Project On Online Trading at Sharekhan LTD

“A STUDY ON ONLINE TRADING” in SHAREKHAN
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A SUMMER INTERNSHIP PROJECT ON
“A STUDY ON ONLINE TRADING”
FOR THE PARTIAL FULFILLMENT OF POST-GRADUATION DEGREE IN

“MASTER OF BUSINESS ADMINSTRATION”
INTERNSHIP DONE AT
“SHAREKHAN LIMITED”
UNDER THE ESTEEMED GUIDENCE OF

PROF. RAVI KUMAR
(FACULTY, AGBS HYDERABAD)
SUBMITTED BY
MITHUN KUMAR PATNAIK
ROLL NO: A30601909082
AMITY GLOBAL BUSINESS SCHOOL

BANJARA HILLS ROAD NO: 11
ADJACENT TO LAKE VEIW APARTMENT
HYDERABAD
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AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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DECLARATION
I hereby declare to the best of my knowledge and belief that the Summer
Training Project Report entitled as “STUDY ON ONLINE TRADING”
for SHAREKHAN LIMITED HYDERABAD being submitted as the
partial fulfilment of Master of Business Administration, has been written
and submitted under the guidance of Mr. Shayam Sundar and Mr
K.P.Singh Industry guides and Mr Ravi Kumar my faculty guide.
I further declare that it is original work done as a part of the academic
course and has not been submitted elsewhere.
The conclusions and recommendations written in this project are based on
the data collected by me while preparing this report.

A30601909082
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certificate
(whom so ever it may concern)
This is to certify that the project report entitled “A STUDY ON

ONLINE TARDING” carried at SHAREKHAN LIMITED Hyderabad is
a bonafide work done by Mr. MITHUN KUMAR PATNAIK, bearing ID
No. A30601909082 a student of AMITY GLOBAL BUSINESS
SCHOOL, Hyderabad and submitted the same in the partial fulfilment
for the award of the degree of “ MASTER OF BUSINESS
ADMINISTRATION” has done his Summer Internship Program
under my guidance from 1st June 2010 to 15th July 2010.
I found him to be good in the task and activities assigned to
him. I wish his success in all future endeavours.
(FACULTY GUIDE) (INDUSTRY GUIDE)
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ACKNOWLEDGEMENT
I would like to express word of thanks to all those who have provided me with
sincere advice and information during the course of my training period. It was
indeed a great pleasure for me to work in a very co-operative, enthusiastic and
learning atmosphere at ShareKhan Limited.
I would like to take this opportunity to thank Dr. Prasad Rao (Director AGBS
Hyderabad) and D.Surekha Thakur (corporate relations), Amity Global
Business School for giving me an opportunity for doing a project in a corporate
firm and all my faculty members, senior officials and colleagues at Share Khan
for their help and support during the project.
I would also like to express my sincere thanks to prof. Ravi Kumar (Faculty
Guide-AMITY GLOBAL BUSINESS SCHOOL, Hyderabad) for his unstinting
guidance and support throughout the project. He has been a great source of
motivation to me.
I would also like to extend my regards to my company guides Mr.K.P.Singh
Territory Manager, Share Khan and Mr.Shyam Sundar, Marketing Manager,
Share khan and for helping me and providing me with right direction during the
course of my project. The interaction with him has provided me with the
knowledge which will definitely help me to enrich my career and help me to
perform better in future.
With all the heartiest thanks; I hope my final project report will be a great
success and a good source of learning and information.

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INDEX
CHAPTER PARTICULARS PAGE NUMBER
CHAPTER -1 OBJECTIVES AND 1
METHODOLOGY
OF STUDY
CHAPTER-2 INDUSTRY 3
ANALYSIS
CHAPTER-3 ELECTRONIC 16
SETTLEMENT OF
TRADE
CHAPTER-4 DEFINATIONS AND 28
EXPLANATIONS
CHAPTER-5 OUTCRY SYSTEM 37
AND ONLINE
TRADING SYSTEM
CHAPTER-6 COMPANY 59
PROFILE
CHAPTER-7 ONLINE TRADING 66
AT SHAREKHAN
CHAPTER-8 COMPARITIVE 82
ANALYSIS
CHAPTER-9 QUESTIONNAIRES 93
AND ANALYSIS
CHAPTER-10 CASE STUDY 114
CHAPTER-11 ARTICLE 119
CHAPTER-12 PROJECT 122
ANALYSIS
CHAPTER-13 BIBILIOGRAPHY 127
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EXECUTIVE SUMMARY
As per the title suggest the project report has been prepared regarding the growth and
development of online trading in India. Online trading was initiated by NSE in India
and soon after the other exchanges also followed it. There was a major boom in yr.
2000 when lots of online trading companies came with a bang but only few were
survived because of lack of computer knowledge and low internet penetration. There
are two types of online trading companies one is the banking online trading
companies and the other is non-banking trading. A few examples of banking online
trading companies are HDFC securities, ICICI direct.com, UTI securities etc. On the
other hand non banking trading companies are sharekhan.com, Angel Broking,
Reliance Money etc. Today online trading contributes are about 8-10%. It is
continuously growing and has a huge market potential. A study was undertaken to
determine the growth of various online trading companies in India in terms of trade
done by them through online and services provided by them.
Major findings indicates that out of a survey of 50 respondents it was seen that major
investors prefer online trading because of few major factors such as time saving
convenience, protection through Freudian brokers etc. although during my research
project I’ve seen that most of the respondents feel online trading, a secure way of
investing into stock market still a few of them feel it unsafe and a bit complicated but
they posses information about online trading. Today the online trading companies
having cut-throat competition in our offering whose brokerage discounts lower
margin money and zero balance account. Due to the rising education awareness and
use of internet there is a huge potential for online trading in future and companies
must come up with innovative offerings to capture the untapped market.
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CHAPTER I
OBJECTIVES AND METHODOLOGY OF
STUDY
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CHAPTER-1
OBJECTIVES OF THE STUDY:
x It is to analyze the changes in trading after the exchange shifted from
outcry to online trading system.
x It is to study the functions of SHAREKHAN through various
departments.
x 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.
x To know about the latest and future development in the stock
exchange trading system.
METHODOLOGY OF THE STUDY:
The data collection methods include both primary and secondary collection
methods.
Primary method: This method includes the data collected from the personal
interaction with authorized members of Share khan Securities limited.
Secondary method: The secondary data collection method includes:

The lecturers delivered by the superintendents of respective departments. The
brochures and material provided by Sharekhan Securities limited and Data
collected through distribution of questionnaires from a sample. The data
collected from the magazines of the NSE, economic times, and etc., various
books relating to the investments, capital market and other related topics.
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NEED FOR THE STUDY:
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.
LIMITATIONS OF THE STUDY:
The study is confined to online trading procedure only. Problems of listing are
not covered due to limited time and to keep the study in manageable limits.
SAMPLE SIZE:
Questionnaire 1: sample size 30
Questionnaire 2: sample size 50
TIME LINE: Project started on 1st June 2010 and concluded on 15th July 2010.
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CHAPTER 2
INDUSTRY ANALYSIS
x FINANCIAL SYSTEM
x DIFFERENT TYPES OF MARKETS
x STOCK EXCHANGES
x SEBI FRAMEWORK
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CHAPTER-2
Following diagram gives the structure of Indian financial system:
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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:
The capital market is the market for securities, where companies and the
government can raise long term funds. The capital market includes the stock market
and the bond market. Financial regulators ensure that investors are protected
against fraud. The capital markets consist of the primary market, where new issues
are distributed to investors, and the secondary market, where existing securities are
traded.
Capital market thus plays a vital role in channelizing the savings of individuals for
Investment in the economic development of the country. As a result the investors
are not constrained by their individual abilities, but by the abilities of the
companies, which in turn enhance the savings and investments in the country,
liquidity of capital market is an important factor affecting growth.
Since projects require long term finance, but on the other hand, the investor may
not like to relinquish control over their savings for a long time. A liquid stock market
ensures a quick exit without incurring heavy losses or costs. Thus development of
efficient market system is necessary for creating conductive climate for investment
and economic growth.
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.
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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 market intermediaries associated with the 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
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:
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 Provision of all the relevant information

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 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
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6. Depository participants.
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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 Ahmadabad 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 Ahmadabad in 1937. During the war boom, a
number of stock exchanges were organized. Soon after it became a central
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subject, central legislation was proposed and a committee headed by

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A.D.Gorwala went into the bill for securities regulation. On the basis of the

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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:
x Ahmadabad Stock Exchange Association Ltd.
x Bangalore Stock Exchange
x Bhubaneswar Stock Exchange Association
x Calcutta Stock Exchange
x Cochin Stock Exchange Ltd.

