is reduced.


                                          32
          o   RBI has also reduced the minimum margin to 25% for loans against
              dematerialized securities as against 50% for loans against physical
              securities.



We should know some things about the internet, e-commerce and etc.

What is Internet?

Internet is a worldwide, self-governed network connecting several other smaller
networks and millions of computers and persons, to mega sources of information.
This technology shrinks vast distances, accelerating the pace of business reforms
and revolutionizing the way companies are managed. It allows direct, ubiquitous
links to anyone anywhere and anytime to build up interactive relationships.

A combination of time and space, called the Internet promises to bring
unprecedented changes in our lives and business. Internet or net is an inter-
connection of computer communication networks spanning the entire globe,
crossing all geographical boundaries. It has re-defined the methods of
communication, work study, education, business, leisure, health, trade, banking,
commerce and what not it is virtually changing every thing and we are living in
dot.com age. Net being an interactive two way medium, through various websites,
enables participation by individuals in business to business and business to
consumer commerce, visit to shopping arcades, games, etc. in cyber space even the
information can be copied, downloaded and retransmitted.

The use of Internet has grown 2000 percent in last decade and is currently growing
at 10 percent per month. In India, growth of Internet is of recent times. It is
expected to bring changes in every functional area of business activity including
management and financial services. It offers stock trading at a lower cost. Internet
can change the nature and capacity of stock broking business in India.

E-commerce:

Electronic commerce is associated with buying and selling over computer
communication networks. It helps conduct traditional commerce through new way
of transferring and processing of information. Information is electronically
transferred from computer to computer in an automated way. E-commerce refers to



                                         33
the paperless exchange of business information using electronic data inter change,
electronic technologies. It not only reduces manual processes and paper transactions
but also helps organization move to a fully electronic environment and change the
way they operated.

PC’s and networking attempts to introduce banks of the tools and technologies
required for electronic commerce. The computers are either workstations of
individual office works or serves where large databases and information reside.

Network connects both categories of computers; the various operating systems are
the most basis program within a computer. It manages the resources of the
computer system in a fair and efficient manner.

Now we can enter in to the concept known as online trading.

In the past, investors had no option but to contact their broker to get real time
access to market data. The net brings data to the investor on-line and net broking
enables him to trade on a click of mouse. Now information has become easily
accessible to both retail as well as big investor.



EVOLUTION OF BROKING IN INDIA:

The evolution of a broking in India can be categorized in three phases -

          o   Stockbrokers will offer on their sites features such as live portfolio
              manager, live quotes, market research and news, etc. to attract more
              investors.
          o   Brokers will offer online broking and relationship management by
              providing and offering analysis and information to investors during
              broking and non-broking hours based on their profile and needs, i.e.
              customized services.
          o   Brokers (now e-brokers) will offer value management or services like
              initial public offering online, on-line asset allocation, portfolio
              management, financial planning, tax planning, insurance services, etc.
              and enables the investors to take better and well considered decisions.




                                         34
The actual definition of “Online Trading” is as explained below:

“Online trading is a service offered on the internet for purchase and sale of shares.
In the real world you place orders on your stockbroker either verbally (personally
or telephonically) or in a written form (fax).” In online trading, you will access a
stockbroker’s website through your internet enabled PC and place orders through
the broker’s internet based trading engine. These orders are routed to the stock
exchange without manual intervention and executed thereon in a matter of a few
seconds.

The net is used as a mode of trading in internet trading. Orders are communicated
to the stock exchange through website.



In India:

Internet trading started in India on 1st April 2000 with 79 members seeking
permission for online trading. The SEBI committees on internet based securities
trading services has allowed the net to be used as an Order Routing System (ORS)
through registered stock brokers on behalf of their clients for execution of
transaction. Under the ORS the client enters his requirements (security, quantity,
price buy/sell) on broker’s site.

Objectives:

Internet trading is expected to

            o   Increase transparency in the markets,
            o   Enhance market quality through improved liquidity, by increasing
                quote continuity and market depth,
            o   Reduce settlement risks due to open trades, by elimination of
                mismatches,
            o   Provide management information system,
            o   Introduce flexibility in system, so as to handle growing volumes easily
                and to support nationwide expansion of market activity.

       Besides, through internet trading three fundamental objectives of securities
       regulation can be easily achieved, these are:




                                           35
       o   Investor protection
       o   Creation of a fair and efficient market, and
       o   Reduction of the systematic risks.



    Some of the brokers offering net trading include ICICI direct, kotakstreet,
    etc.

