1

LUDHIANA STOCK EXCHANGE

SUMMER TRAINING

REPORT

ON

ON-LINE TRADING
Submitted in partial fulfillment of the

Requirement for the degree of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY:-

RAVI THAPAR

DBIMCS,

MANDI GOBINDGARH.

STUDENT DECLARATION
 2

I hereby declare that the

Analytical study

On

OVERALL STUDY ON

ONLINE TRADING

IN

LUDHIANA STOCK EXCHANGE

Submitted in partial fulfillment of the

Requirement for the degree of

MASTER OF BUSINESS ADMINISTRATION

To Punjab Technical University, Jalandhar is my original work and not

submitted for the award of any other diploma, degree.

Place: Ludhiana
Ravi Thapar

Date
Signature

CERTIFICATE
 3

This is to certify that the project report entitled “ONLINE TRADING OF LUDHIANA
STOCK EXCHANGE” submitted by Mr. Ravi Thapar is a bona fide piece of
work conducted under my direct supervision and guidance. No part of this work
has been submitted for any other degree of any other university.

It may be considered for evaluation in partial fulfillment of the degree of Masters in

Business Administration.

Pooja Sharma

Signature
 4

ACKNOWLEDGEMENT
 5

If words are considered as a symbol of approval and token of

appreciation then let the words play the heralding role expressing my
gratitude

The world of capital market war far from me but I got an opportunity to
understand the capital market at LSE. While training I learnt many
things about capital market and its structure. So I am very thankful to
Ludhiana Stock Exchange association limited for giving me such
opportunity.

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

I am also grateful to Miss Pooja Sharma for permitting me to take the

training at Ludhiana stock exchange Ltd.

I acknowledge my deepest sense of gratitude and sincere feeling of in

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

I want to express my sincere gratitude to all the staff members of LSE

for spending their precious time and sharing the value able information
with me and in helping my project to be a success.

PREFACE
 6

For management career, it is important to develop managerial skills. In order

to achieve positive and concrete results, along with theoretical concepts, the exposure of

real life situation existing in corporate world is very much needed. To fulfill this need,

this practical training is required.

I took training in LUDHIANA STOCK EXCHANGE located in Ludhiana. It

was my fortune to get training in a very healthy atmosphere. I got ample opportunity to

view the overall working of the stock exchange.

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

STOCK EXCHANGE, as a part of M.B.A. The subject of my report is- Online trading.

Contents
 7

1. Introduction

(A) Capital Market

9

(B)Stock exchange
13

2. Objectives
19

3. Online Trading
23

4. Research Methodology
57

5. Analysis and Interpretation

59

6. Finding
67
7. Conclusion
69

8. Limitations
70
 8

9. Suggestion
71

10. Bibliography
73

11. Questionnaire
74

Introduction to the capital market

The capital market is the market for securities, where companies

and the government can raise long term funds. The capital market
includes the stock market and the bond market. Financial regulators
ensure that investors are protected against fraud. The capital markets
consist of the primary market, where new issues are distributed to
investors, and the secondary market, where existing securities are
traded.

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
 9

individual abilities, but by the abilities of the companies, which in turn

enhance the savings and investments in the country, liquidity of
capital market is an important factor affecting growth.

Since projects require long term finance, but on the other hand, the
investor may not like to relinquish control over their savings for a long
time. A liquid stock market ensures a quick exit without incurring
heavy losses or costs. Thus development of efficient market system is
necessary for creating conductive climate for investment and
economic growth.

Capital market Segment – Primary And Secondary

Broadly , the comprises of two segments – the new

issue market which is commonly known as primary market and
the stock market which is known as secondary market.

Primary

A primary offering, such as with a corporate bond, means

you are buying it directly from the issuer, at par value, usually. A
secondary market is where you sell or buy existing issues. I.E. If
you bought a bond last year, now need to get your principal, you
can sell it in the secondary market. You may not get par value. If
rates are up since you bought the bond, then you will likely have
to sell it at a discount to be able to get rid of it. If rates have
fallen since you bought it, you could get a premium for it.
 10

Secondary

The market where securities are traded after they are initially offered
in the primary market. Most trading is done in the secondary market.
To explain further, it is trading in previously issued financial
instruments. An organized market for used securities. Bombay Stock
Exchange (BSE), National Stock Exchange NSE, bond markets, over-
the-counter markets, residential mortgage loans, governmental
guaranteed loans etc

Secondary Market refers to a market where securities are traded after

being initially offered to the public in the primary market and/or listed
on the Stock Exchange. Majority of the trading is done in the secondary
market. Secondary market comprises of equity markets and the debt
markets. For the general investor, the secondary market provides an
efficient platform for trading of his securities. For the management of
the company, Secondary equity markets serve as a monitoring and
control conduit—by facilitating value-enhancing control activities,
enabling implementation of incentive-based management contracts,
and aggregating information (via price discovery) that guides
management decisions.

INDIAN CAPITAL MARKET AT GLANCE

1.
 11

2020th century

19 Formulation of Calcutta stock exchange

08

19 Formulation of Lahore and madras stock

18 Trading of shares of east India company in
39 exchange
00 Kolkata And Mumbai
19 Formulation of U.P and Delhi stock exchange
18
40 Joint stock company came into existence
50
19 Securities contract and regulation act enacted
18
56 Speculation and feverish dealing in securities
60
19 Scam of Haridas Mundhra
18
57 Formulation of stock exchange of Mumbai
75
19 Securities and exchange board of India set up
18
88 Formulation of Ahmadabad stock exchange
94
19 Scam of MS Shoes
91

19 SEBI given power Under SEBI act,1992

92

19 Formation of National stock exchange

93

19 HARSHAD MEHTA Scam

95

19 SESA GOA Scam

95

19 CRB scam
97

19 BPL And Videocon Scam

98

21 st century

200 Depositories came into existence

0 (electronic form of shares)
 12

200 Ketan Parekh scam

1

200 Start of rolling settlement and banning of Badla

2 trading

200 Introduction of T+3 settlement in April

2

200 Introduction of T+2 settlement in April

3

200 BSE Sensex touches all time high 6954 in January

5

200 BSE Sensex touches all time high 12500,the

6 highest intraday fall of 1100

200 BSE reaches the level of

7

200 BSE touches all time high in January 2008

8

200 Sensex saw its highest ever loss of 1,408

8 points at the end of the session.

