Main Body of Project

“A STUDY ON ONLINE TRADING” in
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CHAPTER I
OBJECTIVES AND
METHODOLOGY OF STUDY
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CHAPTER-1
AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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

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includes:
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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
• FINANCIAL SYSTEM
• DIFFERENT TYPES OF MARKETS
• STOCK EXCHANGES
• 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.
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MONEY MARKET:
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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.

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➢ E.g.; treasury bills, commercial papers, CD's etc.
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.
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Capital market is a place where we can raise long-term capital.

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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.
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The following are the market intermediaries associated with the

market:
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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

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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:
➢ Provision of all the relevant information
➢ Provision of accurate information and
➢ Transparent allotment procedures without any bias.
SECONDARY MARKET
The primary market deals with the new issues of securities.

Outstanding securities are traded in the secondary market, which
is commonly known as stock market or stock exchange. “The
secondary market is a market where scrip’s are traded”. It is a
market place which provides liquidity to the scrip’s issued in the
primary market. Thus, the growth of secondary market depends
on the primary market. More the number of companies entering
the primary market, the greater are the volume of trade at the
secondary market. Trading activities in the secondary market are
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done through the recognized stock exchanges which are 23 in

number including Over the Counter Exchange of India (OTCE),
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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

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shares on one or more stock exchanges in India. Listing of scrip’s

provides liquidity and offers an opportunity to the investors to
buy or sell the scrip’s.
The following are the intermediaries in the secondary market:

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

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➢ 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
subject, central legislation was proposed and a committee
headed by A.D.Gorwala went into the bill for securities
regulation. On the basis of the committee’s recommendations
and public discussion, the securities contract (regulation) act
became law in 1956.
Functions of Stock Exchanges:
Stock exchanges provide liquidity to the listed companies. By

giving quotations to the listed companies, they help trading and
raise funds from the market. Over the hundred and twenty years
during which the stock exchanges have existed in this country
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and through their medium, the central and state government

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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,

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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:
• Ahmadabad Stock Exchange Association Ltd.
• Bangalore Stock Exchange
• Bhubaneswar Stock Exchange Association
• Calcutta Stock Exchange
• Cochin Stock Exchange Ltd.
• Coimbatore Stock Exchange
• Delhi Stock Exchange Association
• Guwahati Stock Exchange Ltd
• Hyderabad Stock Exchange Ltd.

•
Jaipur Stock Exchange Ltd
• Kanara Stock Exchange Ltd

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• Ludhiana Stock Exchange Association Ltd

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• Madras Stock Exchange

• Madhya Pradesh Stock Exchange Ltd.
• Magadh Stock Exchange Limited
• Meerut Stock Exchange Ltd.
• Mumbai Stock Exchange

• National Stock Exchange of India

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• OTC Exchange of India

• Pune Stock Exchange Ltd.
• Saurashtra Kutch Stock Exchange Ltd.
• Uttar Pradesh Stock Exchange Association
• Vadodara Stock Exchange Ltd.
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
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access to investors from all across the country on an equal

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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

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Capital Market (Equities) segment commenced operations in

November 1994 and operations in Derivatives segment
commenced in June 2000
NSE's mission is setting the agenda for change in the

securities markets in India. The NSE was set-up with the main
objectives of:
• Establishing a nation-wide trading facility for equities and debt

instruments.
• Ensuring equal access to investors all over the country
through an appropriate communication network.
• Providing a fair, efficient and transparent securities market to
investors using electronic trading systems.
• Enabling shorter settlement cycles and book entry settlements
systems, and
• Meeting the current international standards of securities
markets.
The standards set by NSE in terms of market practices and
technology, have become industry benchmarks and are being
emulated by other market participants. NSE is more than a mere
market facilitator. It's that force which is guiding the industry
towards new horizons and greater opportunities.
BSE
The Stock Exchange, Mumbai, popularly known as "BSE" was

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established in 1875 as "The Native Share and Stock Brokers

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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

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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
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of three elected directors, three SEBI nominees or public

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representatives, Executive Director & CEO and Chief Operating

Officer has been constituted. The Committee considers judicial &
quasi matters in which the Governing Board has powers as an
Appellate Authority, matters regarding annulment of
transactions, admission, continuance and suspension of member-
brokers, declaration of a member-broker as defaulter, norms,
procedures and other matters relating to arbitration, fees,

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

examination.
SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

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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
• To protect the interest of investors in securities.

• Regulating the business in stock exchanges and any other
securities market.
• Registering and regulating the working of intermediaries
associated with securities market as well as working of
mutual funds.
• Promoting and regulating self-regulatory organizations.
• Prohibiting insider trading in securities.
• Regulating substantial acquisition of shares and take over
of companies.
• Performing such functions and exercising such powers
under the provisions of capital issues (control) act,
1947and the securities to it by the central government.
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SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK

EXCHANGES):
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• 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.

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• Capital adequacy norms have been laid down for the

members of various stock exchanges depending upon their
turnover of trade and other factors.
• All recognized stock exchanges will have to inform about
transactions within 24 hrs.
CHAPTER-3
ELECTRONIC SETTLEMENT OF
TRADE Page
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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
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account by way of book entry.

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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

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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 of securities sold and credit the broker’s
clearing account.
3. Before the pay-in-day, broker of the investor transfers
the securities to clearing corporation.
4. The broker receives payment from the stock exchange.
5. The investor receives payment from the broker for sale
of securities in the same manner as received in case of
sale of physical securities.
REMATERILISATION OF SHARES
Rematerialization is the process of conversion of electronic

holdings of securities into physical certificate form. For
rematerilisation of scrip’s, the investor has to fill up a 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.
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Market timings:
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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

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Trade modification end time / Exercise Market

: 16:15 hour
INTERNET BASED TRADING THROUGH ORDER

ROUTING SYSTEMS
Internet based trading on conventional exchanges, uses

the Internet as a medium for communicating client orders to
the exchange, through broker web sites. Broker’s web sites
may serve a variety of functions. These may include;
• Allowing the clients to directly trade through investors;
• Advertise the broker dealers’ services to potential
investors;
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• Offer market information and investment tools similar to

those offered by information vendor or SRO web sites;
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• Offer real-time or delayed quote information,

continuously update quotes while the user visits other
sites, or allow investors to create a personal stock
ticker;
• Provide market summaries and commentaries, analyst
reports and trading strategies and market data on