Requirements for net trading:

    For investors:

    1. Installation of a computer with required specification

    2. Installation of a modem

    3. Telephone connection

    4. Registration for on-line trading with broker

    5. A bank account

    6. Depository account

    7. Compliance with SEBI guidelines for net trading



    The following should be produced to get a demat account and online trading
    account:

    As identity proof & address proof any one of the following:

   Voter ID card
   Driving license
   PAN card( in case of to trade more than 50000)
   Ration card
   Bank pass book
   Telephone bill




                                      36
       Other requirements, which are necessary

      First page of the bank pass book and last 6 months statement.
      Bank manager’s signature along with bank’s seal, manager registration code
       on photograph.

       For stock brokers:

       1. Permission from stock exchange for net trading

       2. Net worth of Rs. 50 lac

       3. Adequate back-up system

       4. Secured and reliable software system

       5. Adequate, experienced and trained staff

       6. Communication of order (trade confirmation to investor by e-mail)

       7. Use of authentication technologies

       8. Issue of contract notes within 24 hours of the trade execution

       9. Setting up a website.

The net is used as a medium of trading in internet trading. Orders are
communicated to the stock exchange through website. Internet trading started in
India on 1st April 2000 with 79 members seeking permission for online trading. The
SEBI committees on internet based securities trading services has allowed the net to
be used as an Order Routing System (ORS) through registered stock brokers on
behalf of their clients for execution of transaction.

Under the Order Routing System the client enters his requirements (security,
quantity, price, and buy/sell) in broker's site. They are checked electronically
against the clients account and routed electronically to the appropriate exchange for
execution by the broker. The client receives a confirmation on execution of the
order. The customer's portfolio and ledger accounts get updated to reflect the
transaction. The user should have the user id and password to enter into the
electronic ring. He should also have demat account and bank account. The system
permits only a registered client to log in using user id and password. Order can be
placed using place order window of the website.


                                          37
Procedure for net trading

Step 1: Those investors, who are interested in doing the trading over internet system
i.e. NEAT-IXS, should approach the brokers and get them self registered with the
Stock Broker.

Step 2: After registration, the broker will provide to them a Login name, Password
and personal identification number (PIN).

Step 3: Actual placement of an order. An order can then be placed by using the
place order window as under:

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

(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: 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 10 seconds is there in executing
the trade.

Step 8: It is regarding charging payment, for which there are different mode. Some
brokers will take some advance payment from the investor and will fix their trading
limits. When the trade is executed, the broker will ask the investor for transfer of
funds to his account.

Internet trading provides total transparency between a broker and an investor in
the secondary market. In the open outcry system, only the broker knew the actually
transacted price. Screen based trading provides more transparency. With online
trading investors can see themselves the price at which the deal takes place.




                                           38
The time gap has narrowed in every stage of operation. Confirmation and execution
of trade reaches the investor within the least possible time, mostly within 30 seconds.
Instant feedback is available about the execution. Some of the websites also offer;

      News and research report
      BSE and NSE movements
      Stock analysis
      IPO and mutual fund centers

Step by step procedure in online trading:

Following steps explain the step by step approach to on-line trading:

       Log on to the stock broker's website
       Register as client/investor
       Fill the application form and client broker agreement form on the requisite
       value stamp paper
       Obtain user ID and pass word
       Log on to the broker's site using secure user ID and password
       Market watch page will show real time on-line market data
       Trade shares directly by entering the symbol or number of the security
       Brokers server will check your limit in the on-line account and demat
       account for the number of shares and execute the trade
       Order is executed instantly (10-30 seconds) and confirmation can be
       obtained.
       Confirmation is e-mailed to investor by broker
       Contract note is printed and mailed in 24 hours
       Settlement will take place automatically on the settlement day
       Demat account and the bank account will get debited and credited by
       electronic means.



       ONLINE TRADING HAS LED TO ADDITIONAL FEATURES SUCH
       AS:

       Limit / stop orders: orders that can be go unfilled, but there is an extra
       Charge for this leeway facility since one need to hold a price.
       Market orders: orders can be filled at unexpected prices, but this type is
       much more risky, since you have to buy stock at the given price.
       Cash account: where funds have to be available prior to placing the order.