200 Sexsex saw its 15 month low,from its all time

8 high

200 Sexsex saw its down trend & highest ever loss
9 because of Satyam case.
 13

BRIEF ABOUT THE STOCK EXCHANGES

Stock Exchange is a market like any other

centralized market where both buyers and sellers come and conduct
their business of purchase and sale of shares & securities. In other
words, it is a market place for shares and securities where trading
takes place in a controlled and protected environment.

MEANING OF STOCK EXCHANGE

A stock exchange, share market or bourse is a corporation or mutual

organization which provides "trading" facilities for stock brokers and
traders, to trade stocks and other securities. Stock exchanges also
provide facilities for the issue and redemption of securities as well as
other financial instruments and capital events including the payment of
income and dividends. The securities traded on a stock exchange
include: shares issued by companies, unit trusts and other pooled
investment products and bonds. To be able to trade a security on a
certain stock exchange, it has to be listed there. Usually there is a
central location at least for recordkeeping, but trade is less and less
linked to such a physical place, as modern markets are electronic
networks, which gives them advantages of speed and cost of
transactions. Trade on an exchange is by members only. The initial
offering of stocks and bonds to investors is by definition done in the
primary market and subsequent trading is done in the secondary
market. A stock exchange is often the most important component of a
stock market. Supply and demand in stock markets is driven by various
factors which, as in all free markets, affect the price of stocks (see
stock valuation).

There is usually no compulsion to issue stock via the stock exchange

itself, nor must stock be subsequently traded on the exchange. Such
trading is said to be off exchange or over-the-counter. This is the usual
way that bonds are traded. Increasingly, stock exchanges are part of a
global market for securities.
 14

CONCEPT OF SHARE TRADING

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

The origination of the Indian securities market may be traced back to 1975,
when 22 enterprise brokers under a Banyan tree established the Bombay
Stock Exchange (BSE). Over the last 130 years, the Indian securities market
has evolved continuously to become one of the most dynamic, modern
international standards both in terms of structure and in terms of operating
efficiency.
 15

OPERATIONS OF LUDHIANA STOCK EXCHANGE

TURNOVER

Ludhiana Stock Exchange is one of the leading Stock Exchanges

among the Regional Stock Exchanges of the country, and has been
providing trading platform for the investors situated in Punjab, J&k,
Himachal Pradesh & Chandigarh. At present, it has 357 listed
companies and among them, 231 are listed as regional companies. It
had been generating significant amount of the business in the
secondary market. It recorded a peak turnover of Rs.9154 crores
during the year 2000-2001. The structural changes that took place in
the recent past in the Capital Market of the country had a negative
impact on the trading volume of the Regional Stock Exchanges. There
has been a significant reduction of turnover during the financial year
2001-2002, but the reduction in the turnover of the Exchange has been
more than adequately compensated by substantial rise in the turnover
of LSE Securities Limited, a subsidiary of Ludhiana Stock Exchange.

LISTING

Listing is one of the major functions of a Stock Exchange wherein the

securities of the Companies are enlisted for trading purpose. Any
Company incorporated under Companies Act,1956, coming out with
an IPO, has to mandatorily list its shares on a Stock Exchange.
The Listing Department of Ludhiana Stock Exchange deals with
listing of securities, further listing of issues like bonus and rights
issues, post listing compliance of the companies which are already
listed with Ludhiana Stock Exchange. The Companies desirous of
listing its securities on the Exchange have to sign a Listing
Agreement with the Stock Exchange. After getting the listing
approval, the Company has to ensure and report compliance of the
post listing requirements. The listing section of the LSE monitors the
post-listing compliance of all the listed companies and follows up
with the companies,which are found deficient in compliance.
 16

Sh. S.P. Oswal 16.08.1983 to 27.07.1986

Sh. B.M. Lall Munjal 28.07.1986 to 15.10.1989

Sh. V.N. Dhiri 16.10.1989 to 30.10.1992

30.09.1998 to 04.10.2000

Sh. G.S. Dhodi 31.10.1992 to 22.12.1993

Sh. Jaspal Singh 23.12.1993 to 05.10.1995

01.10.1996 to 29.09.1998
06.10.2001 to 01.07.2002

Sh. M.S. Gandhi 06.10.1995 to 30.09.1996

Sh. R.C. Singal 05.10.2000 to 05.10.2001

Dr. B. B. Tandon, Chairman 25.06.2007 to 10.12.2007

Sh. S.P. Sharma, Chairman 15.12.2007 to

Sh.Jagmohankrishan,
Chairman

PRESIDENTS/ CHAIRMEN
 17

List of directors of LSE

Sh.Jagmohankrishan, Chairman

Sh.Padam parkash kansal,vice chairman

Sh.yash paul mahajan,Public intrest director

Sh.Joginder kumar, director

Sh.Ashok kumar, director

Sh.Sarbjit garg, Public intrest director

 18

Sh.Varun chhabra, director

Sh.T.S.Thapar, director

Sh.Raj Singh,Registrar of conpanies

Sh.Sunil Gupta, director

Sh.Sanjeeev Kumar Gupta, director

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
 19

5 T+5 Auction pay-in by

10.30 (1 am/ pay

Out by
2 pm.)

