INVESTMENT AVENUE

INTRODUCTION:-

Savings form an important part of the economy of any nation. With the savings
invested in various options available to the people, the money acts as the driver
for growth of the country. Indian financial scene too presents a plethora of
avenues to the investors. Though certainly not the best or deepest of markets in
the world, it has reasonable options for an ordinary man to invest his savings.
The money you earn is partly spent and the rest saved for meeting future
expenses. Instead of keeping the savings idle you may like to use savings in
order to get return on it in the future. This is called Investment. One needs to
invest to and earn return on your idle resources and generate a specified sum of
money for a specific goal in life and make a provision for an uncertain future One
of the important reasons why one needs to invest wisely is to meet the cost of
Inflation. Inflation is the rate at which the cost of living increases.
The cost of living is simply what it costs to buy the goods and services you need
to live. Inflation causes money to lose value because it will not buy the same
amount of a good or service in the future as it does now or did in the past. The
sooner one starts investing the better. By investing early you allow your
investments more time to grow, whereby the concept of compounding increases
your income, by accumulating the principal and the interest or dividend earned
on it, year after year. The three golden rules for all investors are:
• Invest early
• Invest regularly
• Invest for long term and not short term
This project will also help to understand the investors facet before investing in
any of the investment tools and thus to scrutinize the important aspects for the
investors before investing that further helped in analyzing the relation between
the features of the products and the investors’ requirements.

1
Investment objectives, importance & need:-
1 return: - investors always expect a good rate of return from their investment. So
he can complete and fulfill his future need & goal.
2) risk:- probability of actual return becoming less than the expected return.
Investments risk is just as important as measuring its expected rate of return
because minimizing risk and maximizing the rate of return are interrelated obj. in
the invest. Mgmt.
3). liquidity:- proportion of the investment could be converted into cash without
much loss of time, It would help the investor meet the eminencies.
4) Hedge against inflation:- return should be more the inflation rate otherwise the
investor will have loss in real term
5). Safety: - the selected investment avenue should be under the legal and
regulatory frame work. So investor can ensure that his investment is in a right
direction/ decision.
6). Promote savings: - investment gives the return in future so people attract
towards the invest. Invest encourages the savings.
7. it enhance economic growth:- with the help of future return people can start his
own work/business.
8). Additional income: - investment provides the extra income so people can fulfill
his objectives
9). Help in removing uncertainly in life.
10). Tax planning: - in various section are available. So investor can get rebate in
income tax and save the tax
11). It help in planning of future:- investment provide the big return in future so
with the help of people can get and fulfill his future needs and goal
12). reduces black money from market:-the help of investment people can
manage his money and allocates at a right place.
13). It help in channelization of resources.
14). It helps in maintaining life standard.

2
Investment process:-
The investment process involves a series of activities
leading to the purchase of securities or other investment alternatives.
1). Investment policy:- formulates the policy for systematic functioning
-> Investible funds – management of fund which are used in investment.
 Objectives & knowledge:- required rate of return, need for regularity of
income, risk perception and the need for liquidity.

 Investor should collect all into about the investment alternatives before
proceeding into investment.

2). Security analysis – through market, industry and company analysis

After formulating the invetment policy the security to be bought has to be
scrutinized.
3). Valuation- the valuation helps to determine the return and risk expected from
an investment in the common stock.
4). Construction of portfolio: - the portfolio so constructed in such manner to meet
the investor’s goals diversification his portfolio and allocates funds among the
securities.
5). Portfolio evaluation: - the portfolio has to be managed efficiently. Through
appraisal as revision process.

Mutual Fund
Mutual fund is a pool of money collected from investors and is invested according
to stated investment objectives Mutual fund investors are like shareholders and
they own the fund. Mutual fund investors are not lenders or deposit holders in a
mutual fund. Everybody else associated with a mutual fund is a service provider,
who earns a fee. The money in the mutual fund belongs to the investors and
nobody else. Mutual funds invest in marketable securities according to the
investment objective. The value of the investments can go up or down, changing
the value of the investor’s holdings.NAV of a mutual fund fluctuates with market
price movements. The market value of the investors’ funds is also called as net

3
assets. Investors hold a proportionate share of the fund in the mutual fund. New
investors come in and old investors can exit, at prices related to net asset value
per unit.

Mutual Funds now represent perhaps the most appropriate investment

opportunity for most small investors. As financial markets become more
sophisticated and complex, investor need a financial intermediary who provides
the required knowledge and professional expertise on successful investing. It is
no wonder then that in the birthplace of mutual funds-the U.S.A.-the fund industry
has already overtaken the banking industry, with more money under Mutual Fund
management than deposited with banks. The Indian Mutual Fund industry has
already opened up many exciting investment opportunities to Indian investors.
Despite the expected continuing growth in the industry, Mutual Fund is a still new
financial intermediary in India.

Mutual Fund Industry in India

Mutual Fund is an instrument of investing money. Nowadays, bank rates have
fallen down and are generally below the inflation rate. Therefore, keeping large
amounts of money in bank is not a wise option, as option, as in real terms the
value of money decreases over a period of time. One of the options is to invest
the money in stock market. But a common investor is not informed and
competent enough to understand
the intricacies of stock market. This is where mutual funds come to the rescue. A
mutual fund is a group of investors operating through a fund manager to
purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost
efficient and very easy to invest in. By pooling money together in a mutual fund,
investors can purchase stocks or bonds with much lower trading costs than if
they tried to do it on their own. Also, one doesn't have to figure out which stocks
or bonds to buy. But the biggest advantage of mutual funds is diversification.
Diversification means spreading out money across many different types of

4
investments. When one investment is down another might be up. Diversification
of investment holdings reduces the risk tremendously.
In 1963, the government of India took the initiative by passing the UTI act, under
which the Unit Trust of India (UTI) was set-up as a statutory body. The
designated role of UTI was to set up a Mutual Fund. UTI’s first scheme, called. In
1987 the other public sector institutions set up their Mutual Funds. In 1992,
government allowed the private sector players to set-up their funds. In 1994 the
foreign Mutual Funds arrives in Indian market. In 2001 there is a crisis in UTI and
in 2003 UTI splits up into UTI1and UTI 2. The history of Indian Mutual Fund
industry can be explained easily by various phases.