                                            39
      Margin account: where orders can be placed against stocks, to increase
      Purchasing power.




      ADVANTAGES OF ONLINE TRADING:

     Online trading has made it possible for anyone to have easy and efficient
      access to more reports and charts than it was previously possible if one went
      to any brokers' office. Thus we have access to a lot more information online.
     Online trading has let room for smaller organizations to compete with
      multinational organizations since it is no longer a leg it issue. Being online
      does not identify the size of any particular organization, therefore, this
      additional power to the underdogs.
     Online trading has allowed companies to locate themselves where they want
     as physical location is not an issue anymore. Companies can establish
      themselves according to their gains and losses, for instance where tax (sales
      and value added taxes) is best suited to them.
     Online trading gives control to individuals and they can exercise it over
      accounts thus comprehend what is going on when they trade. It is like going
      back to school and re-educating oneself on how to trade online.
     Individuals’ benefit by saving comparatively a lot more when trading online
      as the cost per trade is less.
     Individuals can invest in a variety of products, unlike earlier when people
      bought bonds, mutual funds, and stock for long-term basis and sat on them.
      Now they can invest in stocks, stock and index options mutual funds,
      government, and even insurance.



INVESTORS REASONS TO TRADE ONLINE:

     They have control over their accounts, can make their own decisions and
      don’t have to give reasons for their actions. They are independent.
     They have a reason to participate in the market and learn about it.
     It is interesting, cheap, easy, fast, and convenient.
     A lot of information is online so they can keep up-to-date with what is
      happening in the trading world.
     It will give investors a greater choice and better realization.
     The immediate impact will be competition and benefits will accrue to the
      investors.
     It will lead to brokerage commissions going down and brokers striving to
      increase business afloat.




                                        40
      Investors will now go to place, which have better trading conditions and also
       members to offer them better facilities.
      They have access to numerous tools to invest, and can create their own
       portfolio.




HERE ARE THE POSSIBLE DISADVANTAGES:

      When network crashes, there will be problems and delays due to a large
       influx of rapid online trading criteria.
      Individuals are restricted to first-hand financial guidance. This simply means
       that the individual is himself / herself alone to.
      A tax (sales tax and value added tax) evaluation becomes an issue, especially
       when you are trading internationally.
      One has no idea with whom he is dealing with on the other end.
      According to a study conducted by Mary Rowland, careful investor: is online
       trading bad for your portfolio, the more one trades the less returns one gets,
       meaning that an addicted trader gets, carried away online and begins to
       trade for too much which causes losses for him / her.
      Individuals think that they are trading with the market directly and know
       what they are doing, but the truth is that even though technology has taken
       over, the basic rules of trading are the same. It seems that the middleman has
       been removed, but that is not so. When the individuals click on the mouse,
       his trade goes through a broker. The commissions online pertain to the
       intermediary.
      There is a need for more effective communication links over the Internet and
       the ability of the server to deal with a large volume of visitors.



TRADING AND SETTLEMENT AT SHARE KHAN

The NSE first introduced online trading in India. The Online trading system
imparted a greater level of transparency and investors preferred exchanges that
offered Online trading because of the following factors:



      The ease of operation from the view of the both members and the investors.
      Increase in the confidence of the investors because of higher level of
       transparency.
      Facilities better monitoring of the market by the exchange.
      The best price achieved in buying and selling.


                                         41
 All these resulted in ever-increasing volumes on the exchanges offering the online
trading.




TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING

Share Khan deals in buying and selling equity shares and debentures on the
National Stock Exchange (NSE), the Bombay Stock Exchange (BSE) and the Over-
The-Counter Exchange of India (OTCEI).

Share Khan is provided with a computer and required software from their
registered stock exchanges. These centers are called “Broker Work Stations”. These
computers are connected to the server at the stock exchanges through cable.

The member or broker sitting in his office can send the quotations, orders,
negotiations, deals, in-house deals, auction orders etc., through the computer. The

Central trading system (CTS) will accept these orders and send it for match. If there
is any mistake in the order, CTS will reject the orders and send respective error
message to the member concern. All these operations are in built. The main
objective of CTS is to monitor the Stock Exchanges operations.

Order placed by the broker will be sent for a match and if the match is found
suitable, the transaction will be executed. Otherwise, the order will be deleted
automatically after completion of trading time. The carry forward transactions
(Good Till cancellation) are forwarded to the next day. Even if the match is not
found with in the prescribed period, the order will not cancel.



TRADING SESSION

Trading timings are from 9:55 A.M. to 3:30 P.M. on all 5 days of the trading period.
Monday to Friday is the trading period in all the stock exchanges. SEBI has
stipulated that all the stock exchanges in India must have same trading period.




                                         42
BROKER WORK STATION:

At the broker workstation the BBO’s, the last traded price, the day‘s opening price,
previous day’s closing price, highest and lowest prices, the weighted average price
and total trade value will be available continuously, as the BBO for each scrip.