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currencies, mutual funds, options, market indices and

news; and
• Offer investors access to portfolio management tools
and analytic programs;
• Information on commission and fees; and
• Account information and research reports.
In an Order Routing system, a broker offering Internet trading

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

(PROVISION FOR PRICE DISCOVERY AND MATCHING OUTSIDE
CONVENTIONAL EXCHANGES)
In foreign jurisdiction, Alternative trading systems have been

developing outside conventional securities markets, which provide
investors with additional proprietary electronic trading facilities for
securities that are traded principally on securities exchanges, or
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other organized markets. They have price discovery functions,

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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,

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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:
• Public offerings;
• Private offerings; and
• Disclosure and communication
Issuers are using the Internet to market themselves to
potential investors. The Internet is also being used for fulfilling
necessary disclosure requirements, for disseminating the prospects
in electronics form and even for receiving share applications in
public issues electronically. In India, SEBI has taken initiative in
permitting use of the network of stock exchange for collection of
investor applications in public offerings by the issuer companies
INVESTMENT ADVISORY SERVICES
Brokers as well as other service provides such as investment

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firms, research outfits etc. are using the Internet for marketing and
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advertising purposes, for presenting information on portfolio

analysis and market information, and for communicating with and
receiving orders from potential investors. The services offered by
the service providers to the investors are generally the following:
• Advertising

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• Providing investment information and investment

advice;
• Underwriting
• Communicating with the investors;
• Customer orders; and
• 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
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Interest based securities trading, chaired by Prof. Deepak

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B. Phatak, IIT, Pawai, Mumbai

ii. Surveillance and monitoring related issues arising due to
Interest based securities trading, chaired by Shri. L.K.
Singhvi, Sr. ED, SEBI
The committee also requested Ms D N Raval, Executive Director,
SEBI to examine the legality of introduction of Internet trading and

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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
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inputs have been utilized while drafting this report.

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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
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Operational and System Requirements:

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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

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Exchange must also ensure the records maintained in electronic

from by the broker are not susceptible to manipulation.
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.
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Signature Verification/ Authentication:

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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.

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Client Broker Relationship

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

Brokers must enter into an agreement with clients spelling out
all obligations and rights. This agreement should also inter alia, the
minimum service standards to be maintained by the broker for such
service specified by SEBI/Exchange for the internet based trading
from time to time. Exchange will prepare a model agreement for this
purpose. The broker agreement with clients should not have
Investor Information:
The broker web site providing the internet based trading
facility should contain information meant for investor protection
such as 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/
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circulars. Ticker/quote/order book displayed on the web-site of the

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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

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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 separate cell specifically to handle
Internet trading related complaints. It is desirable that exchanges
should also have facility for on-line registration of complaints on
their web site.
Risk Management:
Exchanges must ensure that brokers have a system-based
control on the trading limits of clients, and exposures taken by
clients. Brokers must set predefined limits on the exposure and
turnover of each client. The broker systems should be capable of
assessing the risk of the client as soon as the order comes in. The
client should be informed of acceptance/rejection of the order within
a reasonable period. In case system based control rejects an order
because of client having exceeded limits etc., the broker system
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may have a review and release facility to allow the order to pass
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through.
Contract Notes:
Contract notes must be issued to clients as per existing regulations,
within 24 hours of the trade execution.

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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.
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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30

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31
CHAPTER-4

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DEFINITIONS AND
EXPLANATIONS
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
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same things, the letter being a more common American

32
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
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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 the value of your savings,
you have to keep them in forms other than cash. This is what
investment is all about, deployment of your saving with the
intentions of preserving or increasing their value. This
deployment can be done by using your savings to buy land,
residential properties, commercial properties, gold, jewelry,
works of art, fixed deposits in banks and companies, shares,
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bonds, infact, anything whose value is likely to either remain

constant or appreciate with time. Investment also refers to
33
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

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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.
4. CIRCUIT LIMIT:-
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While issuing the shares to the public the company has to fix a
34
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

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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
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& lower limit of the share he cannot sell the share below the lower
35
limit and not above the upper limit like the upper limit Percentage
generally in this limit also the percentage is below 10% of the face
value of the shares the percentage is below 10% of the face value of
the shares the percentage of the upper &lower limit is equal to
every type of share
For ex. Suppose the person wants to sell the

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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,
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Reliance Industry. So reliance company issues separate share for

separate working area but the bold name which is given to the
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working area is “Reliance”. So in this case Reliance has its own

scripts. Other example Ambuja, Birla, Etc.
9. GROUPS:-

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When the shares are issued by the company they are given the
particular group by the Stock exchange according to its demand in
the market. There are mainly 7 groups.
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

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execute the order at the best possible rate quoted on the

particular date for buying. It may be lowest rate for buying and
37
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.

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Generally the approximation price is fixed. The order stands as

this “buy BRC 100 shares around Rs.40”.
Stop loss order:
The orders are given to limit the loss due to unfavorable price
movement in the market. A particular limit is given for waiting. If
the price falls below the limit, the broker is authorized to sell the
shares to prevent further loss. E.g. Sell BRC limited at Rs.24, stop
loss at Rs.22.
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,
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price, brokerage, and the date of delivery of share. In this

38
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

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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.
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

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days (usually 1, 2, 3 or 5days) after the trading day. The shares

39
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

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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.
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.
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The exchanges/clearing house/ clearing corporation would

40
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.

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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
CHAPTER-5
OUTCRY SYSTEM
The broker has to buy or sell securities for which he has

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received the orders. For this, the broker or his authorized

representatives goes to the stock exchange. This method is
42
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,

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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:

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

43
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

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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

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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
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ensure that he marks “Submitted for Dematerialization” on the

45
certificates before the shares are handed over to the DP for

demat. Dematerialization can only be done to those certificates,
which are already registered in your name and belong to the list
of securities admitted for Dematerialization at NSDL.

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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:
• 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
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extent of 0.5% by quite a few brokerage firms.

• In case of transfer of electronic shares, you save 0.5% in
46
stamp duty. You avoid the cost of courier / notarization.