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x Coimbatore Stock Exchange

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x Delhi Stock Exchange Association
x Guwahati Stock Exchange Ltd
x Hyderabad Stock Exchange Ltd.

x
Jaipur Stock Exchange Ltd
x Kanara Stock Exchange Ltd
x Ludhiana Stock Exchange Association Ltd

x Madras Stock Exchange
x Madhya Pradesh Stock Exchange Ltd.
x Magadh Stock Exchange Limited
x Meerut Stock Exchange Ltd.
x Mumbai Stock Exchange

x National Stock Exchange of India
x OTC Exchange of India
x Pune Stock Exchange Ltd.
x Saurashtra Kutch Stock Exchange Ltd.
x Uttar Pradesh Stock Exchange Association
x Vadodara Stock Exchange Ltd.
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MAJOR STOCK EXCHANGES:
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:
x Establishing a nation-wide trading facility for equities and debt instruments.

x Ensuring equal access to investors all over the country through an
appropriate communication network.
x Providing a fair, efficient and transparent securities market to investors using
electronic trading systems.
x Enabling shorter settlement cycles and book entry settlements systems, and
x 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.
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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 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
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has been constituted. The Committee considers judicial & quasi matters in which
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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
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:
x The minimum age prescribed for the members is 21 years.
x He should be an Indian citizen.
x He should be neither a bankrupt nor compound with the creditors.
x He should not be convicted for fraud or dishonesty.
x He should not be engaged in any other business connected with a
company.
x He should not be a defaulter of any other stock exchange.
x The minimum required education is a pass in 12th standard examination.
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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
x To protect the interest of investors in securities.

x Regulating the business in stock exchanges and any other securities
market.
x Registering and regulating the working of intermediaries associated with
securities market as well as working of mutual funds.
x Promoting and regulating self-regulatory organizations.
x Prohibiting insider trading in securities.
x Regulating substantial acquisition of shares and take over of companies.
x 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):
x 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.
x Capital adequacy norms have been laid down for the members of various
stock exchanges depending upon their turnover of trade and other factors.
x All recognized stock exchanges will have to inform about transactions within
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CHAPTER-3
ELECTRONIC SETTLEMENT OF TRADE
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CHAPTER-3
ELECTRONIC SETTLEMENT OF TRADE
A. Procedure for purchasing dematerialized

Securities:-
The procedure for purchasing dematerialized securities is also similar to the

procedure for buying physical securities.
1. Investor instructs DP to receive credits into his account in the prescribed

form. There may be one time standing instruction or separate instruction
each time to receive credits.
2. Investor purchases securities in any of the stock exchanges linked to
depository through a broker.
3. Broker receives payment from investor and arranges payment to clearing
corporation.
4. Broker receives credit to securities in clearing account on the payout day.
5. Broker gives instructions to DP to debit clearing account and credit client’s
account. Investor receives shares into his account by way of book entry.
B. Procedure of selling dematerialized securities
The procedure for selling dematerialized securities in stock exchanges is

similar as selling physical securities. The only major difference is that instead of
delivering physical securities to the broker, the investor instructs his DP to debit his
demat account with the number of securities sold by him and credit the brokers
clearing account. The procedure for selling dematerialized securities is given below:
1. Investor sells securities in any of the stock exchange linked to
depository through a broker.
2. Investor instructs his DP to debit his demat account with the number
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3. Before the pay-in-day, broker of the investor transfers the securities to

clearing corporation.
4. The broker receives payment from the stock exchange.
5. The investor receives payment from the broker for sale of securities in
the same manner as received in case of sale of physical securities.
REMATERILISATION OF SHARES
Rematerialization is the process of conversion of electronic holdings of

securities into physical certificate form. For rematerilisation of scrip’s, the investor
has to fill up a demat request form (RRF) and submit it to the DP. The DP forwards
the request to depository after verifying the investor’s balances. Depository in turn
initiates the registrars and transfer agent or the issuer company. RTA/ Company
print the certificates and dispatch the same to the investor.
Market timings:
Normal Market / Exercise Market Open time : 09:00 hours

Normal market close : 15:30 hours
Set up cut of time for Position limit/Collateral value : till 15:30 hrs
Trade modification end time / Exercise Market : 16:15 hour
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INTERNET BASED TRADING THROUGH ORDER ROUTING SYSTEMS
Internet based trading on conventional exchanges, uses the Internet

as a medium for communicating client orders to the exchange, through
broker web sites. Broker’s web sites may serve a variety of functions. These
may include;
x Allowing the clients to directly trade through investors;
x Advertise the broker dealers’ services to potential investors;
x Offer market information and investment tools similar to those
offered by information vendor or SRO web sites;
x Offer real-time or delayed quote information, continuously update
quotes while the user visits other sites, or allow investors to create a
personal stock ticker;
x Provide market summaries and commentaries, analyst reports and
trading strategies and market data on currencies, mutual funds,
options, market indices and news; and
x Offer investors access to portfolio management tools and analytic
programs;
x Information on commission and fees; and
x Account information and research reports.
In an Order Routing system, a broker offering Internet trading facility

provides an electronic template for the customer to enter the name of the security,
whatever it is to be bought or sold, the quantity and whatever the order is a market
or limit order. Once the broker’s system receives this information.
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USE OF INTERNET AS ALTERNATIVE TRADING SYSTEMS (PROVISION FOR PRICE

DISCOVERY AND MATCHING OUTSIDE CONVENTIONAL EXCHANGES)
In foreign jurisdiction, Alternative trading systems have been developing

outside conventional securities markets, which provide investors with additional
proprietary electronic trading facilities for securities that are traded principally on
securities exchanges, or other organized markets. They have price discovery
functions, matching systems and crossing systems. The systems that are currently in
use in outside jurisdictions are closed systems and are not accessible to the general
public through the Internet. The securities markets regulators abroad the maintained
flexible and open policies designed to encourage innovation in the secondary
securities markets. As a result, a number of market participants, usually broker-
dealers, have developed computerized “alternative trading systems” by which the
system centralize, display, match, cross or otherwise execute trading interest.
USE OF INTERNET FOR MAKING INITIAL PUBLIC OFFERINGS
Issues of securities of using the Internet to communicate directly with their

shareholders, potential investors and analysts by disseminating corporate
information. In foreign jurisdiction, they are also using the Internet to communicate
to the public for the following:
x Public offerings;
x Private offerings; and
x Disclosure and communication
Issuers are using the Internet to market themselves to potential investors.
The Internet is also being used for fulfilling necessary disclosure requirements, for
disseminating the prospects in electronics form and even for receiving share
applications in public issues electronically. In India, SEBI has taken initiative in
permitting use of the network of stock exchange for collection of investor
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applications in public offerings by the issuer companies

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INVESTMENT ADVISORY SERVICES
Brokers as well as other service provides such as investment firms, research

outfits etc. are using the Internet for marketing and advertising purposes, for
presenting information on portfolio analysis and market information, and for
communicating with and receiving orders from potential investors. The services
offered by the service providers to the investors are generally the following:
x Advertising
x Providing investment information and investment advice;
x Underwriting
x Communicating with the investors;
x Customer orders; and
x Record keeping
WORKING GROUPS SET UP BY THE COMMITTEE
Considering the present state of capital markets in India and keeping in view
the ongoing developments in Internet based securities business, it was felt that SEBI
as a regulator could strive to identify areas where use of Internet in the capital
market is possible within the existing legal framework. One such area identified by
the Committee, which is also the central within the existing legal framework. One
such area identified by the Committee, which is also the central theme of this report,
is the area of Internet trading on existing electronic exchange. In this area, through
early introduction of Cyber Laws would be highly describe but their existence is not a
necessary precondition. To look into the existing regulatory scenario and to bring out
some ground rules for use of the medium of Internet, the Committee therefore
constituted the following two working groups to look into the area of:
i. Security protocols and standardization of interfaces for Interest based
securities trading, chaired by Prof. Deepak B. Phatak, IIT, Pawai, Mumbai
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ii. Surveillance and monitoring related issues arising due to Interest based
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securities trading, chaired by Shri. L.K. Singhvi, Sr. ED, SEBI

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The committee also requested Ms D N Raval, Executive Director, SEBI to examine

the legality of introduction of Internet trading and issue of Alternative trading
systems. This report of the standing committee examines the regulatory and security
requirements Internet Based Trading on Conventional Exchanges. Separate reports
(s) will cover the other areas related to Internet applications in the securities
markets.
The report of the first working group on security protocols and
standardization of interfaces has since been submitted and incorporated in the
report. The committee would like to place on record its sincere thanks to Dr. D.B.
Phatak, Ms. D.N. Raval and their team members. The global financial market is
undergoing a transformation due to rapid technological developments. It thus
becomes imperative that for developing in effective regulatory framework
developments in other parts of the world should be studies and analyzed. With
nearly who million on-line investors, Internet trading in the United States is growing
by leaps and bounds. Internet trading is being facilitated by large brokerage houses,
thus changing the total concept of securities trading. A team comprising of members
from stock exchanges and SEBI visited the United States to these development and
had interactions with brokerages houses, Internet service providers and other
agencies involved in facilitating Internet trading.
The team also discussed the developments in the emerging regulatory and
supervisory framework in United States with the Securities and Exchange
Commission officials. They were also tripped of the various initiatives taken by SEC in
this regard. These inputs have been utilized while drafting this report. 29
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RECOMMENDATIONS OF THE COMMITTEE
Application for Permission by Brokers
SEBI registered Stock Brokers interested in providing Internet based trading

services will be required to apply to the respective stock exchange for a formal
permission. The stock exchange should grant approval or reject the application as
the case may be, and communicate its decisions to the number within 30 calendar
days of the date of completed application submitted to the exchange. The stock
Exchange, before giving permission to brokers to start Internet based services shall
ensure the fulfillment of the following minimum conditions.
Net worth Requirement
The broker must have a minimum net worth of Rs. 50 lacs if the broker is
providing the Internet based facility on his own. However, if some brokers
collectively approach a service provider for providing the interest trading facility, net
worth, criteria as stipulated by the stock exchange will apply. The net worth will be
computed as per the SEBI circular no FITTC/DC/CIR-1/98 dated June 16, 1998.s
Operational and System Requirements:

Operational Integrity:
The stock Exchange must ensure that the system used by the broker has
provision for security, reliability and confidentiality of data through use of encryption
technology. This stock exchange must also ensure that records encryption
technology. The stock Exchange must also ensure the records maintained in
electronic from by the broker are not susceptible to manipulation.
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System Capacity
The stock Exchange must ensure that the brokers maintain adequate backup
systems and data storage capacity. The stock Exchange must also ensure that the
workers have adequate system capacity for handling data transfer, and arranged for
alternative means of communications in case of Internet link failure.
Qualified Personnel:
The stock Exchange must lay down the minimum qualification fro personnel
to ensure that the broker has suitably qualified and adequate personnel to handle
communication including instructions as well as other back office work which is likely
to increase because of higher volumes.
Written Procedures:
Stock Exchange must develop uniform written procedures to handle
contingency Tuitions and for review of incoming and outgoing electronic
correspondence.
Signature Verification/ Authentication:

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

Know Your Client:
The stock Exchange must ensure that brokers have sufficient, verifiable
information about clients, which would facilitate risk evaluation of clients.
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Broker- Client Agreement:

Brokers must enter into an agreement with clients spelling out all obligations
and rights. This agreement should also inter alia, the minimum service standards to
be maintained by the broker for such service specified by SEBI/Exchange for the
internet based trading from time to time. Exchange will prepare a model agreement
for this purpose. The broker agreement with clients should not have
Investor Information:
The broker web site providing the internet based trading facility should
contain information meant for investor protection such as rules and regulations
affecting client broker relationship arbitration rules, investor protection rules etc.
The broker web site providing the Internet based trading facility should also provide
and display prominently, hyper link to the web site/page on the web site of the
relevant stock exchange (s) displaying rules/ regulations/ circulars.
Ticker/quote/order book displayed on the web-site of the broker should display the
time stamp as well as source of such information against the given information.
Order/Trade Confirmation:
Order/Trade confirmation should also be sent to the investor through email
at client’s discretion at the time specified by the client in addition to the other made
of display of such confirmation of real time basis on the broker web site. The
investor should be allowed to specify the time interval on the web site itself with in
which he would like to receive this information through email. Facility for
reconfirmation of orders which are larger than that specified by the member's risk
management system should be provided on the internet based system.
Handling Complaints by Investors:

Exchanges should monitor complaints from investors regarding service
provided by brokers to ensure a minimum level of service. Exchange should have
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that exchanges should also have facility for on-line registration of complaints on
their web site.
Risk Management:
Exchanges must ensure that brokers have a system-based control on the
trading limits of clients, and exposures taken by clients. Brokers must set predefined
limits on the exposure and turnover of each client. The broker systems should be
capable of assessing the risk of the client as soon as the order comes in. The client
should be informed of acceptance/rejection of the order within a reasonable period.
In case system based control rejects an order because of client having exceeded
limits etc., the broker system may have a review and release facility to allow the
order to pass through.
Contract Notes:
Contract notes must be issued to clients as per existing regulations, within 24 hours
of the trade execution.
Cross Trades:
As a matter of abundant precaution, the committee seeks to reiterate that as
III the case of existing system, brokers using Internet based systems for routing client
orders will also not be allowed to cross trades of their clients with each other. All
orders must be offered to the market for matching.
It is emphasized that in addition to the requirements mentioned above, all
existing obligations of the broker as per current regulation will continue without
changes. Exchanges may also like to specify more stringent standards as they may
deem fit for allowing Internet based trading facilities to their brokers.
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Enforcement:
A separate working group has been set to look into the surveillance and
enforcement related issues arising due to Internet based securities trading.
However, general anti-fraud provisions (SEBI Fraudulent and Unfair Trade Practices
Regulations, 1995) would apply to all transactions involving securities or financial
services, regardless of the medium.
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CHAPTER-4
DEFINITIONS AND EXPLANATIONS
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CHAPTER-4
DEFINITIONS AND EXPLANATIONS
1. SHARES:-
In everyday language, when we talk of shares we normally refer to

equity shares or ordinary shares of a company. The terms shares and stock
essentially means the same things, the letter being a more common
American usage.
An equity share is evidence of ownership in a company. The physical

evidence of this ownership of this document is called the Share Certificate.
Now days, shares are usually kept in electronic, or dematerialized, form with
a depository participant (Banks, brokers, financial institutions) of the National
Securities
Depository Limited (NSDL). However, if one wants one can still hold
the share in the physical form which has your name endorsed on it, and is
proved that you are a part owner of the company. Your ownership rights are
proportionate to the number of share you own.
Companies issue shares of a certain fixed denomination, called face

value or par value of that share, which is clearly indicated on a share
certificate in the physical form.
2. INVESTMENT: -
Investment essentially refers to what you do with your savings in
order to preserve them and make them grow or yield an income. If you keep
your savings in the form of cash, they are certainly going to diminish in value
because the purchasing power of money is constantly going down as a result
of inflation. (The value of money is judged by the quantity of goods and
services you can buy with it). Therefore, if you want to maintain or increase
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the value of your savings, you have to keep them in forms other than cash.
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This is what investment is all about, deployment of your saving with the
intentions of preserving or increasing their value. This deployment can be
done by using your savings to buy land, residential properties, commercial
properties, gold, jewelry, works of art, fixed deposits in banks and companies,
shares, bonds, infact, anything whose value is likely to either remain constant
or appreciate with time. Investment also refers to using one's savings with
the intention of earning an income.
3. DEMAT A/C:-
On doing an online business ever customer has to open and demat account in
any bank whichever he likes. Demat account is the account in which the trading
done by the customer is mentioned. If the customer sales or purchases any share
the details of this sale and purchasing are in demat account. This account
contents the name of the shares and also the number of shares held
Or sold and also the rate of the share with this demat account. It is also
compulsory for every customer to open a saving account in the bank because the
amount which is to be received when the customers sales the shares are
transferred from the demat account to the saving account.
It is the responsibility of the customers that the share which he purchased or

sales are properly transferred in demat account from the stock exchange
whichever he deals. The amount of dividend whichever to be received on the
shares when held for one or more year are also transferred in this demat account.
It is compulsory for every customer to have a PAN no. For opening a demat
account. If PAN no. Is not there is no chance for the customer to do any trading
on line. There is no limit of amount to deal in this account.
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4. CIRCUIT LIMIT:-
While issuing the shares to the public the company has to fix a particular limit
of the rate of the per share this limit is called as circuit limit. This circuit limit is
generally fixed on the percentage basis. This circuit limit is applied to both the
ends of the share. That is to the upper limit also and also to the lower limit
actually circuit limit is of two types
1) Upper limit
2) Lower limit
It is compulsory for every company to fix the circuit limit. This limit is
beneficial to both. The customer and also to the company generally every company
fix below 10%of the rate of per share.
5. UPPER LIMIT: -
While issuing the shares to the public the company has to fix the upper limit
this limit is also calculated in percentage the limit is also beyond which the rate of
the shares cannot exceed nor that the customer doing the trading can sell above the
level.
For ex. Customer wants to sell a share which is of Rs10 and its
upper limit is fixed at 10% so in this case the person will have to sell it at Rs11 or the
rate which ever he wants but the person cannot sell it beyond this Rs 11 because by
addition of upper limit to the rate of share the maximum amount of the shares is Rs
11 only and not above.
6. LOWER LIMIT: -
At the time of issuing share the company has to fix the lower limit also. This
lower limit is calculated on the basis of the rate of the shares. This limit bears the
same percentage, which is mentioned for the upper limit of the share. Like upper
limit in this limit also the share minimum rate of the share is fixed the customer who
wants to see; the holding shares has to first consider the upper & lower limit of the
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share he cannot sell the share below the lower limit and not above the upper limit
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10% of the face value of the shares the percentage is below 10% of the face value of
the shares the percentage of the upper &lower limit is equal to every type of share
For ex. Suppose the person wants to sell the shares and the
rate of the share is Rs. 10/- and the lower limit percentage is 10% of the rate. So in
this case the person cannot sell the share at below Rs. 9/-. He will have to sell at
above Rs. 9/- or up to the upper limit of the share.
7. SENSEX:-
When the shares are issued to the public the stock exchange gives a
particular group to the company. For ex. The Reliance Group is given the group “A”
like this there are several companies which fall in “A” Group. The weightage mean is
calculated according to its equity when all the companies of Group “A” has
calculated this weightage mean they are added all together when this addition is
done the result which comes down is known as “Sensex”.
The trading of shares of “A” group is totally depended on this sensex value.
The price of the share rises this sensex value also rises and when the price of this
share comes down the sensex value also comes down. With the sensex
8. SCRIPTS:-
The company, which has more than one working area, it has to issue the
share separately than that company is the company which has the script of its name.
For Ex. The Reliance this company has its several working area Namely
Reliance, Capital Reliance, Infocom Reliance Energy, Reliance Industry. So reliance
company issues separate share for separate working area but the bold name which is
given to the working area is “Reliance”. So in this case Reliance has its own scripts.
Other example Ambuja, Birla, Etc.
9. GROUPS:-
When the shares are issued by the company they are given the particular group
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The scripts 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
scripts are of the blacklisted companies. The ‘C’ group covers the odd lot securities in
‘A’, ‘B1’&’B2’ groups.
10. 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”.
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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.
11. 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.
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12. ROLLING SETTLEMENT SYSTEM:

SETTLEMENT CYCLE SCHEDULE
SR. NO. DAY DESCRIPTION OF ACTIVITY TRADE

1 T Trading Day
2 T +2 PAY IN BY 10.30 am.
3 T +2 PAY – OUT BY 2 pm.
4 T +3 Auction of shortage in deliveries
5 T +5 Auction pay-in by 10.30 (1 am/ pay
Out by 2 pm.)
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.
SEBI made RS compulsory for trading in 10 securities selected on the basis of
the criteria that they were in compulsory demats 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.
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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 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 late by 1.30 p.m on T+1.
Depository participants accept the instructions for pay in securities by investors
in physical form up to 4 p.m and in electronic form up to 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 am 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.
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CHAPTER-5
OUTCRY SYSTEM AND ONLINE