Other information will be available on query from the BWS. These include top
gainers /losers of the day. Trader-wise, scrip wise net position, client wise net
position, top scrip by the volume/value, market summary etc.

Brokers are also provided with information relating to the companies in the matter
of Book closure, Dividend declarations, resolutions in board meeting, information
about liquidated companies, company report etc.



ORDERS:

Orders can be done one at a time or in a batch mode.

The submitted order will be accepted at the CTS, after validation if it finds any
invalid reason the order is return back to the BWS, with the appropriate error
message. If

Accepted at the CTS it will be added to the local pending order book.

The order will then be taken up for matching, if it is a buy order the system tries to
find a sell order, which fits the requirement of the buy order, when such match is
found a trade gets executed. Each trade involves two brokers and respective traders
who sent the order. Both these traders are informed of the trade being executed at
their respective BWS.

At the BWS the trade is added to the local trade book.

Orders sent by the brokers are two types:

      Good for the day (GFD)
      Good till cancellation(GTC)




                                          43
Good for the day:

This is also called as “market order”. For an order if the member selects the deal as
good for the day, the order is treated as market order. If a “best bid” founds match

with “best order” then the transaction gets executed. If the match is not found then
after trade time the order gets cancelled that day. Next day he has to place a new
order.For example if a member wants to purchase 1000 shares of satyam info @ 400
each through Good for Day order. If the correct match is not found, order gets
cancelled automatically and new quotation has to be placed the next day.

Good till cancellation:

This order is forwarded to the last trading day of that settlement period. This is also
called as carry forward order like GFD; broker has to select the option of GTC for
the order. If the order finds match with in the trading settlement period, the order is
executed. If no match is found, the order is cancelled on the last day of settlement
period. This order is not carried forward to the next settlement period.

For example, if a member a place purchase order of 500 shares of SBI @ 690 per
share and selects the order as GTC and place an order. If the match is not found on
that day it will be forwarded to the next day until trading settlement period day.



SETTLEMENT OF TRANSACTIONS:

Clearing of transaction in the form of shares and cash is called settlement. Buyers
will take the delivery of shares through the depository participants like SHARE
KHAN and others.

Finally, the settlement is made by means of delivering the share certificates along
with the transfer deeds. The transferor (or the seller) duly signed transfer deed. It
bears a stamp of the selling broker. The buyer then fills up the certificates fills up
the particulars in the transfer deed. Settlement can be done in the following way.

Spot settlement: under this method, the delivery of securities and payment for them
are affected on the day of the contract itself.

Rolling settlement: Under this rolling settlement the trading is on “T+2”,basis i.e. if
Monday is trading day then Wednesday is the paying day . In case on non-delivery,
the securities will go for auction.




                                           44
DETAILS OF PROCEDURES:

Delivery in : The members who are in pay-out position delivers share certificates in
to clearing house within the settlement period along with the delivery Chelan filled
in with the details of share certificates which has folio numbers or distinctive
numbers etc

Delivery out: The buyer of shares who made pay in position will take delivery of
shares from the clearing house.

Pay-in: The member who is in paying position shall pay for value of shares with in
the trading settlement period (T+2).

Payout: The cheques paid in the clearinghouse will be paid to members who are in
paying position.

All disputes arising between members regarding non-deliveries, non-payments, good
and bad deliveries pertaining to the settlement will be settled by the settlement
committee of the exchange.




                                         45
The given flow chart clearly explains the process of online trading:




                                                               Login



                                  Buy transcation                                 Sell transcation
                                                                               The system will check your
                  The system will check buying                                     dp account quantity
                             limits




   Orders accepted                                       Rejected orders would be                orders accepted
                                                      communicated along with reasons


                                your order is transmitted to exchange for execution



  pending buy orders                           on execution                        pending sell orders
  would be displayed                          of your orders                       would be displayed
    on your screen                                                                   on your screen




  you may edit your     you may delete                     you may edit your                         you may delete your
    pending order     your pending order                     pending order                              pending order



    flashed on your                        conformationcoul                     contract note would
  screen immediately                       d be send to your                     be sent to by mail
      on execution                         e-mail and mobile                      or hand delivery




                                                        46
CHAPTER-5

COMPARATIVE
  ANALYSIS




     47
THE MAJOR PLAYERS IN ONLINE TRADING:

     SHAREKHAN.COM
     5PAISA.COM
     KOTAKSTREET.COM
     INDIABULLS.COM
     ICICIDIRECT.COM
     HDFCSEC.COM



      HDFC SECURITIES:

      Company Background:

      HDFC Securities Ltd is promoted by the HDFC Bank, HDFC and Chase
      Capital Partners and their associates. Pioneers in setting up Dial-a-share
      service with the largest team of Tele-brokers.