Benefits of Investing in Mutual Funds

• Professional Management
Mutual Funds provide the services of experienced and skilled
professionals, backed by a dedicated investment research team that
analyses the performance and prospects of companies and selects
suitable investments to achieve the objectives of the scheme.

• Diversification
Mutual Funds invest in a number of companies across a broad cross-
section of industries and sectors. This diversification reduces the risk
because seldom do all stocks decline at the same time and in the same
proportion. You achieve this diversification through a Mutual Fund with far
less money than you can do on your own.

• Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with

5
 brokers and companies. Mutual Funds save your time and make investing
easy and convenient.

• Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a
higher return as they invest in a diversified basket of selected securities.

• Low Costs
Mutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lower costs for investors.

• Liquidity
In open-end schemes, the investor gets the money back promptly at net
asset value related prices from the Mutual Fund. In closed-end schemes,
the units can be sold on a stock exchange at the prevailing market price or
the investor can avail of the facility of direct repurchase at NAV related
prices by the Mutual Fund.

• Transparency
You get regular information on the value of your investment in addition to
disclosure on the specific investments made by your scheme, the
proportion invested in each class of assets and the fund manager's
investment strategy and outlook.

• Flexibility
Through features such as regular investment plans, regular withdrawal
plans and dividend reinvestment plans, you can systematically invest or
withdraw funds according to your needs and convenience.

6
 • Affordability
Investors individually may lack sufficient funds to invest in high-grade
stocks. A mutual fund because of its large corpus allows even a small
investor to take the benefit of its investment strategy.

• Choice of Schemes
Mutual Funds offer a family of schemes to suit your varying needs over a
lifetime.

• Well Regulated
All Mutual Funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interests of
investors. The operations of Mutual Funds are regularly monitored by
SEBI.

Disadvantages of Investing Mutual Funds: -

• Professional Management:
Some funds doesn’t perform in neither the market, as their management is
not dynamic enough to explore the available opportunity in the market,
thus many investors debate over whether or not the so called
professionals are any better than mutual fund or investor himself, for
picking up stocks.
• Costs:
The biggest source of AMC income is generally from the entry & exit load
which they charge from investors, at the time of purchase. The mutual
fund industries are thus charging extra cost under layers of jargon.
• Dilution:
Because funds have small holdings across different companies, high
returns from a few investments often don't make much difference on the

7
 overall return. Dilution is also the result of a successful fund getting too
big. When money pours into funds that have had strong success, the
manager often has trouble finding a good investment for all the new
money.
• Taxes:
When making decisions about your money, fund managers don't consider
your personal tax situation. For example, when a fund manager sells a
security, a capital-gain tax is triggered, which affects how profitable the
individual is from the sale. It might have been more advantageous for the
individual to defer the capital gains liability.

Types of Mutual Funds

Mutual fund schemes may be classified on the basis of its structure and its
objective: -

By Structure
1. Open-ended Funds: -
An open-end fund is one that is available for subscription all through the year.
These do not have a fixed maturity. Investors can conveniently buy and sell units
at Net Asset Value ("NAV") related prices. The key feature of open-end schemes
is liquidity 25
2. Closed-ended Funds: -
A closed-end fund has a stipulated maturity period which generally ranging from
3 to 15 years. The fund is open for subscription only during a specified period.
Investors can invest in the scheme at the time of the initial public issue and
thereafter they can buy or sell the units of the scheme on the stock exchanges
where they are listed. In order to provide an exit route to the investors, some
close ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate
that at least one of the two exit routes is provided to the Investor.

8
 3. Interval Funds: -
Interval funds combine the features of open-ended and close-ended schemes.
They are open for sale or redemption during pre-determined intervals at NAV
related prices.

4. Money Market Funds: -

The aim of money market funds is to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer short-
term instruments such as treasury bills, certificates of deposit, commercial paper
and inter-bank call money. Returns on these to 2%. It could be worth paying the
load, if the fund has a good performance history.

5. No-Load Funds: -
A No-Load Fund is one that does not charge a commission for entry or exit. That
is, no commission is payable on purchase or sale of units in the fund. The
advantage of a no load fund is that the entire corpus is put to work.

6. Tax Saving Schemes: -

These schemes offer tax rebates to the investors under specific provisions of the
Indian Income Tax laws as the Government offers tax incentives for investment
in specified avenues. Investments made in Equity Linked Savings Schemes
(ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income
Tax Act, 1961. The Act also provides opportunities to investors to save capital
gains u/s 54EA and 54EB by investing in Mutual Funds, provided the capital
asset has been sold prior to April 1, 2000 and the amount is invested before
September 30, 2000

9
Insurance
Characteristic: - life is a roller coaster ride and is full of twists and turns, you
cannot take anything for granted in life. Insurance policies are a safeguard
against the uncertainties of life
Insurance is system by which the losses suffered by a few are spread over many,
expose to similar risks. Insurance is a protection against financial loss arising on
the happening of an unexpected event. Insurance policy helps in not only
mitigating risks but also provides a financial cushion against adverse financial
burdens suffered.
Advantages of insurance:-
1). protection :- saving through life insurance guarantees fill protection against
risk of death of the saver the full assured sum is paid, where as in other schemes
only the amount saved is paid.
2). Easy payment: - for the salaried people salaries saving schemes are
introduced further there is an easy installment facility method of payment through
monthly, quarterly, half yearly on yearly mode.
3). Liquidity: - loans can be raised on the security of the policy
4). Tax relief:- in income tax and wealth tax is available for amount paid by way
of premium for life insurance subject to the tax rates in force.
5). Choice of schemes:- many policies are available.

Schemes of LIC:-

• Basic life insurance plan-

Whole life insurance plan – it is a low cost insurance plan where the sum assured
is payable on the death of the life assured and premium are payable throughout
life.
Endowment assurance plan – the sum assured is payable on the date of maturity
or on the death of the life assured it earlier.