Functions of Stock Exchange

Stock exchange is established into the main purpose of

providing a market place for the members to deal in securities under well laid
down regulations and to protect the interest of the investors. The main
functions of stock exchange are;
 20

1. It brings the companies and investors together so that the investors

can put risk capital into companies and thus, companies can use the
capital.
2. It provides an orderly regulated market for securities.
3. It provides continuous, ready and open market for selling and buying
securities.
4. It promotes savings and investment in the economy by attracting
funds from the investors.
5. It facilitates take overs by means of acquiring majority of shares traded
on the stock market.
6. It acts as a clearing house of business information.
7. It motivates the managers of well reputed companies, to retain their
shares in ‘A’ group, to improve performance.
8. It induces the managers to improve performance for converting non-
specified shares into specified shares in the exchange.
9. It enables the investors to evaluate the net worth of their holdings.
10.It also allows the companies to float their shares in the market.

OBJECTIVES OF THE STUDY

1. To understand the appropriate organizational

structure of the LUDHIANA STOCK EXCHANGE
LTD and LUDHIANA STOCK EXCHANGE securities
LIMITED.
 21

2. To analyse the online trading and its process.

 22

On Line Trading

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
 23

of life. Internet has enabled us to get every information at our doorstep.

When Internet has affected all sectors he could “stock markets” the most
important player of the economy, has remained far behind? Like all other
sectors Internet has set its feet in the stock markets also.

Internet trading commissions are clearly posted on the websites of the

various services, and are typically a fixed rate charge, depending upon the
type of security being traded and the size of trade. In theory, therefore, an
Interest investor always knows what commission he is being charged on each
trade. Internet investors can take as much time as they would like to take
prior to placing a trade order. Similarly the online investor likely does not
have to worry that his broker is making unauthorized trades. Since there is no
individual broker making a commission, the only person who is authorized to
trace in a the account is the actual investor. Furthermore, the internet
investor can never become a victim of excessive trading (where for the
broker) since the investor maintains total control over the number of
transactions which take place in the account.

All of these positive features of internet trading may lead the unwary investor
to believe that Internet trading is a way to take control of their finances and
save more money in the process. Unfortunately, this is not always the case.
The advantages of Internet stock trading have also its weaknesses and these
weaknesses present significant drawbacks for the average investor.

First and foremost, the average investor is not an expert in the financial
markets. There is a danger for allowing the autonomy of online trading to hull
you into the belief that you are an expert investor. An online investor sitting
at home at a personal computer also foregoes proper investment advice and
financial planning, perhaps among the most valuable services provided by
traditional brokers.
 24

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.

When was online trading introduced in INDIA?

Online trading started in India in February 2000 when a couple of brokers

started offering an online trading platform for their customers.

ONLINE TRADING BY NSE & BSE

 25

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
scrips traded on the BSE have been classified into 'A', 'B1', 'B2', 'C', 'F' and 'Z' groups.
The 'A' group shares represent those, which are in the carry forward system (Badla). The
'F' group represents the debt market (fixed income securities) segment. The 'Z' group
scrips are the blacklisted companies. The 'C' group covers the odd lot securities in 'A',
'B1' & 'B2' groups and Rights renunciations. key regulator governing Stock Exchanges,
Brokers, Depositories, Depository participants, Mutual Funds, FIIs and other participants
in Indian secondary and primary market is the Securities and Exchange Board of India
(SEBI) Ltd.

DIFFERENCE BETWEEN ONLINE AND OFFLINE

TRADING
Nevertheless, with all the convenience of online trading
there are still investors who prefer the old fashion way of offline
 26

trading. Offline trading has lost some popularity but it is still the main
form of investing. Offline trading offers many benefits as well.

1. The one benefit that an investor appreciates the most is that they
are not alone when making investment decisions.

2. There are experienced and professional brokerage companies that

handle their investments for them.

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

4. Also, there is someone there to answer any questions that may

cause concerns. Not to mention, with offline trading mistakes are less
likely to take place. No one wants to throw their money away or stand
by and watch someone else throw their money away. It may be wise to
hire a professional to assist you in making the correct investment
decisions if you feel you lack the knowledge necessary.

Points of difference between online trading and ofline

trading are as follows:

1. Online trading is very expensive as compare to manual trading or

offline trading.

2. Online trading consumes less time as compare to manual trading.

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

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

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

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

rate of share very easily.

DEMATERIALISATION OF SHARES
 27

Dematerialization is the process wherein shares certificates or other securities held in

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

ELECTRONIC SETTLEMENT OF TRADE

A. Procedure for purchasing dematerialized securities

The procedure for purchasing dematerialized securities is also similar to the procedure for
buying physical securities.

1. Investor instructs DP to receive credits into his account in the

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

B. Procedure of selling dematerialized securities

 28

The procedure for selling dematerialized securities in stock exchanges is

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

1. Investor sells securities in any of the stock exchange linked to

depository through a broker.
2. Investor instructs his DP to debit his demat account with the
number 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 scrips, the investor has to fill up a
remat 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 prints the certificates
and dispatches the same to the investor.
 29

Market timings:

Trading on the derivatives segment takes place on all days of the week (except Saturdays
and Sundays and holidays declared by the Exchange in advance). The
market timings of the derivatives segment are:

Normal Market / Exercise Market Open time : 09:55 hours

Normal market close : 15:30
hours
Set up cut of time for Position limit/Collateral value : till
15:30 hrs
Trade modification end time / Exercise Market : 16:15
hours

Advent of online trading

The history of e-trading goes back to 1983, when a doctor in Michigan placed
the first online trade using E*TRADE technology. what began with a single
click over 16 years ago has now taken the world by storm. The concept was
visualized by one bill porter, a physicist and inventor with more than dozen of
patents to his credit, who provided online quotes and trading services to
fidelity, Charles Schwab, and quick and Reilly. This led bill to wonder why, as
an individual investor, he had to pay a broker hundreds of dollars for stock
transactions. with incredible foresight, he saw the solution at hand, some day
everyone would own computers and invest through them with unprecedented
efficiency and control. And today his dream has become a reality.
 30