• You can receive your bonuses and rights issues into your
DA as a direct credit, this eliminating risk of loss in transit.
• You can also expect a lower interest charge for loans taken
against Demat shares as compared to loans against
physical shares.

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• There is no lost in transit, thus the overheads of getting a

duplicate copy in such circumstances is reduced.
• 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,
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commerce and what not it is virtually changing every thing and

47
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.

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The use of Internet has grown 2000 percent in last decade

and is currently growing at 10 percent per month. In India,
growth of Internet is of recent times. It is expected to bring
changes in every functional area of business activity including
management and financial services. It offers stock trading at a
lower cost. Internet can change the nature and capacity of stock
broking business in India.
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
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connects both categories of computers; the various operating

48
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

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of mouse. Now information has become easily accessible to both

retail as well as big investor.
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
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placing a trade order. Similarly the online investor likely does not
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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

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maintains total control over the number of transactions which take

place in the account.
All of these positive features of internet trading may lead the
unwary investor to believe that Internet trading is a way to take
control of their finances and save more money in the process.
Unfortunately, this is not always the case. The advantages of
Internet stock trading have also its weaknesses and these
weaknesses present significant drawbacks for the average investor.
First and foremost, the average investor is not an expert in
the financial markets. There is a danger for allowing the autonomy
of online trading to hull you into the belief that you are an expert
investor. An online investor sitting at home at a personal computer
also foregoes proper investment advice and financial planning,
perhaps among the most valuable services provided by traditional
brokers.
There are, of course, additional risks relative to performing
transactions over the Internet especially on a shared computer.
Those people whom investors have provided their account number
and password can freely trade that account while the 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
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moving their transactions online and the major reason has been the lot
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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

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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
Even many years after the launch of the first online brokerage
firm, there remain a large contingent of individual investors
who still pick up the phone and call their stock broker to buy
and sell investments. However, every year a growing number
of investors are placing their trades using online brokers.
EVOLUTION OF BROKING IN INDIA:
The evolution of a broking in India can be categorized in three

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phases -
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• Stockbrokers will offer on their sites features such as live

portfolio manager, live quotes, market research and news,
etc. to attract more investors.
• Brokers will offer online broking and relationship
management by providing and offering analysis and
information to investors during broking and non-broking

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hours based on their profile and needs, i.e. customized

services.
• 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.
In India:
Internet trading started in India on 1st April 2000 with 79
members seeking permission for online trading. The SEBI
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committees on internet based securities trading services has

52
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

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

volumes easily and to support nationwide expansion of
53
market activity.
Besides, through internet trading three fundamental objectives of

securities regulation can be easily achieved, these are:
• Investor protection
• Creation of a fair and efficient market, and

SHAREKHAN LIMITED
• Reduction of the systematic risks.
Some of the brokers offering net trading include ICICI direct,

kotakstreet, etc.
REQUIREMENTS FOR NET TRADING:
For investors:
1. Installation of a computer with required specification

2. Installation of a modem
3. Telephone connection
4. Registration for on-line trading with broker
5. A bank account
6. Depository account
7. Compliance with SEBI guidelines for net trading
The following should be produced to get a demat account

and online trading account:
As identity proof & address proof any one of the following:
• Voter ID card
• Driving license
• PAN card( in case of to trade more than 50000)
• Ration card
• Bank pass book
• Telephone bill
Other requirements, which are necessary

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• First page of the bank pass book and last 6 months statement.
• Bank manager’s signature along with bank’s seal, manager
54
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

SHAREKHAN LIMITED
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

55
password. Order can be placed using place order window of the

website.
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.
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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
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to his account.
56
Internet trading provides total transparency between a broker

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

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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;
• News and research report
• BSE and NSE movements
• Stock analysis
• IPO and mutual fund centers
STEP BY STEP PROCEDURE IN ONLINE TRADING:
Following steps explain the step by step approach to on-line

trading:
• Log on to the stock broker's website
• Register as client/investor
• Fill the application form and client broker agreement form on
the requisite value stamp paper
• Obtain user ID and pass word
• Log on to the broker's site using secure user ID and password
• Market watch page will show real time on-line market data
• Trade shares directly by entering the symbol or number of the
security
• Brokers server will check your limit in the on-line account and
demat account for the number of shares and execute the
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trade
57
• Order is executed instantly (10-30 seconds) and confirmation

can be obtained.
• Confirmation is e-mailed to investor by broker
• Contract note is printed and mailed in 24 hours
• Settlement will take place automatically on the settlement day
• Demat account and the bank account will get debited and
credited by electronic means.
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ONLINE TRADING HAS LEAD TO ADDITIONAL FEATURES

SUCH AS:
• Limit / stop orders: orders that can be go unfilled, but there is

an extra Charge for this leeway facility since one need to hold
a price.
• Market orders: orders can be filled at unexpected prices, but
this type is much more risky, since you have to buy stock at
the given price.
• Cash account: where funds have to be available prior to
placing the order.
• Margin account: where orders can be placed against stocks, to
increase Purchasing power.
ADVANTAGES OF ONLINE TRADING:
• Online trading has made it possible for anyone to have easy

and efficient access to more reports and charts than it was
previously possible if one went to any brokers' office. Thus we
have access to a lot more information online.
• Online trading has let room for smaller organizations to
compete with multinational organizations since it is no longer
a leg it issue. Being online does not identify the size of any
particular organization, therefore, this additional power to the
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underdogs.
58
• 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.