10
 • Term assurance plan –

Two year temporary assurance plan- the sum assured is payable only on the
death of the life assured during the term.
Convertible term assurance plan- An option to purchase a new scheme Bima
sandesh & bima kiran are another term assurance plan.
Plan for children- various children’s deferred assurance plans are avail. Jaaven
balaya, jeevan kishore, jeevan sukanya.etc.
Pension plans – these plans provides for either immediate or deferred pension
for life. The pension payments are made till the death of life annuitant. Both the
deferred annuity and immediate annuity plans are available with the return of the
given amount on death after vesting under the jeevan dharma plan return of pur.
Price on death under the jeevan akshay plan.
Jeevan sarita: - this is a joint life last survivor- annuity cum assurance plan
Unit linked insurance plans:- the investment is denoted as units and is
represented by the value that it has attained called as NAV
ULIP provides multiple benefits to the consumer:-
Life protect in Investment & saving Flexibility, disability Tax planning Adjustable
life cover

Tax benefits from life insurance:-

At present, deductions are allowed up to Rs. 1500/- under sec. 80 did in respect
of medical treatment of handicapped dependents and another amount up to Rs
20000/- under sec 80 DDA in respect of deposit made for maintenance of
handicapped dependents under any scheme framed for their behalf by LIC.
A deduction to an individual for any amt. paid or deposited by him in the jeevan
suraksha plan for receiving pension is allowed.
The deduction will be restricted to Rs. 10000/- according to sec 88, the amt. of
income tax payable on the total taxable income can be reduced by 20% of the
aggregate amt. paid towards premium subject to the max. Of Rs. 70000/-

11
Premium paid under jointly insurance policy on the lives of a husband & wife –
deduction under section 88.

Securities:
Various types of securities are available in the market include shares,
debentures, bonds etc.

Equity shares
About shares -
At the most basic level, stock (often referred to as shares) is ownership, or
equity, in a company. Investors buy stock in the form of shares, which represent
a portion of a company's assets (capital) and earnings (dividends). As a
shareholder, the extent of your ownership (your stake) in a company depends on
the number of shares you own in relation to the total number of shares available
For example, if you buy 1000 shares of
Stock in a company that has issued a total of 100,000 shares, you own one per
cent of the company. While one per cent seems like a small holding, very few
private investors are able to accumulate a shareholding of that size in publicly
quoted companies, many of which have a market value running into billions of
pounds. Your stake may authorize you to vote at the company's annual general
meeting, where shareholders usually receive one vote per share. In theory, every
stockholder, no matter how small their stake, can exercise some influence over
company management at the annual general meeting. In reality, however, most
private investors' stakes are insignificant. Management policy is far more likely to
be influenced by the votes of large institutional
Investors such as pension funds
a) Stock symbol -
A stock symbol, or 'Epic' symbol, is the standard abbreviation of a stock's name.
You can find stock symbols wherever stock performance information is published
- for example, newspaper stock listings and investment websites. Company
names also have abbreviations called ticker symbols. However, it's worth

12
remembering that these may vary at the different exchanges where the company
is quoted.

b) Performance indicators -
Here is a list of the standard performance indicators
Performance Indicator Definition
Closing price: The last price at which the stock was bought or sold.
High and low: The highest and lowest price of the stock from the previous trading
day.
52 week range: The highest and lowest price over the previous 52 weeks.
Volume: The amount of shares traded during the previous trading day High and
low.
Net change: The difference between the closing price on the last trading day and
the
Closing price on the trading day prior to the last.

The stock exchange -

A marketplace in which to buy or sell something makes life a lot easier. The
same applies to stocks. A stock exchange is an organization that provides a
marketplace in which investors and borrowers trade stocks. Firstly, the stock
exchange is a market for issuers who want to raise equity capital by selling
shares to investors in an Initial Public Offering (IPO). The stock exchange is also
a market for investors who can buy and sell shares at any time.

a) Trading shares on the stock exchange: -

As an investor in the INDIA, you can't buy or sell shares on a stock exchange
yourself. You need to place your order with a stock exchange member firm (a
stockbroker) who will then execute the order on your behalf. The NSE AND BSE
are the leading stock exchange in the INDIA. Trading is done through
computerized systems.

13
b) The trading process: -
If you decide to buy or sell your shares, you need to contact a stockbroker who
will buy or sell the shares on your behalf. After receiving your order, the
stockbroker will input the order on the SETS or SEAQ system to match your
order with that of another buyer or seller. Details of the trade are transmitted
electronically to the stockbroker who is responsible for settling the trade. You will
then receive confirmation of the deal.

c) Types of shares available on the stock exchange: -

You cannot trade all stocks on the stock exchange. To be listed on a stock
exchange, a stock must meet the listing requirements laid down by that
exchange in its approval process. Each exchange has its own listing
requirements, and some exchanges are more particular than others. It is possible
for a stock to be listed on more than one exchange. This is known as a dual
listing.

Preference shares –
Characteristics – Those which carry preferential right in respect of payment of
dividend and repayment of capital in case of winding up at the company div. rate
fixed. Preference shareholders have restricted voting right.

Advantage of preference shares –

1. Regular fixed income – fixed rate of dividend.

2. Preferential right and min. risk – they enjoy the right regarding the
payment of div. repayment of principal in case of winding up of company
etc.

3. Voting right for safety of interests.

4. Fair security against depression.

14
 5. Minimum capital losses – pre. Right to repayment of their capital.

Disadvantage of pre. Shares –

1. Restricted booting rights – don’t enjoy are voting right except in matters
dire city affecting their interests.

2. Fixed income – they get a fixed div. irrespective of higher learning of the
comp.

3. No claim over surplus – they are only entitled for repayment of their
investment on preferential basis.

4. Uncertainty of income – comp. can redeem the redeemable pre. Shares

on or after a certain date as per terms of their issue.

5. Unsecured investments – are not provided with any security of assets in

respect of their investment.

Types of pre. Shares –

1. Cumulative or non-cumulative – cum. Ore. Share give the right to the pre.
Shareholders to demand the unpaid divided in any year during the
subsequent year of year when the profits are avail. For distribution but
non. Com. Pre. Share holder not has any right.

2. Redeemable and non-redeemable – redeemable share which have to be

repaid by the company offer the term for which the pre-share have been
issued non-redeemable shares need not be repaid by the comp. except on
winding up.

3. Participating preference share and non-participating pre. Shares –

participating shares which are entitled to a pref. dividend at a fixed rate
with the right to participate further in the profits either along with or after
payment of certain rate of div. with or after payment of certain rate of div.
on equity shares.

15
 4. Convertible and non-convertible pre. Shares – shares are gives a right to
convert their shares into equity shares within a specified period which
cannot be converted into equity called non-convertible.