SHARE OF ONLINE TRADING IN TOTAL CASH

TURNOVER OF NATIONAL STOCK EXCHANGE
Table 1.1(Year 2003)

MONTH CASH ONLINE RATIO(%)

TURNOVER(cr.) TURNOVER(cr.)
January 64,762.24 1,923.34 2.97
Feb 48,289.18 1,559.07 3.23
March 43,159.93 1,302.69 3.02
April 48,971.31 1,425.83 2.91
May 54,690.14 1,981.36 3.62
June 61,585.35 2,142.41 3.48
July 78,877.63 2,720.59 3.45
August 85,346.58 3,301.88 3.87
September 1,03,345.50 3,825.88 3.70
October 1,15,595.32 4,344.33 3.76
November 92,885.71 4,024.02 4.33
December 1,10,372.64 5,876.21 5.32

Source: Ludhiana stock exchange

TABLE-1.2 (Year 2004)

 31

MONTH CASH TURNOVER ONLINE TURNOVER RATIO

January 1,34,268.72 6,015.04 4.48
February 1,08,718.06 5,170.01 4.76
March 1,04,876.53 4,330.23 4.13
April 1,00,951.17 5,244.27 5.20
May 98,919.93 5,187.01 5.24
June 84,898.47 5,358.95 6.31
July 93,836.13 6,819.45 7.27
August 86,855.72 6,192.31 7.13
September 88,508.05 6,976,.41 7.88
October 75,697.32 6,261.90 8.27
November 82,035.27 7,490.16 9.13
December 1,15,593.10 11,000.62 9.52

Source: Ludhiana Stock Exchange

Table 1.3(Year
2222222222200520
MONTH CASH TURNOVER
ONLINE TURNOVER RATIO

January 68,718.95 1,251.84 . 1.82

 32

February 49,563.77 917.80 1.85

March 44,262.50 868.85 1.96
April 53,320.02 914.73 1.72
May 54,979.06 1,237.28 2.25
June 44,241.07 1,108.66 2.51
July 51,398.43 1,290.57 2.51
August 46,113.05 1,310.78 2.84
September 46,498.62 1,318.01 2.84
October 51,902.22 1,476.51 2.85
November 51,351.48 1,639.28 3.19
December 61,973.34 1,915.65 3.09
Source: Ludhiana Stock Exchange

TABLE-1.4(Year 2006)

MONTH CASH TURNOVER ONLINE TURNOVER RA TIO

April 57,229.44 5.85 0.01

May 79,036.68 29.1 0 0.04
June 1,19,373.43 88.58 0.07
July 1,10,056.22 97.49 0.09
August 1,25,347.04 165.09 0.13
September 1,42,479.78 229.98 0.16
October 1,06,854.21 190.18 0.18
November 1,22,731.11 350.79 0.29
December 1,31,414.65 366.75 0.28
Source: Ludhiana Stock Exchange

TABLE-1.5(year 2007)
 33

ONLINE
MONTH CASH TURNOVER RATIO
TURNOVER

January 1,48,829.84 1,130.49 0.76

Februmy 1,35,932.23 1,573.62 1.16
March 60,226.21 849.81 1.41
April 35,615.63 268.9 0.76
May 48,329.11 343.92 0.71
June 42,783.00 238.47 0.56
July 27,227.76 401.68 1.48
August 29,417.15 388.98 1.32
September 35,322.82 453.58 1.28
October 35,326.454 604.17 1.71
November 42,132.23 805.86 1.91
December 54,467.79 1,048.24 1.92
Source: Ludhiana Stock Exchange

Internet Based Trading through Order Routing

Systems
 34

Internet based trading on conventional exchanges, uses the Internet as a

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

• Allowing the clients to directly trade through investors;

• Advertise the broker dealers’ services to potential investors;
• Offer market information and investment tools similar to those offered by
information vendor or SRO web sites;
• Offer real-time or delayed quote information, continuously update quotes
while the user visits other sites, or allow investors to create a personal
stock ticker;
• Provide market summaries and commentaries, analyst reports and trading
strategies and market data on currencies, mutual funds, options, market
indices and news; and
• Offer investors access to portfolio management tools and analytic
programs;
• Information on commission and fees; and
• 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.
 35

Use of Internet as Alternative Trading Systems (Provision

for price discovery and matching outside conventional
exchanges)

In foreign jurisdiction, Alternative trading systems have been developing

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

Use of Internet for making Initial Public Offerings

Issues of securities of using the Internet to communicate directly with their

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

• 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.
 36

Investment Advisory Services

Brokers as well as other service provides such as investment firms, research

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

• Advertising
• Providing investment information and investment advice;
• Underwriting
• Communicating with the investors;
• Customer orders; and
• Record keeping
 37

Working Groups set up by the Committee

Considering the present state of capital markets in India and keeping in view
the ongoing developments in Internet based securities business, it was felt that
SEBI as a regulator could strive to identify areas where use of Internet in the capital
market is possible within the existing legal framework. One such area identified by
the Committee, which is also the central within the existing legal framework. One
such area identified by the Committee, which is also the central theme of this
report, is the area of Internet trading on existing electronic exchange. In this area,
through early introduction of Cyber Laws would be highly describe but their
existence is not a necessary precondition. To look into the existing regulatory
scenario and to bring out some ground rules for use of the medium of Internet, the
Committee therefore constituted the following two working groups to look into the
area of:

i. Security protocols and standardization of interfaces for Interest based

securities trading, chaired by Prof. Deepak B. Phatak, IIT, Pawai, Mumbai
ii. Surveillance and monitoring related issues arising due to Interest based
securities trading, chaired by Shri. L.K. Singhvi, Sr. ED, SEBI

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

examine the legality of introduction of Internet trading and issue of Alternative
trading systems. This report of the standing committee examines the regulatory
and security requirements Internet Based Trading on Conventional Exchanges.
Separate reports (s) will cover the other areas related to Internet applications in the
securities markets.
 38

The report of the first working group on security protocols and standardization of
interfaces has since been submitted and incorporated in the report. The committee
would like to place on record its sincere thanks to Dr. D.B. Phatak, Ms. D.N. Raval
and their team members. The global financial market is undergoing a
transformation due to rapid technological developments. It thus becomes
imperative that for developing in effective regulatory framework developments in
other parts of the world should be studies and analyzed.