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• Online trading gives control to individuals and they can

exercise it over accounts thus comprehend what is going on
when they trade. It is like going back to school and re-
educating oneself on how to trade online.
• Individuals’ benefit by saving comparatively a lot more when
trading online as the cost per trade is less.
• Individuals can invest in a variety of products, unlike earlier
when people bought bonds, mutual funds, and stock for long-
term basis and sat on them. Now they can invest in stocks,
stock and index options mutual funds, government, and even
insurance.
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:
• Freedom of information
The Internet can provide a new sense of control over
your financial future. The amount of investment information
available online is truly astounding. It's one of the best
aspects of being a wired investor. For the first time in history,
any individual with an Internet connection can:
• Know the price of any stock at any time
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• Review the price history of any stock in chart format

• Follow market events in-depth
59
• Receive a wealth of free commentary and analysis

about stock markets and the global economy
• Conduct extensive financial research on any
company

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One of the great appeals of using an online trading account is

the fact that the account belongs to you, and is under your
direct control. When you want to buy or sell stock, you no
longer need to call your broker on the phone; hope that he is
in the office to place your order; possibly argue with the
broker about the order; and hope that the transaction is
executed instantly.
At the most basic level, an online trading account gives you

more agility in buying and selling stocks. This is through
sophisticated information streams, dedicated trading
platforms and sophisticated tools for accessing the markets.
Every broker house aims at providing the investor with the

best price available. Also due to the high level of transparency
with regard to display of information relating to the specific
stocks and company profiles, you will be able to get the best
quote for your orders.
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.
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60
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

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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 confirmation following every trade with full details
for your records. This avoids costly errors that would have
been discovered when it is too late.
Your Bank, Depository and online account are integrated for

your convenience. Various broking houses provide access to
many of the popular banks.
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61
INVESTORS REASONS TO TRADE ONLINE:
• They have control over their accounts, can make their own
decisions and don’t have to give reasons for their actions.
They are independent.

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• They have a reason to participate in the market and learn
about it.
• It is interesting, cheap, easy, fast, and convenient.
• A lot of information is online so they can keep up-to-date with
what is happening in the trading world.
• It will give investors a greater choice and better realization.
• The immediate impact will be competition and benefits will
accrue to the investors.
• It will lead to brokerage commissions going down and brokers
striving to increase business afloat.
• Investors will now go to place, which have better trading
conditions and also members to offer them better facilities.
• They have access to numerous tools to invest, and can create
their own portfolio.
BENEFITS OF ON LINE BROKING

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1) Less Costly:
62
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

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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 free. Most partner banks offer Internet banking as well.
This results in one’s money becoming available to him whenever he
like from his trading account. Conversely in case he spots an
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opportunity in the market he can immediately allocate money from

63
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

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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
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provides some additional advantages to the investors, brokers and

64
also helps the nation to channelize the resources. Net trading would
increase competition in the market hence increase in the bargaining
power of the investors. The entire communication between the
investor, broker and exchange would take place within milliseconds.
HERE ARE THE POSSIBLE DISADVANTAGES:

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• When network crashes, there will be problems and delays due

to a large influx of rapid online trading criteria.
• Individuals are restricted to first-hand financial guidance. This
simply means that the individual is himself / herself alone to.
• A tax (sales tax and value added tax) evaluation becomes an
issue, especially when you are trading internationally.
• One has no idea with whom he is dealing with on the other
end.
• According to a study conducted by Mary Rowland, careful
investor: is online trading bad for your portfolio, the more one
trades the less returns one gets, meaning that an addicted
trader gets, carried away online and begins to trade for too
much which causes losses for him / her.
• Individuals think that they are trading with the market directly
and know what they are doing, but the truth is that even
though technology has taken over; the basic rules of trading
are the same. It seems that the middleman has been
removed, but that is not so. When the individuals click on the
mouse, his trade goes through a broker. The commissions
online pertain to the intermediary.
• There is a need for more effective communication links over
the Internet and the ability of the server to deal with a large
volume of visitors.
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65

SHAREKHAN LIMITED
CHAPTER 6
COMPANY PROFILE
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66
CHAPTER 6

SHAREKHAN LIMITED
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
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broking division caters to domestic and foreign institutional

67
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.

SHAREKHAN LIMITED
Share khan, India’s leading stockbrokers the real arm of

SSKI, an organization with over eight decades of stock market
experience. With more than 175 share shops in over 80 cities,
and a presence on internet through 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.
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Dematerialization in short called as “Demat is the process

68
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

SHAREKHAN LIMITED
chargeable amt per scrip per day = rs 20), so additional rs 9

will be charged as min delivery handling charges)
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)
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69
Brokerage:
• 0.10 %( Each leg) + Turnover Tax +Stamp Duty+ Service Tax For
each leg of Intra-day trades.
• 5paise (Each leg) +Turnover Tax +Stamp Duty+ Service Tax For
• (Minimum brokerage for shares below Rs.50,)

SHAREKHAN LIMITED
• 0.50 %( Each leg) + Turnover Tax +Stamp Duty+ Service Tax for
trades resulting in delivery.
• 10paise (Each leg) +Turnover Tax +Stamp Duty+ Service Tax For
• (Minimum brokerage for shares below Rs.20).
• A minimum brokerage Rs.18 for delivery trades.
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% Page
70

SHAREKHAN LIMITED
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

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 Option of linking additional 4 DP accounts to trading account

71
 Choice of linking 4 banks to trading A/C for online payments
 Cash and derivatives trading in a single account
 E-mail confirmations for all transactions
 Choice of electronic/ physical contracts

SHAREKHAN LIMITED
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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72

SHAREKHAN LIMITED
CHAPTER-7
ON-LINE TRADING AT
SHAREKHAN
Page
73
CHAPTER-7
ON-LINE TRADING AT SHAREKHAN

SHAREKHAN LIMITED
THE MECHANICS OF ONLINE TRADING
The
Accepts
Places
STOCK
Receives
Accepts
BROKER
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settlement
an
the
EXCHANGE
the
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The client is
intimated about the
execution of the
deal by e-mail. Pays
the broker pending
physical delivery.
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74

SHAREKHAN LIMITED
TRADING AND SETTLEMENT AT SHARE KHAN
The NSE first introduced online trading in India. The Online

trading system imparted a greater level of transparency and
investors preferred exchanges that offered Online trading
because of the following factors:
• The ease of operation from the view of the both members and
the investors.
Page
• Increase in the confidence of the investors because of higher

75
level of transparency.
• Facilities better monitoring of the market by the exchange.
• The best price achieved in buying and selling.
All these resulted in ever-increasing volumes on the exchanges

offering the online trading.