      Online Account Type:



     HDFC Online Trading A/c: Plain Vanilla Account with focus on 3 in 1
      advantage.
  

      Pricing of HDFC Account

     Account Opening: Rs 750
     Demat: NIL, 1st year charges included in Account Opening
     Initial Margin : Rs 5000/- for non HDFC Bank Customers (AQB)
     Brokerage:

         Trading 0.15%* each side + ST

        Delivery 0.50%** each side + ST

       *Rs 25 Min Brokerage per transaction

       **Rs 8 Min Brokerage per transaction




                                        48
      ICICI Direct:

     Account Opening: Rs 750
     Schemes: For short periods Rs 750 is refundable against brokerage
      generated in a qtr. These schemes are introduced 3-4 times a year.
     Demat: NIL, 1st year charges included in Account Opening Plus a facility to
      open additional 4 DP’s without 1st yr AMC. Only Rs 100 as linking charges
      per DP
     Initial Margin : Nil



     Brokerage: ICICI’s brokerage rates are inclusive of Stamp duty (0.002%)
      for trading and 0.010% for delivery while service tax (10.2%) on
      BROKERAGE land turnover tax is EXTRA.



     Delivery Vol per    QTR Brokerage Square           Vol P.M. Brokerage

    < 10 lakhs           0.75%         < 50 lakhs        .10% Both Sides

    10 – 25 lakhs        0.70%         50 lakhs – 2 Cr     .08% Both Sides

     25 – 50 lakhs       0.55%              2Cr-5Cr        .05% Both Sides

     50 lakhs - 1 Cr      0.45%         5Cr- 10 Cr         .04% Both Sides

     1 Cr – 2 Cr         0.35%        10Cr -20 Cr        .035 Both Sides

     2 Cr – 5 Cr          0.30%        > 20 Cr            .03 Both Sides

    > 5 Cr 0.25% ----            --------




                                              49
INDIABULLS:

      Company Background:

      India Bulls is a retail financial services company present in 70 locations
      covering 62 cities. It offers a full range of financial services and products
      ranging from Equities to Insurance. 450 + Relationship Managers who act as
      personal financial advisors.


      Online Account Type:

     Signature Account: Plain Vanilla Account with focus on Equity Analysis.
      The equity analysis is a paid service even for A/c holders.
     Power India bulls: Account with sophisticated trading tools, low commissions
      and priority access to R.M.

      Pricing of IB Accounts:

     Signature Account                           Power India Bulls

     * Account Opening: Rs 250                 * Account Opening: Rs 750

      * Demat: Rs 200 if POA is signed,         * Demat: Rs.200 if POA is signed,

          No AMC for this DP       No AMC for this DP

      * Initial Margin: NIL                    * Initial Margin: NIL

      * Brokerage: Negotiable                  * Brokerage: Negotiable




                                          50
     PAID Research:

      SCHEME                                       FACILITY

     WebBased-1-Month-500:                      View & Print on Website

     WebBased-1-Month-6000:                    View & Print on Website

     PrintReport-1-Month-750:                   View & Print on Website

    + 10 Reports Delivered

     PrintReport-1-Month-9000:                   View & Print on Website

                                                    + 10 Reports Delivered

     Kotakstreet:

     Company Background:

     Kotakstreet is the retail arm of Kotak Securities. Kotak Securities limited is
     a joint venture between Kotak Mahindra Bank and Goldman Sachs.



     Online Account Type

    Twin Advantage / Green Channel : 2 DP’s, Limit against shares
    Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per transaction
    High Trader : 6 Times Exposure Cash & Derivatives, Auto sq off 2:55
    Cash Expressway : Spot payment, additional 0.5% charges

     For Kotak Fast Lane / Keat Lite / Keat Desktop are trading interfaces.

     Keat Desktop with advanced tools comes at a charge of Rs 500 p.m, Non
     refundable.




                                       51
    PRICING OF KOTAK

   Account Opening : Rs 500
   Demat: Rs 22.5 p.m
   Initial Margin : Rs 5000(Compulsory)
   Min Margin Retainable : Rs 1000
   Brokerage Slab wise: Higher the volume, lower the brokerage.