With nearly who million on-line investors, Internet trading in the United States is
growing by leaps and bounds. Internet trading is being facilitated by large
brokerage houses, thus changing the total concept of securities trading. A team
comprising of members from stock exchanges and SEBI visited the United states to
these development and had interactions with brokerages houses, Internet service
providers and other agencies involved in facilitating Internet trading. The team also
discussed the developments in the emerging regulatory and supervisory framework
in United States with the Securities and Exchange Commission officials. They were
also tripped of the various initiatives taken by SEC in this regard. These inputs have
been utilized while drafting this report.

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

 39

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.

Operational and System Requirements:

Operational Integrity:

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

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:
 40

Stock Exchange must develop uniform written procedures to handle contingency s

tuations and for review of incoming and outgoing electronic correspondence.

Signature Verification/ Authentication:

It is desirable that participants use authentication technologies. For this purpose is

should be mandatory for participants to use certification agencies as and when
notified by Government/SEBI. They should also clearly specify when manual

signatures would be required.

Client Broker Relationship

Know Your Client:

The stock Exchange must ensure that brokers have sufficient, verifiable information
about clients, which would facilitate risk evaluation of clients.

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 any clause that
is less stringent/contrary to the conditions stipulated is the model agreement.

Investor Information:

The broker web site providing the internet based trading facility should contain
information meant for investor protection such as rules and regulations affecting
client broker relationship arbitration rules, investor protection rules etc. The broker
web site providing the Internet based trading facility should also provide and display
prominently, hyper link to the web site/page on the web site of the relevant stock
exchange (s) displaying rules/ regulations/ circulars. Ticker/quote/order book
 41

displayed on the web-site of the broker should display the time stamp as well as
source of such information against the given information.

Order/Trade Confirmation:

Order/Trade confirmation should also be sent to the investor through email at

client’s discretion at the time specified by the client in addition to the other made of
display of such confirmation of real time basis on the broker web site. The investor
should be allowed to specify the time interval on the web site itself within which he
would like to receive this information through email. Facility for reconfirmation of
orders which are larger than that specified by the member's risk management
system should be provided on the internet based system.

Handling Complaints by Investors:

Exchanges should monitor complaints from investors regarding service provided by

brokers to ensure a minimum level of service. Exchange should have separate cell
specifically to handle Internet trading related complaints. It is desirable that
exchanges should also have facility for on-line registration of complaints on their
web site.

Risk Management:

Exchanges must ensure that brokers have a system-based control on the trading
limits of clients, and exposures taken by clients. Brokers must set predefined limits
on the exposure and turnover of each client. The broker systems should be capable
of assessing the risk of the client as soon as the order comes in. The client should
be informed of acceptance/rejection of the order within a reasonable period. In case
system based control rejects an order because of client having exceeded limits etc.,
the broker system may have a review and release facility to allow the order to pass
through.

Contract Notes:
 42

Contract notes must be issued to clients as per existing regulations, within 24 hours

of the trade execution.

Cross Trades:

As a matter of abundant precaution, the committee seeks to reiterate that as III the
case of existing system, brokers using Internet based systems for routing client
orders will also not be allowed to cross trades of their clients with each other. All
orders must be offered to the market for matching.

It is emphasized that in addition to the requirements mentioned above, all existing

obligations of the broker as per current regulation will continue without changes.
Exchanges may also like to specify more stringent standards as they may deem fit
for allowing Internet based trading facilities to their brokers.

Enforcement: A separate working group has been set to look into the
surveillance and enforcement related issues arising due to Internet based securities
trading. However, general anti-fraud provisions (SEBI Fraudulent and Unfair Trade
Practices Regulations, 1995) would apply to all transactions involving securities or
financial services, regardless of the medium.

FEATURES OF ONLINE TRADING: The Online Trading is having many

features which make it most suitable for the investors to go for. Some of these
features are as follows:

The Internet can provide a new sense of control over your financial future. The
amount of investment information available online is truly astounding. It's one of
the best aspects of being a wired investor. For the first time in history, any
individual with an Internet connection can:
 43

• Know the price of any stock at any time

• Review the price history of any stock in chart format
• Follow market events in-depth
• Receive a wealth of free commentary and analysis about stock
markets and the global economy
• Conduct extensive financial research on any company

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.
 44

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

You as an Investment online customer will be able to execute the entire trading
transaction, right from logging on to our site, to the execution and settlement of
your bank account, in a very short period of time.

Trading on the net, gives even the smallest retail investor access to information
that earlier was available only to the big traders. This provides a level playing field
for all investors in the securities market.

This method of trading reduces the settlement risk for the investor, as in this case
all short sell orders are squared off at the specified cut-off time and not allowed to
be carried forward.

In the case of a demat account your demat account is checked by us before

executing your sell transaction. This reduces the settlement risk for the buyer, who
is assured of the delivery of the securities and for you as a seller of the securities

Every trade is confirmed immediately and you will receive an on-screen

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.

Broking houses work hard to keep our account and personal information secure.
From updated security technology to advanced fraud prevention measures, they
 45

have the people and tools in place to provide a strong defense against electronic
scams and fraud.