Debentures
Debentures are creditor ship securities issued by companies for raising long term
funds on loan basis. Deb. Are the acknowledgement of a debt by a comp. it is
also an instrument executed by a company under its common seal
acknowledging indebtedness to some person and persons to secure the sum
advanced.
Advantages of debentures of investors –
1. Safety and security of investment – debentures holders have a specific or
general or floating charge on the assets of the comp.

2. Regular fixed income or their principal even out of capital if the company
incurs losses.

3. Liquidity- they can be used as collateral security for raising loan from any
financial institution, and can also be sold in a stock exchange.

4. Convert into shares after she expiry at a specific period.

Disadvantages –
1. No control – on the affairs of the company as they have no voting rights.

2. No extra income – they entitled to get fixed interest even company earned
huge profit.

Types of debentures –
1. Secured & unsecured debentures – secured having fixed or floating
change on the assets of the company but unsecured net having.

16
 2. Redeemable & irredeemable debentures

3. Registered and bearer debentures – registered deb. Which are registered

with the comp. in the name of deb. Holders and are trans. Only by a
regular trans. Deed. But bearer deb. Are payable to the bearer and are
transferable by delivery.

4. Convertible and non-convertible debentures

5. Equitable and legal debentures

6. Preferred and ordinary debentures

Bonds
Bonds are a long term debt instrument that promises to pay a fixed annual
sum as interest for specified period at time.
Bonds have face value / par value. May be issued at par or at discount.
The interest rate is fixed. Some time floating.
Bonds are traded in the stock market.
Types of bonds –
1. Secured bond and unsecured bonds

2. Perpetual bond and redeemable bonds – bonds that do not mature or

never mature are called perpetual bonds.

3. Fixed interest rate bonds & floating int. rate which bonds int. rate floating,
charge according to the prefixed norms called floating.

4. Zero coupon bonds – these bonds sell at a dis. And the face value is
repaid at maturity.

5. Capital indexed bonds – the principal amount of the bond is adjusted for
inflation for every year.

GOVERNMENT SECURITIES

17
Government securities (G-secs.) are sovereign securities which are issued by the
Reserve Bank of India on behalf of Government of India, in lieu of the Central
Government's market borrowing program.
The term Government Securities includes:
Central Government Securities.
Central Government Securities.
State Government Securities
Treasury bills
The Central Government borrows funds to finance its 'fiscal deficit’. The market
borrowing of the Central Government is raised through the issue of dated
securities and 364 days treasury bills either by auction or by floatation of loans.
In addition to the above, treasury bills of 91 days are issued for managing the
temporary cash mismatches of the Government. These do not form part of the
borrowing program me of the Central Government.

Types of Government Securities

Government Securities are of the following types: -

Dated Securities: They are generally fixed maturity and fixed coupon securities
usually carrying semiannual coupon. These are called dated securities because
these are identified by their date of maturity and the coupon, e.g., 11.03% GOI
2012 is a Central Government security maturing in 2012, which carries a coupon
of 11.03% payable half yearly. The key features of these securities are:
They are issued at face value.
Coupon or interest rate is fixed at the time of issuance, and remains constant till
Redemption of the security.
The tenor of the security is also fixed.
Interest /Coupon payment is made on a half yearly basis on its face value.
The security is redeemed at par (face value) on its maturity date.

18
Zero Coupon bonds: These are bonds issued at discount to face value and
redeemed at par. These were issued first on January 19, 1994 and were followed
by two subsequent issues in 1994-95 and 1995-96 respectively. The key features
of these securities are:
They are issued at a discount to the face value.
The tenor of the security is fixed.
The securities do not carry any coupon or interest rate. The difference between
the issue price (discounted price) and face value is the return on this security.
The security is redeemed at par (face value) on its maturity date.

Partly Paid Stock: This is stock where payment of principal amount is made in
installments over a given time frame. It meets the needs of investors with regular
flow of funds and the need of Government when it does not need funds
immediately. The first issue of such stock of eight year maturity was made on
November 15, 1994 for Rs. 2000 crore. Such stocks have been issued a few
more times thereafter. The key features of these securities are:
They are issued at face value, but this amount is paid in installments over a
specified period.
Coupon or interest rate is fixed at the time of issuance, and remains constant till
Redemption of the security.
The tenor of the security is also fixed.
Interest /Coupon payment is made on a half yearly basis on its face value.
The security is redeemed at par (face value) on its maturity date.

Floating Rate Bonds: These are bonds with variable interest rate with a fixed
percentage over a benchmark rate. There may be a cap and a floor rate attached
thereby fixing a maximum and minimum interest rate payable on it. Floating rate
bonds of four year maturity were first issued on September 29, 1995, followed by
another issue on December 5, 1995. Recently RBI issued a floating rate bond,
the coupon of which is benchmarked against average yield on 364 Days

19
Treasury Bills for last six months. The coupon is reset every six months. The key
features of these securities are:
They are issued at face value.
Coupon or interest rate is fixed as a percentage over a predefined benchmark
rate at the time of issuance. The benchmark rate may be Treasury bill rate,
bank rate etc.
Though the benchmark does not change, the rate of interest may vary according
to the Change in the benchmark rate till redemption of the security. The tenor of
the security is also fixed.
Interest /Coupon payment is made on a half yearly basis on its face value.
The security is redeemed at par (face value) on its maturity date.

Bonds with Call/Put Option: First time in the history of Government Securities
market RBI issued a bond with call and put option this year. This bond is due for
redemption in 2012 and carries a coupon of 6.72%. However the bond has call
and put option after five years i.e. in year 2007. In other words it means that
holder of bond can sell back (put option) bond to Government in 2007 or
Government can buy back (call option) bond from holder in 2007. This bond has
been priced in line with 5 year bonds.

Capital indexed Bonds: These are bonds where interest rate is a fixed
percentage over the wholesale price index. These provide investors with an
effective hedge against inflation. These bonds were floated on December 29,
1997 on tap basis. They were of five year maturity with a coupon rate of 6 per
cent over the wholesale price index. The principal redemption is linked to the
Wholesale Price Index. The key features of these securities are:
They are issued at face value.
Coupon or interest rate is fixed as a percentage over the wholesale price index at
the time of issuance. Therefore the actual amount of interest paid varies
according to the change in the Wholesale Price Index.
The tenor of the security is fixed.