    Even older customers (on 0.25% & 0.40%) have been moved to the slab wise
    structure w.e.f 1/4/2004



    Slab structure of Kotak

    Delivery Vol p m Brokerage * Square Vol P.M.             Brokerage **

     < 1 lakhs            0.65%       < 10 lakhs             0.10% Both Sides

    1 lakhs – 5 lakhs     0.60%        10 lakhs – 25 lakhs     0.08% Both Sides

    5 lakhs – 10 lakhs    0.50%        25 lakhs - 2 Cr       0.05%     Both Sides

    10 lakhs - 20 lakhs   0.40%         2 Cr - 5 Cr           0.04% Both Sides

    20 lakhs – 60 lakhs   0.30%         > 5 Cr                0.035% Both Sides

     60 lakhs - 2 Cr      0.25%        ---do---               0.03% Both Sides

         >2               0.20%             ----                     --------



    * Brokerage is inclusive of All Taxes     * Brokerage is inclusive of All Taxes

    * DP Charges Extra

    * Min Brokerage of Rs 0.05 per share       * Min Brokerage of Rs 0.01 per
    share




                                      52
    Derivatives Vol off p m           Brokerage

       < 2 Cr                        0.07% Both Sides

     2 Cr - 5.5 Cr                   0.05% Both Sides

     5.5 Cr – 10 Cr                   0.04% Both Sides

     > 10 Cr                         0.03% Both Sides



    * Brokerage is inclusive of All Taxes.



    5paisa:
    Company Background:

    Indiainfoline was founded in 1995 and was positioned as a research firm

    In 2000 e-broking was started under the brand name of 5paisa.com.

    Apart from offering online trading in stock market the company offers

    mutual funds online.

It also acts as a distributor of various financial services i.e. GOI securities,

    Company Fixed Deposits, Insurance.

    Limited ground network, present in 20 cities

    Online Account Types

   Investor Terminal : Investors / Students
   Trader Terminal : Day Traders / HNI’s




                                        53
PRICING FOR RETAIL CLIENTS

    Investor Terminal

   Account Opening : Rs 500
   Demat 1st Yr : Rs 250
   Initial Margin : Rs 2500 (Compulsory)
   Min Margin Retainable : Rs 1000
   Brokerage :

           Trading 0.10% each side + ST

           Delivery 0.50% each side + ST



PRICING FOR HNI CLIENTS



     Trader Terminal

   Account Opening : Rs 500
   Demat 1st Yr : Rs 250
   Initial Margin : Rs 5000(Compulsory)
   Min Margin Retainable : Rs 1000
   Brokerage :

           Trading 0.10% each side + ST

           Delivery 0.50% each side + ST

           (Negotiable to 0.05% each side & 0.25%)

   Account Access Charges

       Monthly Rs 800, adjustable against Brokerage

       Yearly Rs 8000, adjustable against brokerage




                                    54
Share khan:
     Company Background :

    Share khan is the retail broking arm of SSKI Securities Pvt Ltd. SSKI owns
     56% in Share khan, balance ownership is HSBC, First Caryle, and Intel
     Pacific
    Into broking since 80 years
    Focused on providing equity solutions to every segment
    Largest ground network of 210 Branded Share shops in 90 cities

     Online Account Types

    Classis Account / Applet : Investor in equities
    Speed Trade : Trader in equities & derivatives

     PRICING FOR HNI CLIENTS

     Speed Trade

    Account Opening : Rs 1000 ( Refundable against brokerage in Month + 1)
    Demat 1st Yr : Incl in Account Opening




    Initial Margin : Nil
    Min Margin Retainable : NIL
    Brokerage :

        Trading 0.10% each side + All Taxes

        Delivery 0.50% each side + All Taxes

        (Negotiable based on volume)

    Account Access Charges




                                       55
    Monthly Rs 500, adjustable qtrly against brokerage of Rs 9000/- for qtr.

    No access charges for gold customers (Above 1 lac brokerage p.a)

    Pricing for Retail Customers

    Classic / Applet

   Account Opening : Rs 750
   Demat 1st Yr : NIL
   Initial Margin : NIL
   Min Margin Retainable : NIL
   Brokerage:

           Trading 0.10% each side + All Taxes

           Delivery 0.50% each side + All Taxes



    Share khan online Trading Interfaces

    The customer can choose the online trading interface that meets his
    requirement based on his trading habits and preferences

    CLASSIC / APPLET

    The website is meant for customers who Invests in Equities

    SPEEDTRADE

    The speed trade is meant for customers who trade in Equities

    DIAL-N-TRADE – Toll Free

    The DNT is a value added services meant for all customers who

    Want to transact but are not online.