BENEFITS OF ONLINE BROKING

1) Less Costly:

The most significant advantage of the Online broking is the cost reduction in the
brokerage. Due to the power of the Internet one has the privilege of becoming the
clients of really large brokerages with the benefits of enjoying the low charges
hithelio before enjoyed only by the big players. As the DP account has got linked to
the trading account most players do not charge a minimum transaction cost thus
truly allowing one to buy a single share and achieve meaningful rupee price
averaging whatever be your buying power.
 46

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
spot an opportunity in the market he can immediately allocate money from his

savings account to his trading account and make profits.

6.) Unparalleled Safety:

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

7.) Reduces the settlement risk:

 47

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

8.) Offers greater transparency:

Online trading gives greater transparency to the investors by providing them an

audit trail. This involves a complete integrated electronic chain starting from order
placement, to clearing and settlement and finally ending with a credit to the
depository account of the investor. All these stages are subject to inspection, thus
bringing in transparency into the system.

9.) Ease of trade:

It is the ease of doing the trade through net, with a click of mouse, one can buy or
sell any share that is dematerialized.

Other than the above-mentioned advantages, Internet trading provides some

additional advantages to the investors, brokers and also helps the nation to
channelize the resources. Net trading would increase competition in the market
hence increase in the bargaining power of the investors. The entire communication

between the investor, broker and exchange would take place within milliseconds.
 48

PROBLEMS OF ONLINE BROKING

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

 49

Chart

4%
14% 21%

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

27%

Source:- www.lse.co.in

27% Loyality is of traditional broker

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

21% people not prefer online trading because of lack of knowledge.

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

1.) "Server not found":

This may appear on one’s screens when he is desperately trying to get out of an
unprofitable position. Some of the online sites are providing a telephone number for
use in case their sites are overloaded or their server down.

2.) Connectivity of the Broker with NSE:

 50

Recently ICICI Direct had a connectivity problem with the NSE for two and halfhours
during trading hours. This problem is rare but be alive to its possibility.

3.) Cyber attack:

In the event of a malicious attack on the systems of one’s broker he is protected

only if the company is taking proper precautions against such attacks and if proper
backup is regularly been taken. He may like to choose a brokerage that has a stated
security policy and contingency plan in place.

4.) Non-availability of a seamless interface:

As a client one will access the NSE through a server of the online brokerage and this
may involve queuing delays. If a number of client access the server the server takes
its own time sending the orders to the NSE server. He must check out the
seamlessness of this interface before selecting an online brokerage. The faster the
orders are processed the more seamless is the interface.

5.) Non- availability of personalized advice:

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

6.) Margin:

If Internet trading alone is not fast and furious enough; many people are trading on
margin. That is where the brokerage firm lends you money by leveraging his
account, allowing him to buy a large amount of securities by putting up only a small
amount of money. He may have forgotten what he read in the small print of his
agreement, but the brokerage firm has the right to change the maintenance margin
requirements without any warning or notice to him. In fact, the firm has the right to
liquidate his securities holdings (and it can pick and choose which ones) without any
notice to one if he fail to meet the margin call. And there he was leveraged to the
hilt, hoping to hit a home run when he discovered that he is required to make a
large deposit that he cannot make. The next thing one know, the firm is selling off
 51

his securities at a point in time that is not the best for him. These are the perils of
trading on margin.

7.) Little use of advisory services:

The advisory services being promised by the brokers would be of little use to
investors looking for an insight into the market. Many would not like to rely on
research reports, which are there for all. So, net investors will have to do their own
research and take their own decision, whether wild or wise.

8.) Increased charges:

Some of the brokers are of the view that they would have to provide advisory
services to the customers. But with increased volumes, they will have to follow the
international practice of charging a little more than the normal charges from a
customer looking for personal advice.
 52

WHY PEOPLE ARE BENDING TOWARDS ONLINE TRADING

Several broking houses now offer online trading facilities. You can trade online with
e-brokerages such as ICICI Direct, Kotakstreet, India bulls, India info line’s
5paisa.com and HDFC securities.

If you are already comfortable trading with your regular broker, here are few
reasons why you may consider switching to trading online, or at least another
avenue of trading. an obvious advantage of online trading is that your transaction
would be virtually paperless. Your trading account would be linked to your demat
and bank account, ensuring a smooth transaction process. This is especially helpful
in the extent T+2 settlement system, where you have just two days to settle your
transaction.

The normal process of issuing of delivery note, in case of a sale, or arranging for a
payment in case of purchaser of shares, is all taken care of the minute your order is
executed online. The absence of manual intervention ensures that you are
completely in control of all transaction.

There is also little room for error, as your order is always confirmed before it is
executed. You can also make better decision as you have a clear record of all your
previous transaction. When you trade offline, a demat statement is normally sent to
you only on a quarterly basis .keeping track of your portfolio can be a hassle in such
a case. The inter net can provide a new sense of control over your financial future.
The amount of investment information available online is truly astounding. Its one
of the best aspect of being a wired investor for the first time in history, any
individual with an internet connection can:

• Know the price of any stock at any time

• Review the price history of any stock in chart format
• Follow market events in-depth
 53

• Receive a wealth of free commentary and analysis about stock markets and
globe economy.
• Conduct extensive financial research on any company
• Talk with other investors around the world

At investsmart you can get real-time stock quotes, daily roundups of the stock
market, experts commentary, and a deep community of fellow investors.

Convenience is probably the greatest advantage online trading offers investors. if

don’t have time to trade during market hours ,perhaps you are at work, you can log
on the web-trading site and place your order offline, during off market hours. Your
order would join the queue and be expected the next day. You would need to enjoy
a good relationship with your broker, for you to be able to reach him in the late
hours. For non-resident Indians (NRI), trading online is perhaps their easiest option
to invest in the Indian stock markets.