TRADING SYSTEM
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CHAPTER-5
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 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:

x It lacks transparency.
x The scope of manipulation, speculation and mal practice is more.
x 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.
x In audibility was another disadvantage of the outcry system.
x Due to the above disadvantages of the outcry system the SHAREKHAN has
shifted from outcry system to online trading from February 29th 1997.
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MANUAL TRADING
Trading procedure before introduction of 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:
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 place 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.
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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 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
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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:
x 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.
x In case of transfer of electronic shares, you save 0.5% in stamp duty. You
avoid the cost of courier / notarization.
x You can receive your bonuses and rights issues into your DA as a direct
credit, this eliminating risk of loss in transit.
x You can also expect a lower interest charge for loans taken against Demat
shares as compared to loans against physical shares.
x There is no lost in transit, thus the overheads of getting a duplicate copy
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x RBI has also reduced the minimum margin to 25% for loans against
dematerialized securities as against 50% for loans against physical
securities.
ONLINE TRADING
Before getting in to the online trading we should know some things about the
internet, e-commerce and etc.
1. 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
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including management and financial services. It offers stock trading at a lower

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cost. Internet can change the nature and capacity of stock broking business in
India.
2. 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 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.
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MEANING OF ONLINE TRADING
“Change is the law of nature”. There were times when man was a wanderer
or a normal. He himself had to go place to place in search of food, water and now
everything is available at your doorstep just at the click of the mouse. The growth of
information technology has affected almost all sectors of life. Internet has enabled
us to get every information at our doorstep. When Internet has affected all sectors
he could “stock markets” the most important player of the economy, has remained
far behind? Like all other sectors Internet has set its feet in the stock markets also.
Internet trading commissions are clearly posted on the websites of the
various services, and are typically a fixed rate charge, depending upon the type of
security being traded and the size of trade. In theory, therefore, an Interest investor
always knows what commission he is being charged on each trade. Internet investors
can take as much time as they would like to take prior to placing a trade order.
Similarly the online investor likely does not have to worry that his broker is making
unauthorized trades. Since there is no individual broker making a commission, the
only person who is authorized to trace in a account is the actual investor.
Furthermore, the internet investor can never become a victim of excessive trading
(where for the broker) since the investor maintains total control over the number of
transactions which take place in the account.
All of these positive features of internet trading may lead the unwary investor
to believe that Internet trading is a way to take control of their finances and save
more money in the process. Unfortunately, this is not always the case. The
advantages of Internet stock trading have also its weaknesses and these weaknesses
present significant drawbacks for the average investor.
First and foremost, the average investor is not an expert in the financial
markets. There is a danger for allowing the autonomy of online trading to hull you
into the belief that you are an expert investor. An online investor sitting at home at a
personal computer also foregoes proper investment advice and financial planning,
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There are, of course, additional risks relative to performing transactions over

the Internet especially on a shared computer. Those people whom investors have
provided their account number and password can freely trade that account while the
investor will have little, if any, resource against the brokerage firm for the breach of
security.
WHY ONLINE TRADING ENTERED LATE IN INDIA?
The Indian exchanges and brokering houses have been very slow in moving their
transactions online and the major reason has been the lot government regulations. The
initial delay was due to laying down the specifications for creating Closed User Groups
(CUGs). This issue was resolved between the Department of Telecommunications (DoT) and
the Finance Ministry around 1998 and after that soon came the online trading portals like
IL&FS invests mart, ICICIDirect.com, motilaloswal.com, sharekhan.com etc. Connectivity
related issue was perhaps the most important technological factor.RBI made regulation that
it is mandatory for company to store at least 7 year financial and transactional data.
In the non-stop, 24 hours a day, seven days a week world of investing, we are able
to
 Obtain investment news around the clock
 Check quotes on exchanges all over the world – day or night
 Easily compare one investment to another via numerous ratios, charts,
graphs, and tables
 Screen for the best investments to fit our individual goals and requirements
 Trade stocks as easily and quickly as professional traders
 Calculate retirement needs based on various scenarios
 Regularly monitor portfolios and make necessary changes quickly and almost
effortlessly
 Control the routing of individual trades for the best possible price and
execution
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and call their stock broker to buy and sell investments. However, every year a
growing number of investors are placing their trades using online brokers.
EVOLUTION OF BROKING IN INDIA:
The evolution of a broking in India can be categorized in three phases -

x Stockbrokers will offer on their sites features such as live portfolio
manager, live quotes, market research and news, etc. to attract more
investors.
x 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.
x 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.
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.
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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.
ONLINE TRADING BY NSE & BSE
The central computer located at the Exchange is connected to the

workstations of the Brokers through satellite using Very Small Aperture
Terminals (VSATs). Orders placed at the Brokers' workstations reach the central
computer and are matched by the computer based on price and time priority.
Both the exchanges have switched over from the open outcry trading system to a
fully automated computerized mode of trading known as BOLT (BSE on Line
Trading) and NEAT (National Exchange Automated Trading) System. It facilitates
more efficient processing, automatic order matching, faster execution of trades
and transparency. The scripts traded on the BSE have been classified into 'A',
'B1', 'B2', 'C', 'F' and 'Z' groups. The 'A' group shares represent those, which are in
the carry forward system (Badla). The 'F' group represents the debt market (fixed
income securities) segment. The 'Z' group scripts are the blacklisted companies.
The 'C' group covers the odd lot securities in 'A', 'B1' & 'B2' groups and Rights
renunciation
Objectives:
Internet trading is expected to
x Increase transparency in the markets,
x Enhance market quality through improved liquidity, by increasing quote
continuity and market depth,

x Reduce settlement risks due to open trades, by elimination of
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mismatches,
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x Provide management information system,

x 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:
x Investor protection
x Creation of a fair and efficient market, and
x 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:
x Voter ID card
x Driving license
x PAN card( in case of to trade more than 50000)
x Ration card
x Bank pass book
x Telephone bill
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Other requirements, which are necessary
x First page of the bank pass book and last 6 months statement.
x 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
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system permits only a registered client to log in using user id and password.
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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
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transparency. With online trading investors can see themselves the price at
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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;
xNews and research report
xBSE and NSE movements
xStock analysis
xIPO and mutual fund centers
STEP BY STEP PROCEDURE IN ONLINE TRADING:
Following steps explain the step by step approach to on-line trading:

x Log on to the stock broker's website
x Register as client/investor
x Fill the application form and client broker agreement form on the requisite
value stamp paper
x Obtain user ID and pass word
x Log on to the broker's site using secure user ID and password
x Market watch page will show real time on-line market data
x Trade shares directly by entering the symbol or number of the security
x Brokers server will check your limit in the on-line account and demat account
for the number of shares and execute the trade
x Order is executed instantly (10-30 seconds) and confirmation can be
obtained.
x Confirmation is e-mailed to investor by broker
x Contract note is printed and mailed in 24 hours
x Settlement will take place automatically on the settlement day
x Demat account and the bank account will get debited and credited by
electronic means.
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ONLINE TRADING HAS LEAD TO ADDITIONAL FEATURES SUCH AS:
x 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.
x 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.
x Cash account: where funds have to be available prior to placing the order.
x Margin account: where orders can be placed against stocks, to increase
Purchasing power.
ADVANTAGES OF ONLINE TRADING:
x 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.
x 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.
x 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.
x 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.
x Individuals’ benefit by saving comparatively a lot more when trading online
as the cost per trade is less.
x 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.
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Now they can invest in stocks, stock and index options mutual funds,
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FEATURES OF ONLINE TRADING:
The Online Trading is having many features which make it most suitable for the
investors to go for. Some of these features are as follows:
x Freedom of information
The Internet can provide a new sense of control over your financial
future. The amount of investment information available online is truly
astounding. It's one of the best aspects of being a wired investor. For the first
time in history, any individual with an Internet connection can:
x Know the price of any stock at any time
x Review the price history of any stock in chart format
x Follow market events in-depth
x Receive a wealth of free commentary and analysis about stock
markets and the global economy
x Conduct extensive financial research on any company
One of the great appeals of using an online trading account is the fact that
the account belongs to you, and is under your direct control. When you want
to buy or sell stock, you no longer need to call your broker on the phone;
hope that he is in the office to place your order; possibly argue with the
broker about the order; and hope that the transaction is executed instantly.
At the most basic level, an online trading account gives you more agility in
buying and selling stocks. This is through sophisticated information streams,
dedicated trading platforms and sophisticated tools for accessing the
markets.
Every broker house aims at providing the investor with the best price
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available. Also due to the high level of transparency with regard to display of
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information relating to the specific stocks and company profiles, you will be
able to get the best quote for your orders.
Online trading offers you greater transparency by providing you with an audit
trail. This involves a complete integrated electronic chain starting from order
placement, to clearing and settlement and finally ending with a credit into
your depository account. All these stages are subject to inspection, thus
bringing in transparency into the system.
Online trading integrates your bank account, your trading account and your
demat accounts, which leads to easy and paperless trading for you.
You as an Investment online customer will be able to execute the entire

trading transaction, right from logging on to our site, to the execution and
settlement of your bank account, in a very short period of time.
Trading on the net, gives even the smallest retail investor access to
information that earlier was available only to the big traders. This provides a
level playing field for all investors in the securities market.
This method of trading reduces the settlement risk for the investor, as in this
case all short sell orders are squared off at the specified cut-off time and not
allowed to be carried forward.
In the case of a demat account your demat account is checked by us before
executing your sell transaction. This reduces the settlement risk for the
buyer, who is assured of the delivery of the securities and for you as a seller
of the securities
Every trade is confirmed immediately and you will receive an on-screen