20
Interest /Coupon payment is made on a half yearly basis on its face value.
The principal redemption is linked to the Wholesale Price Index.

Features of Government Securities

Nomenclature
The coupon rate and year of maturity identifies the government security.
Example: 12.25% GOI 2008 indicates the following:
12.25% is the coupon rate, GOI denotes Government of India, which is the
borrower, 2008 is the year of maturity.

Eligibility
All entities registered in India like banks, financial institutions, Primary Dealers,
firms, companies, corporate bodies, partnership firms, institutions, mutual funds,
Foreign Institutional Investors, State Governments, Provident Funds, trusts,
research organizations, Nepal Rashtra bank and even individuals are eligible to
purchase Government Securities.

Availability
Government securities are highly liquid instruments available both in the primary
and secondary market. They can be purchased from Primary Dealers. PNB Gilts
Ltd., is a leading Primary Dealer in the government securities market, and is
actively involved in the trading of government securities.

Derivatives
Derivatives are contract which derive these values form the value of one or more
of other assets (known as underling assets).
The underlying assets could be a fin. Security, a security index or some
combination of sec., indexes and commodities, derivatives are financial
instrument that have no intrinsic value.
“In the Indian context the securities contract regulation Act, 1956”

21
Defines ‘derivative’ to include –
1. A security derived from a debt instrument, share loan whether se cured or
unsecured, risk instrument or contract for difference or any other form of
security.

2. A contract which derives its value from the prices or index of prices of
underlying securities.

Characteristics –
1. Future contract – between two parties and the same to be fulfilled in
future.

2. Parties obligation – the counter parties have specified obligation under the
derivative contract.

3. No delivery of assets – in derivatives trading the taking or making of

delivery of underlying asset is not involved

4. Derived contract – the value which derived from the values of other
underlying assets, such comedies, metals, fin. Assets etc.

5. Secondary market instrument – derivatives have little usefulness in

mobility fresh capital by the corporate world, however warrant &
convertibles are exception in this respect.

6. Deferred payment instrument – it means that it is easier to take short or

long position in derivatives in comparison to other assets or securities.

Derivative instrument –
1. Forwards

2. Future

3. Options

4. Swaps

22
Advantage of derivatives
1. Reflect perception of market participants about the future and lead the
prices of underlying to the perceived future level.

2. Help of transfer risks.

3. Higher trading volumes – derivatives, due to their interest nature, are

linked to the underlying cash market wish the introduction at derivates.
The participation by more players who would not otherwise participate for
lack of an arrangement to trans. Risk.

4. Controlled environment – speculative trades shift to a more controlled

environment at derivatives market.

5. Attract entrepreneurial activity – derivatives attracting many bright,

creative well educated people with an entrepreneurial attitude.

Disadvantages of derivatives
1. Speculative and gambling motives – promotes the speculative activity in
the market.

2. Increase in risk – it is particularly customized privately managed and

negotiated and thus they are highly risky.

3. Instability of financial system – derivatives are also risky for whole fin.
System. The rears of micro and macro financial crises have caused to the
cheeked growth of derivatives which have turned many players into big
losers.

4. Price instability – it all works activity are not accrue in a well organized
way, follows standard code of conduct than it will result in price instability.

5. Increased regulatory burden- on the govt. or regulatory authorizes to

control the activities of the traders in fin. Derivatives.

23
Non-negotiable securities

Deposits –

Deposits earn fixed rate of return even tour bank deposits resemble fixed income
securities they are not negotiable instruments. Some of the deposits are dealt
subsequently.

1. Bank deposits – it is the simple investment avenue for the investors.

Traditionally the bank offered current account, saving account & fixed
deposit. Current account does not offer any interest rate. The drawback of
having large amounts in savings accounts is that the return is just 4.5%.
The saving account interest rate is regulated by the reserve bank of India
and kept low because of the high cost of servicing them. The savings
account is more liquid and convenient to handle. The fixed account carries
high interest rate and the money is locked up for a fixed period. With
increasing competition among the banks, the banks have handled the
plain savings accounts with the fixed accounts later to the needs of the
small savers. The deposits in the banks are considered to be safe
because of RBI regulation. The risk arises investors prefer the bank
deposits.

2. NBFC deposits – in recent years, there has been significant increases in

the important of non-banking financial companies in the process of
financial intermediation. The NBFC comes under the purviews of the RBI.
The amendment of RBI act of Kim -1997, made registration compulsory
for the NBFC’s.

• Period – the immaturity period ranges form few months to five years.

24
• Maximum limit – the limit for acceptance of deposit has been based on the
credit rating of the company. The NBFC not having net owned funds of
Rs. 25 lakh are not entitled to accept deposits.

• Interest – interest rate higher than the commercial bank on public deposit.
The interest rate differs according to maturity period.

• Security – security of the deposits of the NBFC in much lower than the
deposits with banks. To improve the liquidity of NBFCs the percentage of
liquid assets required to be maintained y them has been enhanced form
12.5% to 15% with effect from April 1999 respectively.

3. Post office deposits – like the bank, post office also offers fixed deposit
facility and monthly income scheme. Post office monthly income scheme
is a popular scheme for the retired. An interest rate of 13% is paid
monthly. The term of the scheme is 6 years, at the end of which a bonus
of 10% is paid. The annualized yield to maturity works out to be 15.01%
pa. After three years, premature closure is allowed without any penalty. If
the closure is after one year, a penalty of 5% is charged.

4. Tax sheltered savings scheme – the tax sheltered savings schemes offer
tax relief to those who participate in their schemes according to the
income tax laws.

Public provident fund scheme

National savings scheme

a) Public provident fund scheme – ppf earns an interest rate of 12% pa.
Which is exempted form the income tax under sec. 88? The individuals
and Hindu undivided families can participate in this scheme. The
maximum limit per annum for the deposit is Rs. 60000. The interest is
accumulated in the deposit. Ppf is also provides the early withdrawal
facility.

25
 b) National savings schemes – this scheme helps in deferring the tax
payment. Individual and HUF are eligible to open NSS account in the
designated post office. Locking period of 4 years quality for a rebate of
20% under section 55 of the income tax act, subject to a maximum of
rs 12000.

Real / physical assets

The imp. Categories of real assets are –

1. Real estate – real estate has historically been useful in a portfolio for both
income and capital gain. Home ownership is a form of equity investment
because such property appreciates in value. A residential house is very
attractive investment proposal due to following reasons –

A) Capital appreciation of residential property is in general very high.