    DNT – TOLL FREE FERTURES




                                      56
   Dedicated Toll – Free number for Order placements
   Automatic fund transfer with phone banking*
   Simple and secure IVR based system for authentication
   No wait time, on entry of Phone Id & TPIN, the call is transferred
   Trusted, professional advice of Tel-brokers who offer undiluted Sharekhan
    Research Inputs
   After-hours order placement facility **
   Transfer of money using phone banking is available with Citibank only



    ** Between 9 a.m to 9.55 am and 3.30p.m to 6 p.m

    CLASSIC/WEBSITE FEATURES

   Facility to integrate choice of 4 Banks/DP/Trading Account
   Instant credit for shares sold from DP
   Automatic pick-up of shares from linked DP for pay – in
   Automatic deposit of shares into linked DP after pay-out
   4 Times leverage on Margin Trades
   Margin Trading available for entire marker session
   Slab wise brokerage structure for delivery and margin trades, shortly
   Free calls for order placement on Toll-Free
   Trusted, Professional advice of Tele-brokers
   Facility to enter After Market Orders online & via Phone




    CLASSIC/WEBSITE FEATURES

   Daily Research newsletter (Investor Eye) Via e-mail
   Access to new IPO without any paperwork
   Advanced portfolio monitoring Tools
   Integrated DP account with trading account
   Option of linking additional 4 DP accounts to trading account
   Choice of linking 4 banks to trading a/c for online payments
   Cash and Derivatives trading in a single account
   E-mail confirmations for all transactions
   Choice of electronic/Physical contracts




                                     57
    SPEED TRADE EXE FEATURES

    ALL THE FEATURES OF CLASSIC

    *Real – time streaming quotes using 2 Marker Watches

    *Trade Execution in 2-3 seconds

    * Instant Order/trade confirmations in the same window

    *Hot keys similar to a Broker’s Terminal

    *MULTIPLE Tic-by-Tic Intra-day charts with multiple indicators

    * Availability of 2 ISP & 6 Servers ensuring maximum uptime

    * Customized alerts based on multiple parameters

    * Cancel All/Square Off All Facility

    * Window for Top Gainers, Top Losers, and Most Active updated Live

SWOT ANALYSIS

STRENGTH:

   Strong credibility among investors because of its heritage.
   Excellent reputation among the business society.
   Capability of providing superior customer service.
   Quality research team.
   Easier access to the customer due to largest ground network of 280 branded
    share shops in 120 cities.
   Abundant information about economy and companies.
   Ability to attract and retain superior and quality personnel.
   Highly sophisticated infrastructure.
   Efficient research and analysis team, which by interpreting the economy and
    company’s performance accurately is enhancing the profitability of the
    clientele.




                                      58
WEAKNESS:

     Limited customer appeal as the company product line does not include
      mutual funds which is increasingly becoming a preferred customer
      investment option.
     Inadequate product awareness among the retail investors.
     Limited customer appeal as the company does not have access to the BSE
      online space.
     Brand awareness is low in the financial market.
     Promotional activities conducted by the company are not at par with the
      other firms.



OPPORTUNITIES:

     Hyderabad covers only 2% of investors which gives huge potential for the
      market penetration.
     Bullish phase of the market attracts investing public.
     Access to the BSE online space for the retail investors creates opportunity to
      increase clientele base.
     Awareness campaigns about online trading create new market.



THREATS:

     Availability of Unit Linked Insurance Policies (ULIP’s) and mutual funds in
      the market.
     Threat of entry is high in this industry as the manpower required is less and
      capital requirement is medium.




                                        59
STATEMENT SHOWING COMPARISION OF ACCOUNT OPENING

COMPANY
NAME           ACCOUNT OPENING FEES
SHAREKHAN                          1000
5 PAISA.COM                         500
KOTAK STREET                        500
INDIA BULLS                         750
ICICI
DIRECT.COM                          750
HDFC SEC.COM                        750




                                    60
STATEMENT SHOWING COMPARISION OF DEEMAT FEES




COMPANY NAME       DEEMAT FEES
SHAREKHAN                          0
5 PAISA.COM                      250
KOTAK STREET                     270
INDIA BULLS                      200
ICICI DIRECT.COM                   0
HDFC SEC.COM                       0




                                 61
STATEMENT SHOWING COMPARISION OF



COMPANY NAME TRADING CHARGES
SHAREKHAN                      0.10%
5 PAISA.COM                    0.10%
KOTAK STREET                   0.10%
INDIA BULLS                    0.10%
ICICI DIRECT.COM               0.01%
HDFC SEC.COM                   0.15%




                                62
STATEMENT SHOWING COMPARISION OF




COMPANY NAME DELIVERY CHARGES
SHAREKHAN                       0.50%
5 PAISA.COM                     0.50%
KOTAK STREET                    0.50%
INDIA BULLS                     0.50%
ICICI DIRECT.COM                0.75%
HDFC SEC.COM                    0.50%