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confirmation following every trade with full details for your records. This
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Your Bank, Depository and online account are integrated for your
convenience. Various broking houses provide access to many of the popular
banks.
INVESTORS REASONS TO TRADE ONLINE:
x They have control over their accounts, can make their own decisions and
don’t have to give reasons for their actions. They are independent.
x They have a reason to participate in the market and learn about it.
x It is interesting, cheap, easy, fast, and convenient.
x A lot of information is online so they can keep up-to-date with what is
happening in the trading world.
x It will give investors a greater choice and better realization.
x The immediate impact will be competition and benefits will accrue to the
investors.
x It will lead to brokerage commissions going down and brokers striving to
increase business afloat.
x Investors will now go to place, which have better trading conditions and also
members to offer them better facilities.
x They have access to numerous tools to invest, and can create their own
portfolio.
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BENEFITS OF ON LINE BROKING
1) Less Costly:
The most significant advantage of the online broking is the cost reduction in
the brokerage. Due to the power of the Internet one has the privilege of becoming
the clients of really large brokerages with the benefits of enjoying the low charges
hithelio before enjoyed only by the big players. As the DP account has got linked to
the trading account most players do not charge a minimum transaction cost thus
truly allowing one to buy a single share and achieve meaningful rupee price
averaging whatever be your buying power.
2) Peace of Mind:
One can never have complete peace of mind but online investing does away
with the hassles of filling up instruction slips, visits to the broker for handing over
these slips and consequent costs.
3) Keeping Records:
The site one trades on keeps a record of all transactions down to unexecuted
orders and cancelled orders thus keeping one abreast of all your transactions 24
hours a day. No paperwork means more time at one’s disposal for research and
analysis.
4) Access to Information and investment Tools:

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

The bank account linked with the trading account invariably has an A TM
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free. Most partner banks offer Internet banking as well. This results in one’s money
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case he spots an opportunity in the market he can immediately allocate money from
his savings account to his trading account and make profits.
6.) Unparalleled Safety:

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

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

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

It is the ease of doing the trade through net, with a click of mouse; one can
buy or sell any share that is dematerialized.
Other than the above-mentioned advantages, Internet trading provides some
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additional advantages to the investors, brokers and also helps the nation to
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hence increase in the bargaining power of the investors. The entire communication
between the investor, broker and exchange would take place within milliseconds.
HERE ARE THE POSSIBLE DISADVANTAGES:
x When network crashes, there will be problems and delays due to a large
influx of rapid online trading criteria.
x Individuals are restricted to first-hand financial guidance. This simply means
that the individual is himself / herself alone to.
x A tax (sales tax and value added tax) evaluation becomes an issue, especially
when you are trading internationally.
x One has no idea with whom he is dealing with on the other end.
x 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.
x 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.
x 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.
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CHAPTER 6
COMPANY PROFILE
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CHAPTER 6
COMPANY PROFILE
SHAREKHAN
Sharekhan, 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 Sharekhan

Commodities Pvt.Ltd-a wholly owned subsidiary of its parent SSKI. Sharekhan is
the member of two major commodity exchanges MCX and NCDEX.
SSKI
Apart from Sharekhan, 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
Sharekhan 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, India’s leading stockbrokers the real arm of SSKI, an
organization with over eight decades of stock market experience. With more
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than 175 share shops in over 80 cities, and a presence on internet through
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www.sharekhan.com, India’s premier online trading destination, we reach out to

customers like no one else.
Share khan offers you trade execution facilities on the BSE and the NSE,
for cash as well as derivatives, depositary services and most importantly,
investment advice tempered by 80 years of research and broking experience. To
ensure that your trading experience with share khan is fast, secure and hassle
free. We offer a suite of products and services, providing you with a multi-
channel access to the stock markets.
SSKI group also comprises institutional broking and corporate finance.
While the institutional broking division caters to the largest domestic and foreign
institutional investors. The corporate finance division focuses on niche areas such
as infrastructure. Telecom and media. SSKI holds a sizeable portion of the market
in each of these segments.
As the forerunner of investment research in the India market, we provide
the best research coverage amongst broking houses in India. Our research team
is rated as one of the best in the country. Voted four times as the top domestic
brokerage house by Asia money survey. SSKI is consistently ranked almagest the
top domestic brokerage houses in India.
Dematerialization in short called as “Demat is the process by which an
investor can get physical certificates converted into electronic form, Rs 20 per
scrip per day (the brokerage per scrip will be charged for the trades resulting in
delivery on actual or Rs. 20 whichever is more).
(For e.g. If a customer buys 100 shares of sail, total delivery value
=2200. Brokerage @ 0.5% = rs 11, but the min chargeable amt per scrip per
day = rs 20), so additional rs 9 will be charged as min delivery handling
charges)
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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

Commercial Terms and Conditions to open online trading account
Account Opening Fees:
CLASSIC ACCOUNT:750/-(Life Time opening charges)
SPEED TRADE: 1,000/-up with 9 top international banks.
(City Bank, HDFC, IDBI, Oriental Bank of Commerce, UTI, Indus Ind Bank, UBI, Yes
Bank& ICICI)
Brokerage:
x 0.10 %( Each leg) + Turnover Tax +Stamp Duty+ Service Tax For each leg of Intra-day
trades.
x 5paise (Each leg) +Turnover Tax +Stamp Duty+ Service Tax For each leg of Intra-day
trades.
x (Minimum brokerage for shares below Rs.50,)
x 0.50 %( Each leg) + Turnover Tax +Stamp Duty+ Service Tax for trades resulting in
delivery.
x 10paise (Each leg) +Turnover Tax +Stamp Duty+ Service Tax For each leg of Intra-day
trades.
x (Minimum brokerage for shares below Rs.20).
x A minimum brokerage Rs.18 for delivery trades.
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Exposure:
You will be given a Trading account with 25% margin i.e. 4 Times your margin
With SHARE KHAN.
CLASSIC PREPAID A/C:

Account opening Charges 750/-
5000/- Advance Brokerage cheque.
Brokerage: Delivery – 0.50%
Intraday – 0.10%
SPEED TRADE PREPAID A/C:

Account Opening Charges: 2000/-
Brokerage: Delivery - 0.25%
Intraday – 0.05%
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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 market 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
 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

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SPEEDTRADE EXE FEATURES:
 All the features of classic
 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.
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CHAPTER-7
ON-LINE TRADING AT
SHAREKHAN
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CHAPTER-7
ON-LINE TRADING AT SHAREKHAN
THE MECHANICS OF ONLINE TRADING
CLIENT BROKER STOCK EXCHANGE
Places an order on Accepts the Accepts the order

the net on the order, Checks after checking the
broker’s website the client’s scrip limit of the
through the Identity and broker for the day
distinctive I.D. places the order
code with the stock Executes the order
exchange
The settlement of
the deal (buy/sell
order) gets
reflected in his Pays the
Demat account. Exchange
Though his
The client is owns account
intimated about the and receives it Receives the
execution of the from the client money and
deal by e-mail. account. completes the
Pays the broker settlement
pending physical
delivery.
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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:
x The ease of operation from the view of the both members and the investors.
x Increase in the confidence of the investors because of higher level of
transparency.
x Facilities better monitoring of the market by the exchange.
x The best price achieved in buying and selling.
All these resulted in ever-increasing volumes on the exchanges offering the

online trading.
TRADING PROCEDURE AT 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
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error message to the member concern. All these operations are in built. The
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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 9:00 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.
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
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will be accepted at the CTS, after validation if it finds any invalid reason the order
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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:
x Good for the day (GFD)

x Good till cancellation(GTC)
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
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settlement period. This order is not carried forward to the next settlement
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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.
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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.
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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 Rejec ted orders w ould be orders accepted

c ommunic ated along w ith 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 y o u may d elete y o u may ed it y o u r you may delete your
pending order y o u r p en d in g o rd er p en d in g o rd er 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
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SCREEN SHOTS:
BUYING AND SELLING OF SHARES ONLINE BY USING TRADE TIGER SOFTWARE
CHECKING SCRIPTS
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VIEWING SELECTED SCRIPTS
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SELECTING SCRIPTS BY TYPING KEY WORDS
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BUYING OF SHARES
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BUYING THROUGH SELECTING PRICES
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SELLING OF STOCKS
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MODIFYING ORDERS
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CHAPTER 8
COMPARATIVE ANALYSIS
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CHAPTER 8
COMPARATIVE ANALYSIS
THE MAJOR PLAYERS IN ONLINE TRADING
x SHAREKHAN.COM
x 5PAISA.COM
x KOTAKSTREET.COM
x INDIABULLS.COM
x ICICIDIRECT.COM
x HDFCSEC.COM
x 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:
x HDFC Online Trading A/c: Plain Vanilla Account with focus on 3 in 1

advantage.
Pricing of HDFC Account

x Account Opening: Rs 750
x Demat: NIL, 1st year charges included in Account Opening
x Initial Margin : Rs 5000/- for non HDFC Bank Customers (AQB)
x Brokerage:
Trading 0.15%* each side + ST
Delivery 0.50%** each side + ST
90
*Rs 25 Min Brokerage per transaction

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x ICICI DIRECT:
x Account Opening: Rs 750

x Schemes: For short periods Rs 750 is refundable against brokerage generated
in a qtr. These schemes are introduced 3-4 times a year.
x 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
x Initial Margin : Nil

x 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 C .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% ---- --------
x 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
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Equities to Insurance. 450 + Relationship Managers who act as personal financial

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Online Account Type:

x Signature Account: Plain Vanilla Account with focus on Equity Analysis. The
equity analysis is a paid service even for A/c holders.
x 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
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
x 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

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x Twin Advantage / Green Channel : 2 DP’s, Limit against shares

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x Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per transaction
x High Trader : 6 Times Exposure Cash & Derivatives, Auto sq off 2:55
x 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.
PRICING OF KOTAK
x Account Opening : Rs 500
x Demat: Rs 22.5 p.m
x Initial Margin : Rs 5000(Compulsory)
x Min Margin Retainable : Rs 1000
x 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
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* Min Brokerage of Rs 0.05 per share * Min Brokerage of Rs 0.01 per share
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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.
x INDIA INFOLINE
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

x Investor Terminal : Investors / Students
x Trader Terminal : Day Traders / HNI’s
PRICING FOR RETAIL CLIENTS