B) Loans are available from various quarters for buying / constructing a

residential home.

C) For wealth tax purpose, the value of a residential home is reckoned at his
historical cost and not at its present market prices.

D) Interest on loans taken for buying / constructing a residential home is tax-

deductible within certain limits.

E) Ownership of a residential home provides psychological sets. The other

forms of real estate like commercial premises, industrial land, plantation,
farmhouses etc.

ADVANTAGES AND DISADVANTAGES

26
There are many advantages and disadvantages of investing in real estate. One
of the advantages of investing in real estate is; real estate is an investment that
can give you income for the rest of your life. If you buy properties and rent the
properties out it can give you lifelong income. Another advantage of investing in
properties is you can use a lot of leverage to acquire them. There are many ways
you can buy properties without using your own money. One way of doing this is
seller financing. Seller financing is when you agree to pay the seller over time the
down payment and the rest you get from the bank.

One last advantage of investing in real estate is real estate has intrinsic value to
it. A stock that you buy can lose 99% of its value but it is almost impossible to
buy a property and it loses 99% of its value. One disadvantage of investing in
properties is if you buy a property and can't make the mortgage payments you
can lose the property and damage your credit. Another disadvantage of investing
in properties is, as an investor you depend on a lot of people to do their part. If
the people you are renting out to do not pay their rent you will have to use their
security money and find new people quickly or it can eat up your profits.

One last disadvantage of investing in properties is the cost it takes to maintain or

repair. Many times when you think you're done with a property something can
break or needs to be replaced. Investing in properties does have its advantages
and disadvantages. If you use the information you read here you will have some
idea of what the advantages and disadvantages are.

There are many different types of investment real estate: rental houses,
apartments, vacant land, commercial buildings, industrial, shopping centers or
warehouses. They all offer big tax incentives for investors who understand those
benefits. Many people believe that depreciation is the best real estate tax
deduction of all. The IRS REQUIRES real estate investors to depreciate their
investment properties.
Depreciation is a "paper loss" required for estimated wear, tear and
obsolescence. However, land value is not depreciable. This applies to 100% of

27
the money invested in buying vacant land and that part of the property value
apportioned to land on an improved property. (That is, land with a building on it).
Condominiums do not have a land element and 100% of the purchase price can
be depreciated.

Residential income property is depreciated over 27.5 years on a straight-line

basis.
Commercial property is depreciated over 39 years, also on a straight-line basis.

Tax benefits

If you are a "real estate professional" who meets certain time requirements and
who "materially participates" in managing your investment property, you are
allowed almost unlimited income tax-deductions from your investment property.

CURRENCY
Definition
An exchange of currencies, where an investor will exchange a specific amount of
one currency for another currency which can be invested at a higher interest rate.
Any form of money that is in public circulation currency includes both hard money
(coins) and soft money (paper money). Typically currency refers to money that is
legally designated as such by the governing body, but in some cultures currency
can refer to any object that has a perceived value and can be exchanged for
other objects.

Characteristics
The money market is a market for financial assets that are close substitutes for
money. It is a market for overnight short-term funds and instruments having a
maturity period of one or less than one year. It is not a place (like the Stock
market), but an activity conducted by telephone. The money market constitutes a
very important segment of the Indian financial system.

28
The characteristics of the money market are:

1. It is not a single market but a collection of markets for several instruments

2. It is wholesale market of short term debt instruments
3. Its principal feature is honor where the creditworthiness of the participants is
important.
4. The main players are: Reserve bank of India (RBI), Discount and Finance
House of India (DFHI), mutual funds, banks, corporate investor, non-banking
finance companies (NBFCs), state governments, provident funds, Primary
dealers. Securities Trading Corporation of India (STCI), public sector undertaking
(PSUs), non-resident Indians and overseas corporate bodies.
5. It is a need based market wherein the demand and supply of money shape the
market.

Functions of the Currency Market:

A currency market is generally expected to perform three broad functions:

1. Provide a balancing mechanism to even out the demand for and supply of
short term funds
2. Provide a focal point for central bank intervention for influencing liquidity and
general level of interest rates in the economy.
3. Provide reasonable access to suppliers and users of short term funds to fulfill
their borrowings and investment requirements at an efficient market clearing
price.

Besides the above functions, a well functioning money market facilitates the
development of a market for longer term securities. The interest rates for
extremely short term use of money serve as a benchmark for longer term
financial instruments.

Advantages

29
An efficient money market benefits a number of players. It provides a stable
source of funds to banks in addition to deposits allowing alternative financing
structures and competition. It allows banks to manage risks arising from interest
rate fluctuations and to manage the maturity structure of their assets and
liabilities.

A developed inter-bank market provides the basis for growth and liquidity in the
money including the secondary market for commercial paper and treasury bills.

An efficient money market encourages the development of non-bank

intermediaries thus increasing the competition for funds. Savers get a wide array
of savings instruments to choose from and invest their savings.

A liquid money market provides an effective source of long term finance to

borrowers. Large borrowers can lower the cost of raising funds and manage
short term funding or surplus efficiently.

A liquid and vibrant money market is necessary for the development of a capital
market, foreign exchange market, and market in derivative instruments. The
money market supports the long term debt market by increasing the liquidity of
securities. The existence of an efficient money market is a precondition for the
development of a government securities market and a forward foreign exchange
market.

Trading in forwards, swaps, and futures is also supported by a liquid money

market as the certainty of prompt cash settlement is essential for such
transactions. The government can achieve better pricing on its debt as it provides
access to a wide range of buyers. It facilitates the government market borrowing.

Monetary control through indirect methods (repos and open market operations) is
more effective if the money market is liquid. In such a market response to the
central bank’s policy actions are both faster and less subject to distortion.

30
The average turnover of the money market in India is over Rs 40,000 crore daily.
This is more than 3 per cent of the total money supply in the Indian economy and
6 percent of the total funds that commercial banks have let out to the system.
This implies that 2 per cent of the annual GDP of India gets traded in the money
market in just one day. Even though the money market is many times larger than
the capital market, it is not even a fraction of the daily trading in developed
markets.