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

Moreover, if our connection is maddeningly slow and we want to get your order
executed immediately, most e-brokerages also provide a facility to trade offline by
placing our order via the phone.
 54

PROCESS OF ONLINE TRADING

An investor interesting in trading through Internet shall have to, firstly register
himself with an Internet brokerage firm. Some formalities such as filling the account
opening form of the e-broker, copies of identity proof, copy of residence proof are
made to register himself with the e-trader. Secondly, the investor would be required
to open a bank account with a scheduled bank and sufficient balance should be kept
in the account. Thirdly he would be required to open account with a depository
participant because only dematerialized shares can be traded on Internet.

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

Broker’s site.

The broker accepts and executes the order and

places it with the exchange

The exchange accepts the order after checking the share

limit for the day.

The broker makes the payment either directly via the client
bank account or pays through its own account and recovers
it later from the client.
 55

The exchange receives money and completes the

settlement.

The client is intimated about the settlement

either through the demat or via e-mail.

So, generally following steps are followed while doing the trading through the
Internet:

Step-I:

Those investors interested in doing the trading over Internet system, that is,NEAT -
ISX (NSE), should approach the brokers and register with the Stock Broker.

Step-2:

After registration, the broker will provide to them a login name, password and a
personal identification number (PIN).

Step-3:

Actual placement of an order, Using the place order window as under can then
place an order:

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

(b) Second, fill in the symbol, series and the default quantity.

Step-4:

It is the process of review. Thus, the investor has to review the order placed by
clicking the review option. He may also re-set to clear the values.

Step-5:
 56

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 ten seconds is there in
executing the trade.

Step-8:

It is regarding charging payment, for which there are different modes. Some brokers
will take some advance payment from the, investors and will fix their trading limits.
When the trade is executed, the broker will ask the investor for transfer of funds by
the investor to his account.
 57

THE MECHANICS OF ONLINE TRADING

CLIENT BROKER STOCK EXCHANGE

Accepts the Accepts the order

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

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

58

Rolling Settlement Cycle :

In a rolling settlement, each trading day is considered as a trading period and trades executed
during the day are settled based on the net obligations for the day. At NSE and BSE, trades in
rolling settlement are settled on a T+2 basis i.e. on the 2nd working day. For arriving at the
settlement day all intervening holidays, which include bank holidays, NSE/BSE holidays,
Saturdays and Sundays are excluded. Typically trades taking place on Monday are settled on
Wednesday, Tuesday's trades settled on Thursday and so on.

Concept Of Buying Limit

Suppose you have sold some shares on NSE and are trying to figure out that if you can use the
money to buy shares on NSE in a different settlement cycle or say on BSE. To simplify things
for ICICI Direct customers, we have introduced the concept of Buying Limit (BL). Buying Limit
simply tells the customer what is his limit for a given settlement for the desired exchange.
Assume that you have enrolled for a ICICI Direct account, which requires 100% of the money
required to fund the purchase, be available. Suppose you have Rs 1,00,000 in your Bank A/C and
you set aside Rs 50,000 for which you would like to make some purchase. Your Buying Limit is
Rs 50,000. Assume that you sell shares worth Rs 1,00,000 on the NSE on Monday. The BL
therefore for the NSE at that point of time goes upto Rs 1,50,000. This means you can buy shares
upto Rs 1,50,000 on NSE or BSE. If you buy shares worth Rs 75,000 on Tuesday on NSE your
 59

BL will naturally reduce to Rs75,000. Hence your BL is simply the amount set aside by you
from your bank account and the amount realized from the sale of any shares you have made less
any purchases you have made. Your BL of Rs 50,000, which is the amount set aside by you
from your Bank account for purchase is available for BSE and NSE. As you have made the sale
of shares on NSE for Rs.100000, the BL for NSE & BSE rises to 1,50,000. The amount from
sale of shares in NSE will also be available for purchase on BSE. ICICI Direct

Future Agenda:

Under the existing legal and regulatory framework, SEBI registered brokers can
offer trading on Internet through order is routing systems. However, with the rapid
development of the technology, we have to evolve fisher steps in this direction it is
therefore proposed that as the next step link between the depositories and banks
shall be established after the necessary regulations have been passed. This would
reduce the clearing and settlement time and would also minimize the risk of all the
participants involved in the transactions. We have to look forward towards
achieving an ideal scenario where all the services related to securities markets
including marketing of initial public offers on internet, providing investment
advisory services to the clients, broking, clearing and settlement etc., are provided
on the Internet by an intermediary. In a nutshell it can be said that we are moving
towards a one-stop service center.
60
 61

RESEARCH METHODOLOGY

The basic task of research is to generate accurate

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

systematic and objective process of gathering, recording and analyzing data

for aid in making business decisions.

There are basically two techniques adopted for obtaining information:

1. Primary Data.

2. Secondary Data.

Primary Data is gathered specifically for the project at hand through

personal interviews with the accounts officers.

Secondary data is previously collected and assembled for some

project other than the one at hand. It is gathered and recorded by someone

else prior to current needs of the researcher. It is less expensive than the

primary data.

SECONDARY DATA

Secondary data was collected from Ludhiana Stock Exchange

 62

Scope of study:

The study is limited to Ludhiana Stock Exchange , Firoz Gandhi Market Ludhiana

Data Collection:

Data is collected from secondary sources.