Investor Terminal

x Demat 1st Yr : Rs 250
x Initial Margin : Rs 2500 (Compulsory)
x Brokerage :
Trading 0.10% each side + ST
Delivery 0.50% each side + ST
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PRICING FOR HNI CLIENTS

Trader Terminal
x Demat 1st Yr : Rs 250
x Initial Margin : Rs 5000(Compulsory)
x Brokerage :
Trading 0.10% each side + ST
Delivery 0.50% each side + ST
(Negotiable to 0.05% each side & 0.25%)
x Account Access Charges
Monthly Rs 800, adjustable against Brokerage
Yearly Rs 8000, adjustable against brokerage
x SHAREKHAN
Company Background
x Sharekhan is the retail broking arm of SSKI Securities Pvt Ltd. SSKI owns 56%
in Sharekhan, balance ownership is HSBC, First Caryle, and Intel Pacific
x Into broking since 80 years
x Focused on providing equity solutions to every segment
x Largest ground network of 210 Branded Share shops in 90 cities
Online Account Types

x Classis Account / Applet : Investor in equities
x Speed Trade : Trader in equities & derivatives
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PRICING FOR HNI CLIENTS
Speed Trade
x Account Opening : Rs 1000 ( Refundable against brokerage in Month + 1)

x Demat 1st Yr : Incl in Account Opening
x Initial Margin : Nil
x Min Margin Retainable : NIL
x Brokerage :
Trading 0.10% each side + All Taxes
Delivery 0.50% each side + All Taxes
(Negotiable based on volume)
x Account Access Charges
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

x D e mat 1 s t Y r : N I L
x Initial Margin : NIL
x Min Margin Retainable : NIL
x Brokerage:
Trading 0.10% each side + All Taxes
Delivery 0.50% each side + All Taxes
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Sharekhan online Trading Interfaces
The customer can choose the online trading interface that meets his requirement
based on his trading habits and preferences
CLASSIC / APPLET
The website is meant for customers who Invests in Equities
SPEEDTRADE
The speed trade is meant for customers who trade in Equities
DIAL-N-TRADE – Toll Free

The DNT is a value added services meant for all customers who
Want to transact but are not online.
DNT – TOLL FREE FERTURES
x Dedicated Toll – Free number for Order placements

x Automatic fund transfer with phone banking*
x Simple and secure IVR based system for authentication
x No wait time, on entry of Phone Id & TPIN, the call is transferred
x Trusted, professional advice of Tel-brokers who offer undiluted Sharekhan
Research Inputs
x After-hours order placement facility **
x 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

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

x Access to new IPO without any paperwork
x Advanced portfolio monitoring Tools
x Integrated DP account with trading account
x Option of linking additional 4 DP accounts to trading account
x Choice of linking 4 banks to trading a/c for online payments
x Cash and Derivatives trading in a single account
x E-mail confirmations for all transactions
x Choice of electronic/Physical contracts
SPEEDTRADE EXE FEATURES
ALL THE FEATURES OF CLASSIC

*Real – time streaming quotes using 2 Marker Watches
*Trade Execution in 2-3 seconds
* Instant Order/trade confirmations in the same window
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*Hot keys similar to a Broker’s Terminal

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

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* 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
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CHAPTER 9
QUESTIONNAIRES AND ANALYSIS
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CHAPTER 9
QUESTIONNAIRES
Questionnaire 1
Questionnaire
On the customer’s perception about investment in share market. (Sample size

32)
1. Gender? A) Male B) Female

Analysis:
MALE FEMALE
27 5
MALE
FEMALE
From the sample size of 30, 27 are males and 5 are only females. Interest of
female investors has to be improved.
2. A GE
A) 18-28 B) 29-39 C) 40-49 D)>49
18-28 29-39 40-49 >4 9
18 12 2 0
20
15
10
Series1
5
101
0
18-28 29-39 40-49 >49
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From the above data most of them are young and middle aged persons. It shows
that participation of youth is major.
3. MARITAL STATUS?
A) MARRIED B) UNMARRIED
MARRIED UNMARRIED
18 14
20
15
10 Series1
5
0
MARRIED UNMARRIED
Married is 60% and unmarried is 46%. This means most of them are having
families.
4. EDUCATIONAL QUALIFICATION?
A) HSC B)10+2 C)GRADUATE D)POST GRADUATE
HSC 10+2 GRADUATE POST GRADUATE Column1
1 2 18 11
20
15
10
5
0 Series1
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60% are graduates and 36% are post graduates. This means the sample is well
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5) OCCUPATION
A) BUSINESS B)SERVICE C)STUDENT 4)RETIRED
BUSINESS SERVICE STUDENT RETIRED
1 31 0 0
40
30
20
10
0 Series1
96.8% are in to service. This means most of them are working.
6. INCOME
A) BELOW ONE LAKH B) 1-2 LAKH C) 2-5 LAKH D) >5 LAKHS
<1LAC 1-2 LACS 2-5 LACS >5LACS
0 3 17 12
20
15
10
5 Series1
0
<1LAC 1-2 2-5 >5LACS
LACS LACS
From the above status 53% are earning in the range of 2-5 lakhs of rupees and
32% earning more than 5 lakhs per annum. That the average income of the
sample is very high.
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7. Idea about Trading or investment in shares?

A) YES B) NO
Y ES NO
19 13
20
15
10 Series1
5
0
YES NO
60% of the samples have idea about Trading but the rest of 40% say they have
no idea. Hence scope of attracting new investors is high.
8. Are you interested in DEMAT account?

A) YES B) NO
Y ES NO
20 1 2
20
15
10 Series1
5
0
YES NO
Out of 60% having idea about trading 62% are interested in taking DEMAT a/c.
The rest 37% are not interested out of 40% who are not having any idea about
trading.
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Correlation
Between question7 and question8
Y ES NO Y ES NO
20 12 19 13
CORELATION Column1
1
POSITIVE CORRELATION
There is a positive correlation between people who have idea about Trading and
willing to Trade as well as people who have no idea about trading and not will to
have a demat a/c.
9(a). Are you trading any where?

A) yes B) NO
Column1 Y ES NO
Q9 A 14 18
Q9A
20
Q9A
0
YES NO
56% are not trading any where so there is possibility of getting customers from
this sample. 43% are trading.
9(b). IF YES?
A)INDIA INFOLINE B) RELIGARE C) ANAND RATHI D) STEEL CITY E)KARVY F) ICICI
G) RELIANCE H) N/A
INDIA ANAND STEEL
INFOLINE RELIGARE RATHI CITY KARVY ICICI RELIANCE N/A
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2 0 4 2 1 4 1 18
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20
0 Series1
12% in icici direct, 12% in anand rathi, 6% in India infoline, 6% in steel city
securities and 3% in religare and reliance.
10. IF YOU ARE INTERESTED THEN WHERE YOU WOULD LIKE TO INVEST YOUR
MONEY?
A) EQUITY B) DERIVATIVES C) FOREX TRADING D) COMMODITY E) N/A
EQUITY DERIVATIVES FOREX TRADING COMMODITY N/A
17 1 1 1 12
20
15
10
5
0 Series1
53% are interested in Equity markets. This shows that derivatives, forex and
commodity Trading is too risky.
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11. If you are interested in DEMAT account then what% of INCOME you would like
to invest in shares?
A) <5% B) (5-10)% C) (10-20)% D) >20 E) N/A
<5 % (5-10)% (10-20)% >2 0 N/A

4 6 6 3 12
12
10
8
6
4 Series1
2
0
Most of them wanted to invest between (5-20) % of there income in to shares.

This can bring in greater volumes of trade.
12. Do you think investment in shares market is better than any other investment?
A) YES B) NO
Y ES NO
20 12
20
15
10 Series1
5
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0
YES NO
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62% believe that share market better than any other investment. 38% believe
they are other sources of investment than share market.
Correlation between Q12 and Q7

Y ES NO
20 12
Y ES NO
19 13
CORELATION
1
*POSITIVE
CORELATION*
There is a positive correlation that means people who idea about share markets
believe its better than other investments but the rest believe it is not.
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QUESTIONNAIRE 2
“CUSTOMER AWARENESS ON ONLINE TRADING”
(Sample size 50)
1.How long have you been doing online-trading?
(a)1 year (b) 2 year
(c) 3 year (d) 4 year
1year 2years 3years 4years

18 15 7 10
4years
1 3years
2years
1year
0 5 10 15 20
From my survey people who are trading since 1year is 36%, since 2years is 30%,
since 3years is 14% and since 4years is 20%. This means the numbers of investors
are increasing at a greater speed during the recent trend.
2.How will you describe your experience with on-line trading till date?
(a) Very easy to operate
(b) Very difficult to operate
(c) Not secure
(d) Any other
(a) (b) (c) (d)

30 5 8 7
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30
25
20
15 Series1
10
5
0
(a) (b) (c) (d)
Almost 60% of the sample says Online Trading is easy and 16% of sample says
Online Trading is not secure. Hence we can say Online Trading is easy to operate
and it should be made more secure.
3. What is your annual income?

(a) Below 100000 (b) 1,00,000 – 2,00,000
(c) 2,00,000 – 3,00,000 (d) 3,00,000 – 4,00,000
A B C D
10 18 12 10
D
1
C
B
A
0 5 10 15 20
36% of the sample has moderate income level of 1lakh to 2lakh, 44% of the
samples earn an annual income of more than 2lakhs and 20% percent of the
sample is below 1lakh. The above figures say that per-capita income level is quite
high and has good opportunities for investments.
4. What amount of money do you invest normally?