Postal Services in India

India possesses the largest postal network in the world with 155,000 post offices
spread all over the country as on March 31, 2001, of which 89 per cent are in the
rural sector. Post offices in India play a vital role in the rural areas. They connect
these rural areas with the rest of the country and also provide banking facilities in
the absence of banks in the rural areas. Post Offices offer various types of
accounts. These are:

• Savings Account
• Recurring Deposit Account
• Monthly Income Account
• Time Deposit Account

Post Offices also offer various saving and tax saving instruments such as:

• National Savings Certificate

• Public Provident Fund
• Kisan Vikas Patra

National Savings Certificate

31
National Saving Certificate of NSC is another popular and safe investment
option. Maturity period of NSC is 6 years compared to 16 in PPF.

National Savings Certificate, popularly known as NSC, is a time-tested tax saving

instrument that combines adequate returns with high safety.

National Savings Certificate can be purchased by the following:

• An adult in his own name or on behalf of a minor,

• A minor,
• A trust
• Two adults jointly,
• Hindu Undivided Family

National Savings Certificates are available in the denominations of Rs. 100, Rs

500, Rs. 1000, Rs. 5000, & Rs. 10,000. There is no maximum limit on the
purchase of the certificates.

Period of maturity of a certificate is six years. Presently, maturity value of a

certificate of Rs. 100 denomination is Rs. 160.10. Maturity value of a certificate of
any other denomination is at proportionate rate. Premature encashment of the
certificate is not permissible except at a discount in the case of death of the
holder(s), forfeiture by a pledge and when ordered by a court of law.

Interest accrued on the certificates every year is liable to income tax but deemed
to have been reinvested. Income Tax rebate is available on the amount invested
and interest accruing under Section 88 of Income Tax Act, as amended from time
to time. Income tax relief is also available on the interest earned as per limits
fixed vide section 80L of Income Tax, as amended from time to time.

Denominations and Limit

32
National Savings Certificates are available in the denominations of Rs. 100 Rs
500, Rs. 1000, Rs. 5000, & Rs. 10,000. There is no maximum limit on the
purchase of the certificates. So it is for you to decide how much you want to put
in the NSCs. This is of course a huge benefit for you can decide as much as your
budget allows.

Maturity
Period of maturity of a certificate is six years. Presently interest paid is 8 % per
annum half yearly compounded. Maturity value of a certificate of any other
denomination is at proportionate rate. Premature encashment of the certificate is
not permissible except at a discount in the case of death of the holder(s),
forfeiture by a pledge and when ordered by a court of law.

Tax Benefits

Interest accrued on the certificates every year is liable to income tax but deemed
to have been reinvested. Income Tax rebate is available on the amount invested
and interest accruing under Section 88 of Income Tax Act, as amended from time
to time. Income tax relief is also available on the interest earned as per limits
fixed vide section 80L of Income Tax, as amended from time to time

Public Provident Fund

Public Provident Fund or PPF is a safe investment method in India. Minimum
deposit in a year is Rs500 and maximum is Rs70, 000. Tenure of the deposit is
for 16 years relative long compared to other type of investments. PPF deposits
are eligible for income tax rebate. Loan is available on PPF from the third year
onwards.

Public Provident Fund, popularly known as PPF, is a savings cum tax saving
instrument. It also serves as a retirement planning tool for many of those who do
not have any structured pension plan covering them.

33
Public Provident Fund account can be opened at designated post offices
throughout the country and at designated branches of Public Sector Banks
throughout the country. The account can be opened by an individual in his own
name, on behalf of a minor of whom he is a guardian, or by a Hindu Undivided
Family.

Minimum deposit required in a PPF account is Rs. 500 in a financial year.

Maximum deposit limit is Rs. 70,000 in a financial year. Maximum number of
deposits is twelve in a financial year.

The account matures for closure after 15 years. Account can be continued with
or without subscriptions after maturity for block periods of five years. Premature
withdrawal is permissible every year after completion of 5 years from the end of
the year of opening the account.

Loans from the amount at credit in PPF amount can be taken after completion of
one year from the end of the financial year of opening the account and before
completion of the 5th year.

Interest at the rate notified by the Central Government from time to time, is
calculated and credited to the accounts at the end of each financial year.
Presently, the rate of interest is 8% per annum.

Income Tax rebate is available "on the deposits made", under Section 88 of
Income Tax Act, as amended from time to time. Interest credited every year is
tax-free.

Kisan Vikas Patra

34
Kisan Vikas Patra (KVP) is a saving instrument that provides interest income
similar to bonds. Amount invested in Kisan Vikas Patra doubles on maturity after
8 years & 7 months. Kisan Vikas Patra can be purchased by the following:

• An adult in his own name, or on behalf of a minor,

• A minor,
• A Trust,
• Two adults jointly.

Kisan Vikas Patra are available in the denominations of Rs 100, Rs 500, Rs

1000, Rs 5000, Rs. 10,000 & Rs. 50,000. There is no maximum limit on
purchase of KVPs. Premature encashment of the certificate is not
permissible except at a discount in the case of death of the holder(s),
forfeiture by a pledge and when ordered by a court of law.

No income tax benefit is available under the Kisan Vikas Patra

scheme. However, the deposits are exempt from Tax Deduction at
Source (TDS) at the time of withdrawal.

India has a very organized and well maintained postal network with post offices
in even small villages. Postal Department offers many basic services like
delivering letters, parcels, registers, money orders and advanced services like
instant money order, speed post, express delivery and other services like bill
collection. Recently they revamped the speed post with uniform rate called one
India one rate scheme. Apart from these services they offer many financial
services called Postal Saving Schemes

COMMODITIES
A commodity is a normal physical product used by everyday people during the
course of their lives, or metals that are used in production or as a traditional store
of wealth and a hedge against inflation. For example, these commodities include