                                 63
STATEMENT SHOWING COMPARISION OF




COMPANY
NAME           INITIAL MARGIN
SHAREKHAN                     0
5 PAISA.COM                2500
KOTAK STREET               5000
INDIA BULLS                   0
ICICI
DIRECT.COM                    0
HDFC SEC.COM               5000




                                  64
CHAPTER-6

 FINDINGS
    AND
CONCLUSIONS




   FINDINGS:




      65
Information plays a vital role in the secondary market. There are
more speculators than investors.
Previously rolling settlement is T+5 days, now it changed to T+2 days
and further it will be changing to T+1 day.
The number of players is increasing at a steady rate and today there
are over a dozen of brokerage houses who have opted to offer net
trading to their customers and prominent among them are SHARE
KHAN, India bulls, kotakstreet, ICICI direct and geojit.
With the computerization of the trading activity, the number of
transaction and the volume of trading have increased to a great
extent. SKSE is dealing in both BSE and NSE.
Earlier, SKSE was not taking orders on phone. But today due to
competation even SKSE has started taking orders on phone call like
other stock exchanges.
Bank account for instant transfer was not available earlier, but today,
SKSE is providing the facility of giving instant bank account.
The Depository system has reduced the time lag in delivering and
settlement of securities and also supported the cause of providing
more liquidity to the security holder.
The need for setting up of a depository, paper less trading through
online trading system and settlement became in evitable and
unavoidable for the smooth and efficient functioning of the capital
market.




               CONCLUSION:




                           66
Things have changed for the better with the SHAREKHAN going on-line
coupled with endeavor to stream line the whole trading system, things have
changed dramatically over the last 3 to 4 years. New and advanced
technologies have breached geographical and cultural barriers, and have
brought the countrywide market to doorstep.
Due to invention of online trading there has been greater benefit to the
investors as they could sell / buy shares as and when required and that to
with online trading.
The broker’s has a greater scope than compared to the earlier times because
of invention of online trading.
The introduction of on-line trading would influence the investors resulting in
an increase in the business of the exchange. It has helped the brokers to
handling a vast amount of transactions which led to efficient trading,
delivering, settlement system with adequate protection to investors
The concept of business has changed today, this is a service oriented industry
hence the survival would require them to provide the best possible service to
the clients.




                                  67
CHAPTER-7

SUGGESTIONS




  SUGGESTIONS:


      68
   The exchange authorities have to take steps to educate Investors and increase
    their confidences.
   Genuine investors are not at all interested in the speculative gain as their
    investment is based on the future profits, therefore the authorities of the
    exchange should be more vigilant to curb the speculation.
        o Volume of paper work is small but it is very complicated to maintain
            data in system. Hence the complexity should be reduced by regular
            audit and updating data.
        o The pool a/c does not know the true owner of the shares and hence
            dividends are paid to the broker instead of owners, by this broker can
            do any manipulations or.
        o The online trading is easy to work but it is costly to maintain and
            difficult to learn. It should increase the speed of executing the orders.
        o Mutual funds trading for other companies have to be encouraged. If
            phone orders are encouraged, trading in z securities are allowed, bank
            account for instant transfer are provided and offline option are given
            then SKSE would be definitely improving in the turnover.
        o In skse, the investors should be provided web trading facility so that
            they can do their own trading by sitting infront of internet rather than
            consulting DP members.
        o SKSE has to give advertisement through the media stating the
            advantages to the investors for using SKSE.




                            BIBILOGRAPHY


                                       69
     BOOKS:
   Investment management
                                    -V.K.Bhalla
   Investment management
                                  -Preethi Singh
 Security Analysis And Portfolio Management
                                  -V.A.Avadhani
 Marketing of Financial Services
                                  -V.A.Avadhani
 Indian Financial System
                                  -M.Y.Khan




        WEBSITES:

     www.Share Khan.com
     www.bseindia.com
     www.sebi.com
     www.moneycontrol.com
     www.economictimes.com
     www.nseindia.com




                                    70

				
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Description: ONLINE TRADING STARTED IN INDIA AFTER 2001. SO THERE IS LOT OF DEVELOPMENT IN FINANCIAL MARKETS JUST BECAUSE OF ONLINE TRADING. IF YOU STUDIED THIS YOU WOULD BE ABLE TO DO ONLINE TRADING BY YOURSELF IN YOUR HOME AND CAN EARN A LOT OF MONEY.