(a) >50000 (b) 50000 to 150000
(c) 150000 to 2000000 (d) any other amount
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<50000 50000-150000 150000-200000 >200000

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20
<50000
15
50000-150000
10
150000-200000
5
>200000
0
1
From the above data 40% of the sample says they invest around 150000-200000.
64% of people invest less than 50000 but 36% invest in more than 150000 in share
market. This trend shows that investors want to invest in share markets for more
returns even though there is risk.
5. What percentage of your monthly household income could be available for

investment?
(a) Less than 5% (b) 5% to 10%
(c) 10% to 15% (d) 15% to 20%
>5 % (5-10)% (10-15)% (15-20)%

9 20 12 9
20
15
10 Series1
5
0
>5% (5-10)% (10-15)% (15-20)%
From the above trend we can say that 40% of the investors have 5-10% of
household income available for investment and more than 40% say they have 10-
20% of income for investments. The income level trends in the above question also
prove that effective amounts of investments can made. Only 20% have 5% of
income for investment.
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6. How often do you trade?

(a)Daily (b) Weekly
(c) Monthly (d) More than one month
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DAILY WEEKLY MONTHLY MORE THAN ONE MONTH

20 12 4 14
20
15
10
5
0 Series1
From the above trend 40% of people trade daily, 24% trade weekly and 36% trade
for more than a month or monthly. This trend shows that there is mixture of
investors who trade daily and also investors who hold for long term. 40% of the
traders are daily traders so Online Trading will be very helpful to them.
7. Which trading do you prefer?

(a) Online trading (b) offline trading
(c) Both
on-line offline Both

22 12 16
30
20
Series1
10
0
on-line offline Both
From the above trend we can say that 44% of people say that they prefer online
trading, 24% prefer offline trading and 32% prefer both. This shows that people are
aware of online trading.
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8. According to you, is online trading settled in Indian investor psyche?

(a) Yes (b) No
yes no
16 34
40
30
20 Series1
10
0
yes no
From the above trend we can say that 32% say that online trading has settled in
Indian investor psyche and 68% say that it is not yet settled in Indian psyche.
10. Which media do you prefer the most as an investor?

(a) T.V (b) Newspaper
(c) Magazines (d) Journals
T.V NEWS PAPPER MAGZINES JOURNALS

18 25 2 5
25
20
15
10
5
Series1
0
50% of the sample prefer news paper media, 36% prefer T.V media and rest 14%
prefer journals and magazines.
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11. Where do you often invest your money?

(a) Equity (b) Mutual fund
(c) Insurance (d) Term deposits
(e) Others
EQUITY MUTUAL FUND INSURANCE TERM DEPOSITS

15 10 10 15
15
10
5
0 Series1
30% of the sample invests in equity and 30% of the sample says they invest in Term
deposits. 20% in mutual funds and 20% in insurance. This status says that equity
has an equal priority to Term Deposits.
12. What is the primary objective of your investment?

(a) Capital appreciation (b) Source of income
(c) Retirement planning (d) Wealth preservation
(e) Education funding /others
(A) (B) (c) (D) ( E)

8 19 1 14 6
20
15
10
Series1
5
0
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(A) (B) (c) (D) (E)

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Out the samples 38% believe investment as a source of income, 28% think its for
wealth preservation, 16% think for capital appreciation and only few percentage
think its for other purposes. This data tells that objective of investment is source of
income as well as for wealth preservation.
13. Online trading is a secure way of trading

( a) Strongly agree (b) Agree
(c) Can’t say (d) Disagree
STRONGLY
AGREE AGREE CANT'T SAY DISAGREE
18 12 8 12
20
15
10
5
0 Series1
From the above data 36% strongly say online trading is secure 24% agree it is
secure and 24% say it’s not secure. Most of the people believe Online Trading as
safe and secure but there are few who think it is not. May because Online Trading
works with internet platform.
14. Online trading is an easy and fast way of trading

STRONGLY AGREE AGREE CANT'T SAY DISAGREE

16 14 8 12
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20
10
0
Series1
Series1
Almost 60% believe that Online Trading is faster way of trading. Hence there is a
wide scope of opportunities in Online trading in this fast moving world.
15. Introduction of online trading helped attract new Investors thus increasing the
trading volumes at Stock Market
STRONGLY AGREE AGREE CANT'T DISAGREE

25 10 5 10
30
20
10
0 Series1
Series1
STRONGLY AGREE
AGREE CANT'T
DISAGREE
Almost 70% of the samples agree that Online Trading has attracted new investors
and increasing trading volumes. Only 20% disagree with above statement. Hence
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Online Trading has brought reforms in to markets.

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TESTS:
CROSS TABS:
Between question 2 and 6
Chart Title
18
16
14
Axis Title
12
10
8
6
4
2
0
A B C D
D 3 2 1 1
C 2 2 1 3
B 3 1 0 1
A 10 9 2 9
Interpretation
Most people who think online trading is easy to operate are very frequent Traders.
People who think online trading difficult are not frequent traders. Few people who
think online trading is not secure hold for long term. Only very few have other
reasons for not choosing online trading. The interpretation of the data says that
online trading is easy to operate and good for daily trading.
CORRELATION:
Between questions 1 and 4
Value=0.603806
It is a positive correlation.
Interpretation
Longer the trading more the amount invested in the markets.
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CHI-SQUARE TEST:
Between question 2 and 7
H0= the type of trading does not depends upon the experience the person has in
online trading.
H1= the type of trading depends upon the experience the person has in online
trading.
Chi-Square Tests
Asymp. Sig. (2-

Value df sided)
a
Pearson Chi-Square 6.548 6 .365
Likelihood Ratio 6.927 6 .328
N of Valid Cases 51
a. 9 cells (75.0%) have expected count less than 5. The

minimum expected count is 1.27.
Chi-square value is greater than 0.05 so we reject H0.
Interpretation
Therefore the type of trading depends upon the experience the person has in
online trading.
Interpretation from Questionnaire2:
x The numbers of investors are increasing at a greater speed during the recent
trend.
x Online Trading is easy to operate and it should be made more secure.
x Per-capita income level is quite high and has good opportunities for investments.
x Investors want to invest in share markets for more returns even though there is
risk.
x Trend shows that there is mixture of investors who trade daily and also investors
who hold for long term. 40% of the traders are daily traders so Online Trading will
be very helpful to them.
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x People are aware of online trading but 68% say that it is not yet settled in Indian
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x 50% prefer news paper media, 36% prefer T.V media and rest 14% prefer journals
and magazines. Hence most of them follow television broadcasting.
x Equity has an equal priority to Term Deposits. Hence people can be attracted
towards investment in Capital markets.
x Objective of investment is source of income as well as for wealth preservation.
Many are making trading as a source of income hence investments can increase.
x Most of the people believe Online trading as safe and secure but there are few
who think it is not. May because Online Trading works with internet platform.
Hence care should be taken to make internet safer.
x Almost 60% believe that Online Trading is faster way of trading. Hence there is a
wide scope of opportunities in Online trading in this fast moving world.
x Online Trading has brought reforms in to markets.
x Longer the trading more the amount invested in the markets.
x The type of trading depends upon the experience the person has in online trading.
x Most people who think online trading is easy to operate are very frequent Traders.
People who think online trading difficult are not frequent traders. Few people who
think online trading is not secure hold for long term. Only very few have other
reasons for not choosing online trading. The interpretation of the data says that
online trading is easy to operate and good for daily trading.
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CHAPTER-10
CASE STUDY
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CHAPTER-10
CASE STUDY-1
CASE STUDY ON KSE
Capital Markets:
Khambata and Khambata against 16% for the market. The high dividend
payments are probably used by the parent company as a means of repatriating
profits. As of 1986, the market share price of multinationals reflects the high
dividend payments; the market-to-book value ratio of multinationals was over 4,
compared to less than 2 for the market as a whole. The fundamental
characteristics of the Pakistani stock market and those of other developed and
emerging markets. As of end 1986, 37 public sector companies are listed on the
Karachi Stock Exchange (KSE) with a market capitalization of Rs l0 million or 32%
of total market capitalization. The number of shares traded on the Karachi Stock
Exchange has shown a secular increase from 24.6 million shares in 1977 to 100
million shares in 1986. Turnover in the 25 most active shares accounted for
48.4% of total market turnover in FY87, while in the case of 58 shares less than
5,000 shares each were traded during the same period. Interestingly;
multinationals (generally regarded as blue chips) did not figure at all in the 25
most active shares. While forming 28% of market capitalization, they accounted
for only 5.8% of market turnover probably because they are closely held and
there is relatively little float in these shares.
The Companies Ordinance (1984) provides for: (i) declaration of holdings in

companies by directors, principal officers and their families; and (ii) a submission
of information on sales/transfer of shares and profits if arising in less than six
months from date of purchase. It should be noted that insiders not only include
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management but also others associated with the company having access to
sensitive information. However, the prevalence of transactions in nominee
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names makes it difficult, if not impossible, to prove insider trading. There is also

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a growing controversy as to whether members of the Exchange should be

permitted on the boards of directors of companies.
CONCLUSIONS AND RECOMMENDATIONS
The pricing of both equity and debenture capital in Pakistan is not

determined by market forces but is administratively set by the Government. In
the case of equity, all issues of new companies are priced at par. The initial issue
price of closely-held companies going public is set by CCI and is determined on
historic data with future prospects not being taken into account. This has
resulted in the shares of well-managed companies being issued at below market-
clearing price so that the new shareholders benefit at the expense of the original
shareholders.
Such policies have denied underwriters any useful function in setting issue
prices or in distributing securities. In addition, as both the issue price and
underwriting commission are fixed, underwriters have almost no role in
determining a market price for the issue nor does the underwriting commission
reflect perceived issue risk.
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CASE STUDY-2
CASE STUDU ON SAXO BANK
Today, Saxo Bank is an undisputed world leader in online trading of Foreign

Exchange (FX), Stocks, Stocks on Margin (CFDs), Futures and fixed income products.
The reputation of Saxo Bank as an award-winning and technology-driven European
Internet-bank is built thanks to the modern and reliable software systems that
support the Saxo Bank business model.
In the beginning of 2003 Saxo Bank decides to offer online investment

services for a completely new customer segment - private investors, who would
benefit from a full range of investment products. Since the time-to-market of new
banking software products is a real challenge in the highly competitive financial
services market, Saxo Bank decides to find a software development services
company in the near shore zone that specializes in portal solutions and has expertise
in serving the Financial Services sector.
After strict pre-screening of near shoring locations and companies, Saxo Bank
had turned to Russia's leading software development services provider - Reksoft that
has a software development centre located in the largest city of Eastern Europe - St.
Petersburg, Russia.
The two key concerns for Saxo Bank were the optimal time-to-market
indicator and the highest standards in information security - both in relation to
product and personnel.
Reksoft provides Saxo Bank with a full range of application life-cycle services -
application architecture development, software development, application testing,
support in platform implementation and continuous maintenance (3rd level
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application support services).