35
grains such as wheat, corn and rice or metals such as copper, gold and silver.
The full list of commodity markets is numerous and too detailed. The best way to
trade the commodity markets is by buying and selling futures contracts on local
and international exchanges.
Trading futures is easy, and can be accessed by using the services of any full or
on-line futures brokerage service. Traditionally, there is an expectation when
trading commodity futures of achieving higher returns compared to shares or real
estate, so successful investors can expect much higher returns compared to
more conventional investment products.
The process of trading commodities, as mentioned above, must be facilitated by
the use of trading liquid, exchangeable, and standardized futures contracts, as it
is not practical to trade the physical commodities.
Futures contracts give the investor ease of use and the ability to buy or sell
without delay. A futures contract is used to buy or sell a fixed quantity and quality
of an underlying commodity, at a fixed date and price in the future. Futures
contracts can be broken by simply offsetting the transaction. For example, if you
buy one futures contract to open then you sell one futures contract to close that
market position. The execution method of trading futures contracts is similar to
trading physical shares, but futures contracts have an expiry date and are
deliverable. Futures contracts have an expiry date and need to be occasionally
rolled over from the current contract month to the following contract month. The
reason is because the biggest advantage to trading commodity futures, for the
private investor is the opportunity to legally short-sell these markets. Short-selling
is the ability to sell commodity futures creating an open position in the
expectation to buy-back at a later time to profit from a fall in the market. If you
wish to trade the up-side of commodity futures, then it will simply be a buy-to-
open and sell-to close set of transactions similar to share trading.
The commodity markets will always produce rising of falling trends, and with the
abundance of information and trading opportunities available there is no reason
for any investor to exclusively trade the share market when there is potential
profits from trading commodity futures.

36
The increased use of commodity trading vehicles in investment management has
led practitioners to create investable commodity indices and products that offer
unique performance opportunities for investors in physical commodities. As is
true for stock and bond performance, as well as investment in managed futures
and hedge fund products, commodity-based products have a variety of uses.
Besides being a source of information on cash commodity and futures
commodity market trends, they are used as performance benchmarks for
evaluation of commodity trading advisors and provide a historical track record
useful in developing asset allocation strategies. However, the investor benefits of
commodity or commodity-based products lie primarily in their ability to offer risk
and return trade-offs that cannot be easily replicated through other investment
alternatives. Previous research that direct stock and bond investment offers little
evidence of providing returns consistent with direct commodity investment.
Commodity-based firms may not be exposed to the risk of commodity price
movement. Thus for investors, direct commodity investment may be the principal
means by which one can obtain exposure to commodity price movements.
The commodities that are traded in the market.
• Gold

• Copper

• Silver

• Sugar

• Wheat

• Zeera

• Guar

The commodity trading system functions on a real time basis through online
means. Farmers, exporters, importers, and traders are the main participants in
this market. This article will help the reader to gain overall knowledge on the

37
topic. The commodity trading system operates through online channels. Trading
takes place on a real time basis and is either routed through satellite
communication system or the internet.

Commodity Trading System - Trade Clearing Mechanism

In a commodity market, trade clearing takes place through a registered clearing
house of an exchange. Clearing house helps the system to function smoothly
and properly by guaranteeing:

• timely settlement
• registration of a trade and its consequent follow up
• delivery of the commodity to the concerned buyer and simultaneous
payment to the seller
• settlement of funds in non-delivery cases

Commodity Trading System - Clearing and Settlement

Clearing and settlement of commodities in the commodity trading system
commences only after the end of trading hours on the expiration date of the
contract. Processing of delivery matching considers the following:

• Location of the order

• Available warehouse capacity
• Total quantity of commodities that have already been deposited and given
to dematerialize.

After the completion of the delivery matching process, the following steps are
followed:

• Information on the final outcome of the matching process (amount of

commodities to be delivered or received and amount of unmatched
position) is given to the clearing members of the exchange.

38
 • Unmatched positions (gains or losses) are cash settled.
• Commodity delivery takes place through the following steps:
• The concerned buyer asks its depository participant to deliver the
commodity.
• The depository participant, in turn, forwards this request to the designated
depository.
• Depository forwards this message to the registrar and then to the transfer
agent.
• Transfer agent, in turn, verifies authenticity of the request.
• In case of genuine request, transfer agent passes on the details of
delivery to the warehouse.
• Warehouse then arranges delivery of the concerned commodity to the
designated buyer (only after thorough identification check).

Commodity Trading Strategy

Commodity Trading Strategies are determined by the traders according to

their personal objectives and requirements. There can be many types of
Commodity Trading Strategy, but the most popular of them are the Trend
Following Strategy and the Range Trading Strategy. Commodity Trading
Strategy can be of various types. It totally depends on the traders that which
Commodity Trading Strategy that want to undertake in order to reap the benefit
of the Call Option or Put Option.

But, for determining the optimal Commodity Trading Strategy, every trader is
required to consider the following issues:

• the level of risk tolerance

• the level of comfort with the chosen Option

• the market trends

39
 • important parameters of commodity trading system
• After considering the above mentioned things, traders can develop their
own trading plan and can construct a personal Commodity Trading
Strategy, according to his requirements. But, here, we will discuss the two
most popular Commodity Trading Strategies-

• Trend Following
• Range Trading

Advantages

Leverage

Commodity futures operate on margin, meaning that to take a position only a

fraction of the total value needs to be available in cash in the trading account.

Commission Costs

It is a lot cheaper to buy/sell one futures contract than to buy/sell the underlying
instrument. For example, one full size S&P500 contract is currently worth in
excess off $250,000 and could be bought/sold for as little as $20. The expense of
buying/selling $250,000 could be $2,500+.

Liquidity

The involvement of speculators means that futures contracts are reasonably

liquid. However, how liquid depends on the actual contract being traded.
Electronically traded contracts, such as the e-minis tend to be the most liquid
whereas the pit traded commodities like corn, orange juice etc are not so readily

40
available to the retail trader and are more expensive to trade in terms of
commission and spread.

Ability to go short

Futures contracts can be sold as easily as they are bought enabling a speculator
to profit from falling markets as well as rising ones. There is no uptick rule for
example like there is with stocks.

No Time Decay

Options suffer from time decay because the closer they come to expiry the less
time there is for the option to come into the money. Commodity futures do not
suffer from this as they are not anticipating a particular strike price at expiry.

Disadvantages

Leverage

Can be a double edged sword. Low margin requirements can encourage poor
money management, leading to excessive risk taking. Not only are profits
enhanced but so are losses!

Speed of trading

Traditionally commodities are pit traded and in order to trade a speculator would
need to contact a broker by telephone to place the order who then transmits that
order to the pit to be executed. Once the trade is filled the pit trader informs the
broker who then then informs his client. This can take some take and the risk of
slippage occurring can be high. Online futures trading can help to reduce this
time by providing the client with a direct link to an electronic exchange.

41