SHAREKHAN LIMITED
TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING
Share Khan deals in buying and selling equity shares and

debentures on the National Stock Exchange (NSE), the Bombay
Stock Exchange (BSE) and the Over-The-Counter Exchange of
India (OTCEI).
Share Khan is provided with a computer and required
software from their registered stock exchanges. These centers
are called “Broker Work Stations”. These computers are
connected to the server at the stock exchanges through cable.
The member or broker sitting in his office can send the
quotations, orders, negotiations, deals, in-house deals, auction
orders etc., through the computer. The
Central trading system (CTS) will accept these orders and send it
for match. If there is any mistake in the order, CTS will reject the
orders and send respective error message to the member
concern. All these operations are in built. The main objective of
CTS is to monitor the Stock Exchanges operations.
Order placed by the broker will be sent for a match and if the
match is found suitable, the transaction will be executed.
Otherwise, the order will be deleted automatically after
completion of trading time. The carry forward transactions (Good
Till cancellation) are forwarded to the next day. Even if the match
is not found with in the prescribed period, the order will not
cancel.
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76
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.

SHAREKHAN LIMITED
BROKER WORK STATION:
At the broker workstation the BBO’s, the last traded price,

the day‘s opening price, previous day’s closing price, highest and
lowest prices, the weighted average price and total trade value
will be available continuously, as the BBO for each scrip.
Other information will be available on query from the BWS. These
include top gainers /losers of the day. Trader-wise, scrip wise net
position, client wise net position, top scrip by the volume/value,
market summary etc.
Brokers are also provided with information relating to the
companies in the matter of Book closure, Dividend declarations,
resolutions in board meeting, information about liquidated
companies, company report etc.
ORDERS:
Orders can be done one at a time or in a batch mode. The

submitted order will be accepted at the CTS, after validation if it
finds any invalid reason the order is return back to the BWS, with
the appropriate error message. If
Accepted at the CTS it will be added to the local pending order
book.
The order will then be taken up for matching, if it is a buy
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order the system tries to find a sell order, which fits the
77
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:

SHAREKHAN LIMITED
• Good for the day (GFD)

• 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 settlement period. This order is not carried forward to the
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next settlement period.

78
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:

SHAREKHAN LIMITED
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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79
DETAILS OF PROCEDURES:
Delivery in : The members who are in pay-out position delivers

share certificates in to clearing house within the settlement

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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:

SHAREKHAN LIMITED
L o g i n
B u y t r a n s c a S t i e o l ln t r a n s c a t i o n
T h e s y s t e m w i l l c h e
T h e s y s t e m w i l l c d h pe c a kc c b o u u y n i nt g q u a n t i t
l i m i t s
O r d e r s a c c e p t e dR e j e c t e d o r d eo r r s d w e ro s u l ad c b c e e p t
c o m m u n i c a t e d a l o n g w i t h r e a s
y o u r o r d e r i s t r a n s m i t t e d t o
p e n d i n g b u oy n o e r xd e e c r s u pt i oe n n d i n g s e l l o r d
w o u l d b e d o i sf p y l o a yu er d o w r d o e u r ls d b e d i s p l a
o n y o u r s c r e e n o n y o u r s c r e e n
y o u m a y y o e u d m i t a y y o d u e r l e y t oe u m a y e d i t yy oo uu r m a y d e l e t e
p e n d i n y g o uo rr d p e e r n d i n g p o e r dn ed r i n g o r d e r p e n d i n g o r d e r
f l a s h e d o c n o y n o f ou r m a c t io o n n t c r a o c u t l n o t e w o
s c r e e n i m dm be d e i as t e e n l yd b t e o s y e o n u t r t o b y m a
o n e x e c u e t -i o m n a i l a n d o mr h o a b n i ld e d e l i v e r y
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SCREEN SHOTS:

SHAREKHAN LIMITED
BUYING AND SELLING OF SHARES ONLINE BY USING TRADE

TIGER SOFTWARE
CHECKING SCRIPTS
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SHAREKHAN LIMITED
VIEWING SELECTED SCRIPTS
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SHAREKHAN LIMITED
SELECTING SCRIPTS BY TYPING KEY WORDS
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SHAREKHAN LIMITED
BUYING OF SHARES
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SHAREKHAN LIMITED
BUYING THROUGH SELECTING PRICES
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SHAREKHAN LIMITED
SELLING OF STOCKS
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MODIFYING ORDERS
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SHAREKHAN LIMITED
CHAPTER 8
COMPARATIVE ANALYSIS
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CHAPTER 8

SHAREKHAN LIMITED
COMPARATIVE ANALYSIS
THE MAJOR PLAYERS IN ONLINE TRADING
• SHAREKHAN.COM
• 5PAISA.COM
• KOTAKSTREET.COM
• INDIABULLS.COM
• ICICIDIRECT.COM
• HDFCSEC.COM
• HDFC SECURITIES:
Company Background:
HDFC Securities Ltd is promoted by the HDFC Bank, HDFC and

Chase Capital Partners and their associates. Pioneers in setting
up Dial-a-share service with the largest team of Tele-brokers.
Online Account Type:
• HDFC Online Trading A/c: Plain Vanilla Account with focus

on 3 in 1 advantage.
Pricing of HDFC Account

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

• Brokerage:
91
Trading 0.15%* each side + ST

Delivery 0.50%** each side + ST
*Rs 25 Min Brokerage per transaction
**Rs 8 Min Brokerage per transaction
• ICICI DIRECT:

SHAREKHAN LIMITED
• Account Opening: Rs 750

• Schemes: For short periods Rs 750 is refundable against
brokerage generated in a qtr. These schemes are introduced 3-4
times a year.
• Demat: NIL, 1st year charges included in Account Opening

Plus a facility to open additional 4 DP’s without 1 st yr AMC. Only
Rs 100 as linking charges per DP
• Initial Margin : Nil

• Brokerage: ICICI’s brokerage rates are inclusive of Stamp
duty (0.002%) for trading and 0.010% for delivery while service
tax (10.2%) on BROKERAGE land turnover tax is EXTRA.
Delivery Vol per QTR Brokerage Square Vol P.M.Brokerage

< 10 lakhs 0.75% < 50 lakhs .10%
Both Sides
10 – 25 lakhs 0.70% 50 lakhs – 2 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
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> 5 Cr 0.25% ----

--------
92
• INDIABULLS:
Company Background:

SHAREKHAN LIMITED
India Bulls is a retail financial services company present in 70

locations covering 62 cities. It offers a full range of financial
services and products ranging from Equities to Insurance. 450 +
Relationship Managers who act as personal financial advisors.
Online Account Type:

• Signature Account: Plain Vanilla Account with focus on
Equity Analysis. The equity analysis is a paid service even for A/c
holders.
• Power India bulls: Account with sophisticated trading tools,

low commissions and priority access to R.M.
Pricing of IB Accounts:
Signature Account Power India Bulls
* Account Opening: Rs 250 * Account
Opening: Rs 750
* Demat: Rs 200 if POA is signed, * Demat:
Rs.200 if POA is signed,
No AMC for this DP No AMC for this
DP
* Initial Margin: NIL * Initial Margin: NIL
* Brokerage: Negotiable * Brokerage:
Negotiable
PAID Research:
SCHEME FACILITY
WebBased-1-Month-500: View & Print on
Website
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WebBased-1-Month-6000 View & Print on Website

93
PrintReport-1-Month-750: View & Print on Website

+ 10 Reports
Delivered
PrintReport-1-Month-9000: View & Print on Website
+ 10 Reports
Delivered

SHAREKHAN LIMITED
• KOTAKSTREET:
Company Background:
Kotakstreet is the retail arm of Kotak Securities. Kotak Securities
limited is a joint venture between Kotak Mahindra Bank and
Goldman Sachs.
Online Account Type
• Twin Advantage / Green Channel : 2 DP’s, Limit against shares
• Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per

transaction
• High Trader : 6 Times Exposure Cash & Derivatives, Auto sq

off 2:55
• Cash Expressway : Spot payment, additional 0.5% charges
For Kotak Fast Lane / Keat Lite / Keat Desktop are trading
interfaces.
Keat Desktop with advanced tools comes at a charge of Rs 500

p.m, Non refundable.
PRICING OF KOTAK
• Account Opening : Rs 500
• Demat: Rs 22.5 p.m
• Initial Margin : Rs 5000(Compulsory)

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• Min Margin Retainable : Rs 1000

94
• 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 **

SHAREKHAN LIMITED
< 1 lakhs 0.65% < 10 lakhs

0.10% Both Sides
1 lakhs – 5 lakhs 0.60% 10 lakhs – 25 lakhs
0.08% Both Sides
5 lakhs – 10 lakhs 0.50% 25 lakhs - 2 Cr
0.05% Both Sides
10 lakhs - 20 lakhs 0.40% 2 Cr - 5 Cr
0.04% Both Sides
20 lakhs – 60 lakhs 0.30% > 5 Cr
0.035% Both Sides
60 lakhs - 2 Cr 0.25% ---do---
0.03% Both Sides
>2 0.20% ---- --------
* Brokerage is inclusive of All Taxes * Brokerage is inclusive of

All Taxes
* DP Charges Extra
* Min Brokerage of Rs 0.05 per share * Min Brokerage of
Rs 0.01 per share
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.
• INDIA INFOLINE
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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

SHAREKHAN LIMITED
Company Fixed Deposits, Insurance. Limited ground network,

present in 20 cities.
Online Account Types

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

Investor Terminal

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

Trader Terminal
• Demat 1st Yr : Rs 250
• Initial Margin : Rs 5000(Compulsory)
• Brokerage :
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Trading 0.10% each side + ST

96
Delivery 0.50% each side + ST

(Negotiable to 0.05% each side & 0.25%)
• Account Access Charges
Monthly Rs 800, adjustable against Brokerage
Yearly Rs 8000, adjustable against brokerage
• SHAREKHAN

SHAREKHAN LIMITED
Company Background
• 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
• Into broking since 80 years
• Focused on providing equity solutions to every segment
• Largest ground network of 210 Branded Share shops in 90
cities
Online Account Types

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

Month + 1)
• Demat 1st Yr : Incl in Account Opening
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• Initial Margin : Nil

97
• Min Margin Retainable : NIL

• Brokerage :
Trading 0.10% each side + All Taxes
Delivery 0.50% each side + All Taxes
(Negotiable based on volume)
• Account Access Charges

SHAREKHAN LIMITED
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

• Demat 1st Yr : NIL
• Initial Margin : NIL
• Min Margin Retainable : NIL
• Brokerage:
Trading 0.10% each side + All Taxes
Delivery 0.50% each side + All Taxes
Sharekhan online Trading Interfaces
The customer can choose the online trading interface that meets
his requirement based on his trading habits and preferences
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CLASSIC / APPLET
98
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

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

• Automatic fund transfer with phone banking*
• Simple and secure IVR based system for authentication
• No wait time, on entry of Phone Id & TPIN, the call is
transferred
• Trusted, professional advice of Tel-brokers who offer undiluted
Sharekhan Research Inputs
• After-hours order placement facility **
• Transfer of money using phone banking is available with
Citibank only
** Between 9 a.m to 9.55 am and 3.30p.m to 6 p.m
CLASSIC/WEBSITE FEATURES
• Facility to integrate choice of 4 Banks/DP/Trading Account
• Instant credit for shares sold from DP
• Automatic pick-up of shares from linked DP for pay – in
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• Automatic deposit of shares into linked DP after pay-out

99
• 4 Times leverage on Margin Trades

• Margin Trading available for entire marker session
• Slab wise brokerage structure for delivery and margin trades,
shortly
• Free calls for order placement on Toll-Free
• Trusted, Professional advice of Tele-brokers

SHAREKHAN LIMITED
• Facility to enter After Market Orders online & via Phone
CLASSIC/WEBSITE FEATURES
• Daily Research newsletter (Investor Eye) Via e-mail

• Access to new IPO without any paperwork
• Advanced portfolio monitoring Tools
• Integrated DP account with trading account
• Option of linking additional 4 DP accounts to trading account
• Choice of linking 4 banks to trading a/c for online payments
• Cash and Derivatives trading in a single account
• E-mail confirmations for all transactions
• Choice of electronic/Physical contracts
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
*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
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Live
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SHAREKHAN LIMITED
CHAPTER 9
QUESTIONNAIRES AND
ANALYSIS
CHAPTER 9
QUESTIONNAIRES
Questionnaire 1
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Questionnaire
102
On the customer’s perception about investment in share market. (Sample size