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CONCLUSIONS AND RECOMMENDATIONS
The SaxoBank MiniTrader online platform, enters operations offering entry-level

trading on a popular selection of instruments from the Saxo Bank product range,
including:
x Direct trading on live tradable prices through the professional online trading
platform
x Low trading costs and spreads
x Reputable fully regulated EU bank where the Saxo Bank multinational staff offer
personal service in 18 languages
x Wealth of trading recommendations and market predictions from the Bank's own
analysts and major financial institutions
Saxo MiniTrader online trading platform fully meets the needs of the Bank's
clients, combining a highly secure online environment with a wealth of trading
modules. Saxo MiniTrader helps private investors make successful trading decisions
with real-time execution.
Saxo Bank outsourcing to Reksoft has allowed roll-out the operational system
within a very tight time frame. Thanks to that, Saxo Bank was able to grow its
customer base, greatly benefiting from the launch of this innovative solution for a
new market segment.
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CHAPTER-11
ARTICLE
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CHAPTER-11
ARTICLE
Sharekhan, one of India's leading brokerage houses, is the retail arm of SSKI. With over
510 share shops in 170 cities, and India's premier online trading portal
www.sharekhan.com, our customers enjoy multi-channel access to the stock
markets. Sharekhan offers you trade execution facility on the BSE and NSE, for both
cash and derivatives market, commodity trading facility on the MCX and NCDEX,
automated IVRS-based trading facility from your telephone, depository services and
most importantly, investment advice tempered by 80 years’ of research and broking
experience.
The event titled ‘Empower’ is an attempt made by Sharekhan to offer
financial education to their clients. They offer their analysis on the stock market – its
ups and downs, which shares to hold or to sell. In short they serve as a common
man’s guide into the sensex providing financial tips depending on the present
market scenario and their perspective on what it holds for tomorrow.
This detailed analysis and financial education is possible and made available to all by
using the technology of Live Webcasting with PPT and Chat Interactivity.
1. 5-6 speakers give presentations on variable topics of financial interest through the
use of PPT.
2. The presentations are streamed live using the Webcast technology, enabling
interactivity so that the geographically distanced viewers could post in their queries
on the presentation as well and after the live session the edited version of the same
is enabled on the website thereby enabling the viewers who would have missed out
on the live proceedings to benefit from the
Process through a Video on Demand of the proceedings.
3. Given the criticality of the situation and the effort that has been put in there has
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to be enough redundancy or contingency plan for ensuring a smooth flow of the

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event and so that there no glitches. Prior to the event atleast two rounds of testing

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(internet connectivity) is essential if there is sufficient time at hand, if not one test
would suffice.
4. 2 Encoders for the purpose of encoding are used – 1 main and the other as back
up. The content is then streamed through the internet connectivity. In Sharekhan
the Connectivity available is from two different service providers namely Tata and
Reliance. The bandwidth available is 1 mbps and 512 kbps respectively.
5. A separate login page is created. The viewer has to fill up all the fields in login
page like user name, location, section email ID.
6. After entering all the information accurately, user will be redirected to the
“user.htm” where user can ask questions.
7. The viewers would then post their question/ queries/ comments in the
feedback/chat window provided
8. The webcast team along with client team members would take a look at the
questions and the ones which were unique and relevant questions would be passed
on to the concerned presenters, the presenter would thus address the questions
9. As many questions as possible within the given time frame are answered. The
remaining questions are posted on their website along with answers for the same.
Hence, for a client like Sharekhan wanting to create awareness about the current
market scenario to its clients, brokers, retailers etc, the combination of the
technology of Webcasting along with Chat Integration proved to be cost effective,
time saving and at the same time eliminating the monotony of repetitive.
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CHAPTER-12
PROJECT ANALYSIS
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CHAPTER-12
PROJECT ANALYSIS
SWOT ANALYSIS
Strengths
x Strong credibility among investors because of its heritage.
x Excellent reputation among the business society.
x Capability of providing superior customer service.
x Quality research team.
x Easier access to the customer due to largest ground network of 280 branded
share shops in 120 cities.
x Abundant information about economy and companies.
x Ability to attract and retain superior and quality personnel.
x Highly sophisticated infrastructure.
x Efficient research and analysis team, which by interpreting the economy and
company’s performance accurately is enhancing the profitability of the
clientele.
Weaknesses
x Inadequate product awareness among the retail investors.
x Brokerage is high when compared to its competitors like Indiainfoline and
Religare.
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x Brand awareness is low in the financial market.

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x Promotional activities conducted by the company are not at par with the
other firms.
Opportunities
x Hyderabad covers only 2% of investors which gives huge potential for the
market penetration.
x Bullish phase of the market attracts investing public.
x Access to the BSE online space for the retail investors creates opportunity to
increase clientele base.
x Awareness campaigns about online trading create new market.
Threats
x Availability of Unit Linked Insurance Policies (ULIP’s) and mutual funds in the
market.
x Threat of entry is high in this industry as the manpower required is less and
capital requirement is medium.
OBSERVATIONS:
x Fluctuations are more in secondary market than any other market.
x There are more speculators than investors.
x Information plays a vital role in the secondary market.

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x Previously rolling settlement is T+5 days, now it changed to T+2 days and
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x It was also observed that many broking houses offering internet trading
allow clients to use their conventional system as well just ensure that
they do not loose them and this instead of offering e-broking services
they becomes service providers.
x 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 indiainfoline.
CONCLUSION:
x 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.
x In the present scenario to compete with the Broker’s would require sound
infrastructure and trading as per international standards.
x 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
handling a vast amount of transactions and this can be an efficient trading,
delivering, settlement system with adequate protection to investors. The
trading of SHAREKHAN of the first day was Rs. 1.8 crores.
x 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.
x The broker’s has a greater scope than compared to the earlier times because
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of invention of online trading.

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x 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.
RECOMMENDATIONS:
x I recommend the exchange authorities to take steps to educate Investors
about their rights and duties. I suggest to the exchange authorities to
increase the investors’ confidences.
x I recommend the exchange authorities to be vigilant to curb wide
fluctuations of prices.
x The speculative pressures are responsible for the wide changes in the price,
not attracting the genuine investors to the greater extent towards the
market.
x 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.
x Necessary steps should be taken by the exchange to deal with the situations
arising due to break down in online trading.
x Effective monitoring of transaction have to be done in avoid uncertainties.
x Internet cost have to be reduced in order attract online trading users.
x Transparency has to maintain in the Share Markets.

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CHAPTER-13
BIBILOGRAPHY
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BOOKS:
x Investment management
-V.K.Bhalla
x Investment management
-Preethi Singh
x Security Analysis And Portfolio Management
-V.A.Avadhani
x Marketing of Financial Services
-V.A.Avadhani
x Indian Financial System
-M.Y.Khan
WEBSITES:
x www.Share Khan.com
x www.bseindia.com
x www.sebi.com
x www.moneycontrol.com
x www.economictimes.com
x www.nseindia.com
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“A STUDY ON ONLINE TRADING” in SHAREKHAN

A SUMMER INTERNSHIP PROJECT ON

“A STUDY ON ONLINE TRADING”

FOR THE PARTIAL FULFILLMENT OF POST-GRADUATION DEGREE IN

UNDER THE ESTEEMED GUIDENCE OF

AMITY GLOBAL BUSINESS SCHOOL

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

MITHUN KUMAR PATNAIK

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

This is to certify that the project report entitled “A STUDY ON

(FACULTY GUIDE) (INDUSTRY GUIDE)

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

MITHUN KUMAR PATNAIK

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

OBJECTIVES OF THE STUDY:

x It is to analyze the changes in trading after the exchange shifted from

outcry to online trading system.

x It is to study the functions of SHAREKHAN through various

x 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

x To know about the latest and future development in the stock

exchange trading system.

METHODOLOGY OF THE STUDY:

Secondary method: The secondary data collection method includes:

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

NEED FOR THE STUDY:

performance of the capital market.

LIMITATIONS OF THE STUDY:

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

Following diagram gives the structure of Indian financial system:

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

The organized market comprises of official market represented by recognized

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

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

Primary market is generally referred to the market of new issues or market

Investors’ protection in the primary market:

To ensure healthy growth of primary market, the investing public should be

 Provision of all the relevant information

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

 Provision of accurate information and

Secondary market operations involve buying and selling of securities on the

The following are the intermediaries in the secondary market:

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

STOCK MARKETS IN INDIA:

Definition of a stock exchange:

“Stock exchange means any body or individuals whether incorporated or not,

 Shares of public company.

History of Stock Exchanges:

subject, central legislation was proposed and a committee headed by

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

committee’s recommendations and public discussion, the securities contract

Functions of Stock Exchanges:

Stock exchanges provide liquidity to the listed companies. By giving

Various Stock Exchanges in India:

At present there are 23 stock exchanges recognized under the securities

x Ahmadabad Stock Exchange Association Ltd.