Sources of data collection are:

1) Ludhiana Stock Exchange

2) www.nseindia.com

3) www.bseindia.com

4) www.on-linetrading.com

For the successful research the manipulation of certain things, concepts, and
symbols for the purpose of generalization is inevitable. Research is simply the pursuit of
truth with the help of the study.
 63

Analysis and Interpretation

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

(a)1 year (b) 2 year

(c) 3 year (d) 4 year

Sample size 100

50

40

30 1year
2year
20 3year
4year
10

0
YEAR

According to this survey we find that 44% people says that we

are investing the money online from one year and 26% people
says that we are investing the money online from 2 years and
19% to 11% people says that we are investing money online
from 3 to 4 year. so we can say that now online trading is very
popular in the modern market.
 64

2. How will you describe your experience with on-line trading till
date?

(a) very easy to operate

(b) very difficult to operate

(c) not secure

(d) Any other

Sample size 100

60

50 I find it very easy to operate

40
I find it very difficult to
30 operate

20 I feel it is not secure

10 Any other
0
Experience

According to this survey we find that 60% of people find very easy to
operate and 15% people find diffcuilt two operate and 10% and 15%
people find no secure and any other. so we can say that online trading
is very simple to operate and easy to understand.
 65

3. what amount of money you invest normally ?

(a) 50000 (b) 100000 to 150000

(c) 150000 to 2000000 (d) Any other amount

Sample size 100

35
30
25
50000
20
100000to150000
15
150000to200000
10 Any Other
5
0
Money

According to this survey we find that 35% of people invest

money normally 50000 and 28% of people invest money
100000to150000 and 23% and 14% of people invest money
between 150000to200000 and any other. So we can say that the
people are not invest more money in the share market because
there is a great risk involved while doing the trading.
 66

4 . How often do you trade?

(a)Daily (b) Weekly

(c) Monthly (d) More than one month

Sample Size 100

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

5
0
Time

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

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

5. which trading you prefer?

 67

(a) On line trading (b) Manual trading

(c) Both

Sample Size 100

50

40

30 On line trading
Offline trading
20
Both
10

0
Relationship

According to this survey we find that 20% people prefer online

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

6. Whether online trading settled in Indian investor psyche

 68

(a) Yes (b) No

Sample Size 100

70
60
50
40 Yes
30 No
20
10
0
Settleled

According to this survey we find that 30% people says yes and 70%
people says no. so we can find that on line trading is not settled in
the Indian psyche because some people are not experience towards
online trading.

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

 69

(a) Lack of awareness the investors about on-line trading

(b) Shortage of domestic technical expertise

(c) Shortage Of Infra structure

(c) any other

Sample Size 100

50

40 Lack of awareness

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

0
Shortcomings

According to this survey we find that 15% of people says lack of

awareness 49% says Shortage of expertise and 14% people says
Shortage Of Infra structure and 22% says any other. So we can
say that mostly people are shortage of experience about the
Indian derivatives market or share market.

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

(a) T.V (b) Newspaper

 70

(c) Magazines (D) Journals

60

50

40 T.V
30 Newspaper
Magazines
20
Journals
10

0
Media

According to this survey we find that 55% people Prefer T.V and 25%
people prefer newspaper and 10% people prefer magazines and 10%
people prefer journals. So we can suggest that mostly people are very
easily grapped the knowledge through T.V.

FINDINGS
 71

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

According to this survey we find that 44% people says that we

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

2. How will you describe your experience with on-line trading till date?

According to this survey we find that 60% of people find very easy
to operate. and15% people find no secure. so we can say that online
trading is very simple to operate and easy to understand

3. what amount of money you invest normally ?

According to this survey we find that 35% of people invest

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

4. How often do you trade?

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

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

5. which trading you prefer?

According to this survey we find that 20% people prefer online

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

6. Whether online trading settled in Indian investor psyche

According to this survey we find that 30% people says yes and 70%
people says no. so we can find that on line trading is not settled in
 72

the Indian psyche because some people are not experience towards
online trading.

7. What shortcomings do you feel in Indian derivatives market?

According to this survey we find that 37% of people says lack of

awareness 49% says Shortage of expertise and 14% people says
any other. So we can say that mostly people are shortage of
experience about the Indian derivatives market or share market.

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

According to this survey we find that 41% people Prefer T.V
and 39% people prefer newspaper and 20% people prefer magazines.
So we can suggest that mostly people are very easily grapped the
knowledge through T.V.

CONCLUSION
 73

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

Nevertheless to say that online trading has the bright future as the percentage of
the trade done through online trading is increasing day by day.

LIMITATIONS
 74

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

 The advisory services being promised by the brokers would be of

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

 As a client one will access the NSE through a server of the online
brokerage and this may involve queuing delays

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

Suggestions
 75

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

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

Of course, online trading has many pros. There are several wonderful
reasons to invest online and consider online trading.

1. Money saving opportunities The amount of money you save depends

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

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

3. Enter online trades at anytime You can enter online trades at anytime and
from anywhere. This is very convenient if you live in a different time zone
than the country you are trading in. Not to mention, it is especially fit for
investors with busy schedules.
 76

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

BIBLIOGRAPHY

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

MAGAZINES
• Business World
• LSE’s Magazine

INTERNET SITES
• www.nseindia.com
• www.bseindia.com
• www.on-linetrading.com
• www.sebi.gov.in
• www.lse.co.in
 77

Questionnaire

Dear respondent,

I am student of MBA. I am working on the

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

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

(a)1 year (b) 2 year

(c) 3 year (d) 4 year

2 .How will you describe your experience with on-line trading till
date?

(a) very easy to operate

(b) very difficult to operate

(c) not secure

(d) Any other

 78

3. what amount of money you are invested normally ?

(a) 50000 (b) 100000 to 150000

(c) 150000 to 2000000 (d) Any other amount

4. How often do you trade?

(a)Daily (b) Weekly

(c) Monthly (d) More than one month

5. In which trading you will prefer?

(a) Online trading (b) offline trading

(c) Both

6. According to you online trading setteled in Indian investor psyche

(a) Yes (b) No

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

(a) Lack of awareness the investors about on-line trading

(b) Shortage of domestic technical expertise

(c) Shortage Of Infra structure

(d) If any other

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

(a) T.V (b) Newspaper

(c) Magazines (d) Journals