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

Analysis:
FEMAL
MALE E

SHAREKHAN LIMITED
27 5
From the sample size of 30, 27 are males and 5 are only females. Interest of
female investors has to be improved.
2. AGE
A) 18-28 B) 29-39 C) 40-49 D)>49
18-28 29-39 40-49 >49
18 12 2 0
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
MARRIE UNMARRI
D ED
18 14
Married is 60% and unmarried is 46%. This means most of them are having
families.
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4. EDUCATIONAL QUALIFICATION?
A) HSC B)10+2 C)GRADUATE D)POST GRADUATE
103
GRADUA POST Column

HSC 10+2 TE GRADUATE 1
1 2 18 11

SHAREKHAN LIMITED
60% are graduates and 36% are post graduates. This means the sample is well
educated.
5) OCCUPATION
A) BUSINESS B)SERVICE C)STUDENT 4)RETIRED
BUSINE SERVI STUDE RETIRE
SS CE NT D
1 31 0 0
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
<1LA 1-2 2-5 >5LA
C LACS LACS CS
0 3 17 12
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
104
YES NO
19 13
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.

SHAREKHAN LIMITED
8. Are you interested in DEMAT account?

A) YES B) NO
YES NO
20 1 2
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.
Correlation
Between question7 and question8
YES NO YES NO
20 12 19 13
CORELATI Column
ON 1
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?

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A) yes B) NO
105
Column1 YES NO
Q9A 14 18
56% are not trading any where so there is possibility of getting customers from
this sample. 43% are trading.

SHAREKHAN LIMITED
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 RELIG ANAND STEEL KAR RELIA
INFOLINE ARE RATHI CITY VY ICICI NCE N/A
2 0 4 2 1 4 1 18
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
EQUIT DERIVATIV FOREX COMMODI
Y ES TRADING TY N/A
17 1 1 1 12
53% are interested in Equity markets. This shows that derivatives, forex and
commodity Trading is too risky.
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106
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- (10-
<5% 10)% 20)% >20 N/A

SHAREKHAN LIMITED
4 6 6 3 12
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
YES NO
20 12
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

YES NO
20 12
YES NO
19 13
CORELATION
1
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*POSITIVE
CORELATION*
107
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.

SHAREKHAN LIMITED
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
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.
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2.How will you describe your experience with on-line trading till
date?
108
(a) Very easy to operate

(b) Very difficult to operate
(c) Not secure
(d) Any other
(a) (b) (c) (d)

30 5 8 7

SHAREKHAN LIMITED
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
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
50000-
<50000 150000 150000-200000 >200000
12 20 8 10
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.
Page
This trend shows that investors want to invest in share

markets for more returns even though there is risk.
109
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

SHAREKHAN LIMITED
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.
6. How often do you trade?

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

DAILY WEEKLY MONTHLY MONTH
20 12 4 14
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
Page
From the above trend we can say that 44% of people say
that they prefer online trading, 24% prefer offline trading
110
and 32% prefer both. This shows that people are aware of
online trading.
8. According to you, is online trading settled in Indian investor

psyche?
(a) Yes (b) No

SHAREKHAN LIMITED
yes no
16 34
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
NEWS JOURNAL
T.V PAPPER MAGZINES S
18 25 2 5
50% of the sample prefer news paper media, 36% prefer T.V media
and rest 14% prefer journals and magazines.
11. Where do you often invest your money?

(a) Equity (b) Mutual
fund
(c) Insurance (d) Term

deposits
(e) Others
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MUTUAL
EQUITY FUND INSURANCE TERM DEPOSITS
15 10 10 15
111
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?

SHAREKHAN LIMITED
(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
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
STRONG
LY DISAGRE
AGREE AGREE CANT'T SAY E
18 12 8 12
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.
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112
14. Online trading is an easy and fast way of trading

STRONGLY CANT'T DISAGR

AGREE AGREE SAY EE
16 14 8 12

SHAREKHAN LIMITED
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 DISAGR
AGREE AGREE CANT'T EE
25 10 5 10
Almost 70% of the samples agree that Online Trading has

attracted new investors and increasing trading volumes.
Only 20% disagree with above statement. Hence Online
Trading has brought reforms in to markets.
TESTS:
CROSS TABS:
Between question 2 and 6
Interpretation
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Most people who think online trading is easy to operate are

113
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.

SHAREKHAN LIMITED
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.
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)
Pearson Chi-Square 6.548a 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.
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Chi-square value is greater than 0.05 so we reject H0.

114
Interpretation
Therefore the type of trading depends upon the experience the
person has in online trading.
Interpretation from Questionnaire2:

SHAREKHAN LIMITED
• The numbers of investors are increasing at a greater speed

during the recent trend.
• Online Trading is easy to operate and it should be made
more secure.
• Per-capita income level is quite high and has good
opportunities for investments.
• Investors want to invest in share markets for more returns
even though there is risk.
• 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.
• People are aware of online trading but 68% say that it is not
yet settled in Indian psyche.
• 50% prefer news paper media, 36% prefer T.V media and
rest 14% prefer journals and magazines. Hence most of
them follow television broadcasting.
• Equity has an equal priority to Term Deposits. Hence people
can be attracted towards investment in Capital markets.
• 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.
• 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.
• Almost 60% believe that Online Trading is faster way of
Page
trading. Hence there is a wide scope of opportunities in

115
Online trading in this fast moving world.

• Online Trading has brought reforms in to markets.
• Longer the trading more the amount invested in the
markets.
• The type of trading depends upon the experience the person
has in online trading.
• Most people who think online trading is easy to operate are
very frequent Traders. People who think online trading

SHAREKHAN LIMITED
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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116

SHAREKHAN LIMITED
CHAPTER-10
CASE STUDY
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
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company as a means of repatriating profits. As of 1986, the

market share price of multinationals reflects the high dividend
117
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

SHAREKHAN LIMITED
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
management but also others associated with the company
having access to sensitive information. However, the prevalence
of transactions in nominee names makes it difficult, if not
impossible, to prove insider trading. There is also a growing
controversy as to whether members of the Exchange should be
permitted on the boards of directors of companies.
CONCLUSIONS AND RECOMMENDATIONS

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118
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.

SHAREKHAN LIMITED
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.
CASE STUDY-2
CASE STUDU ON SAXO BANK
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Today, Saxo Bank is an undisputed world leader in online

119
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.

SHAREKHAN LIMITED
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 application
support services).
CONCLUSIONS AND RECOMMENDATIONS

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The SaxoBank MiniTrader online platform, enters operations

120
offering entry-level trading on a popular selection of instruments

from the Saxo Bank product range, including:
• Direct trading on live tradable prices through the professional

online trading platform
• Low trading costs and spreads

SHAREKHAN LIMITED
• Reputable fully regulated EU bank where the Saxo Bank

multinational staff offer personal service in 18 languages
• 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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121

SHAREKHAN LIMITED
CHAPTER-11
ARTICLE
CHAPTER-11
ARTICLE
Page
Sharekhan, one of India's leading brokerage houses, is the retail arm of SSKI.
122
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,

SHAREKHAN LIMITED
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 to be enough redundancy or contingency plan for
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ensuring a smooth flow of the event and so that there no glitches.

123
Prior to the event atleast two rounds of testing (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

SHAREKHAN LIMITED
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
Page
Chat Integration proved to be cost effective, time saving and at the

124
same time eliminating the monotony of repetitive.

SHAREKHAN LIMITED
CHAPTER-12
PROJECT ANALYSIS
Page
125
CHAPTER-12
PROJECT ANALYSIS
SWOT ANALYSIS

SHAREKHAN LIMITED
Strengths
• Strong credibility among investors because of its heritage.
• Excellent reputation among the business society.
• Capability of providing superior customer service.
• Quality research team.
• Easier access to the customer due to largest ground network
of 280 branded share shops in 120 cities.
• Abundant information about economy and companies.
• Ability to attract and retain superior and quality personnel.
• Highly sophisticated infrastructure.
• Efficient research and analysis team, which by interpreting the
economy and company’s performance accurately is enhancing
the profitability of the clientele.
Weaknesses
• Inadequate product awareness among the retail investors.
• Brokerage is high when compared to its competitors like
Indiainfoline and Religare.
• Brand awareness is low in the financial market.

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• Promotional activities conducted by the company are not at

126
par with the other firms.
Opportunities
• Hyderabad covers only 2% of investors which gives huge
potential for the market penetration.

SHAREKHAN LIMITED
• Bullish phase of the market attracts investing public.
• Access to the BSE online space for the retail investors creates
opportunity to increase clientele base.
• Awareness campaigns about online trading create new
market.
Threats
• Availability of Unit Linked Insurance Policies (ULIP’s) and
mutual funds in the market.
• Threat of entry is high in this industry as the manpower
required is less and capital requirement is medium.
OBSERVATIONS:
• Fluctuations are more in secondary market than any other

market.
• There are more speculators than investors.
• Information plays a vital role in the secondary market.

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• Previously rolling settlement is T+5 days, now it changed

to T+2 days and further it will be changing to T+1 day.
127
• 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.

SHAREKHAN LIMITED
• 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:
• 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.
• In the present scenario to compete with the Broker’s would
require sound infrastructure and trading as per international
standards.
• 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.
• Due to invention of online trading there has been greater
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benefit to the investors as they could sell / buy shares as and

128
when required and that to with online trading.

• The broker’s has a greater scope than compared to the earlier
times because of invention of online trading.
• The 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.

SHAREKHAN LIMITED
RECOMMENDATIONS:
• 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.
• I recommend the exchange authorities to be vigilant to curb
wide fluctuations of prices.
• The speculative pressures are responsible for the wide
changes in the price, not attracting the genuine investors to
the greater extent towards the market.
• 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.
• Necessary steps should be taken by the exchange to deal with
the situations arising due to break down in online trading.
• Effective monitoring of transaction have to be done in avoid

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uncertainties.
129
• Internet cost have to be reduced in order attract online
trading users.
• Transparency has to maintain in the Share Markets.

SHAREKHAN LIMITED
CHAPTER-13
BIBILOGRAPHY
Page
130
BOOKS:

SHAREKHAN LIMITED
• Investment management
-V.K.Bhalla
• Investment management
-Preethi Singh
• Security Analysis And Portfolio Management
-V.A.Avadhani
• Marketing of Financial Services
-V.A.Avadhani
• Indian Financial System
-M.Y.Khan
WEBSITES:
• www.Share Khan.com
• www.bseindia.com
• www.sebi.com
• www.moneycontrol.com
• www.economictimes.com
• www.nseindia.com
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131

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“A STUDY ON ONLINE TRADING” in

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

OBJECTIVES OF THE STUDY:

• It is to analyze the changes in trading after the

exchange shifted from outcry to online trading system.

• It is to study the functions of SHAREKHAN through

• To know the online screen based trading system

adopted by SHAREKHAN and about its communication

facilities. The appropriate configuration to set the network,

which would link the SHAREKHAN to individual / members.

• To know about the latest and future development in the

stock exchange trading system.

METHODOLOGY OF THE STUDY:

The data collection methods include both primary and secondary

Primary method: This method includes the data collected from

Secondary method: The secondary data collection method

The lecturers delivered by the superintendents of respective

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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

study in manageable limits.

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

Following diagram gives the structure of Indian financial system:

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

Financial markets are helpful to provide liquidity in the system

According to functional basis financial markets are classified into

The organized market comprises of official market

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

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

➢ E.g.; treasury bills, commercial papers, CD's etc.

The capital market is the market for securities, where companies

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

The following are the market intermediaries associated with the

1. Merchant banker/book building lead manager

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

Investors’ protection in the primary market:

To ensure healthy growth of primary market, the investing public

The primary market deals with the new issues of securities.

done through the recognized stock exchanges which are 23 in

National Stock Exchange of India and Interconnected Stock

Secondary market operations involve buying and selling of

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

shares on one or more stock exchanges in India. Listing of scrip’s

The following are the intermediaries in the secondary market:

STOCK MARKETS IN INDIA:

Stock exchanges are the perfect type of market for securities

Definition of a stock exchange:

“Stock exchange means any body or individuals whether

➢ Shares of public company.

History of Stock Exchanges:

The only stock exchanges operating in the 19th century were

Functions of Stock Exchanges:

Stock exchanges provide liquidity to the listed companies. By

and through their medium, the central and state government