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A

STUDY ON ONLINE TRADING in SHAREKHAN LIMITED

A SUMMER INTERNSHIP PROJECT ON

A STUDY ON ONLINE TRADING


FOR THE PARTIAL FULFILLMENT OF POST-GRADUATION DEGREE IN

MASTER OF BUSINESS ADMINSTRATION


INTERNSHIP DONE AT

SHAREKHAN LIMITED
UNDER THE ESTEEMED GUIDENCE OF (FACULTY, AGBS HYDERABAD)

PROF. RAVI KUMAR

MITHUN KUMAR PATNAIK ROLL NO: A30601909082

SUBMITTED BY

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

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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DECLARATION

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

MITHUN KUMAR PATNAIK A30601909082

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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certificate
a bonafide work done by Mr. MITHUN KUMAR PATNAIK, bearing ID for the award of the degree of MASTER OF BUSINESS SCHOOL, Hyderabad and submitted the same in the partial fulfilment under my guidance from 1st June 2010 to 15th July 2010. ADMINISTRATION has done his Summer Internship Program I found him to be good in the task and activities assigned to ONLINE TARDING carried at SHAREKHAN LIMITED Hyderabad is This is to certify that the project report entitled A STUDY ON
(whom so ever it may concern)

No. A30601909082 a student of AMITY GLOBAL BUSINESS

him. I wish his success in all future endeavours.


(FACULTY GUIDE)

(INDUSTRY GUIDE)

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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A STUDY ON ONLINE TRADING in SHAREKHAN LIMITED I would like to express word of thanks to all those who have provided me with

learning atmosphere at ShareKhan Limited.

sincere advice and information during the course of my training period. It was

ACKNOWLEDGEMENT

indeed a great pleasure for me to work in a very co-operative, enthusiastic and I would like to take this opportunity to thank Dr. Prasad Rao (Director AGBS

guidance and support throughout the project. He has been a great source of motivation to me.

Guide-AMI TY GLOBAL BUSI NESS SCHOOL, Hyder abad) for his unstinting

for their help and support during the project.

firm and all my faculty members, senior officials and colleagues at Share Khan I would also like to express my sincere thanks to prof. Ravi Kumar ( Facult y

B yd ness School o. u vi kha e a a opp( rt rp t r f t r r oing a pro e m in c obal Husierabad) and fDrSgireng mT hnkur ocounioy aoe delati ons), jAct ityaGlorporate

course of my project. The interaction with him has provided me with the perform better in future.

Share khan and for helping me and providing me with right direction during the knowledge which will definitely help me to enrich my career and help me to

Territory Manager, Share Khan and Mr.Shyam Sundar, Marketing Manager,

I would also like to extend my regards to my company guides Mr.K.P.Singh

success and a good source of learning and information.

With all the heartiest thanks; I hope my final project report will be a great

MITHUN KUMAR PATNAIK

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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CHAPTER CHAPTER -1

CHAPTER-2 CHAPTER-3

CHAPTER-4 CHAPTER-5

CHAPTER-6 CHAPTER-7 CHAPTER-8 CHAPTER-9 CHAPTER-10 CHAPTER-11 CHAPTER-12 CHAPTER-13

INDEX PARTICULARSPAGE NUMBER OBJECTIVES AND1 METHODOLOGY OF STUDY INDUSTRY3 ANALYSIS ELECTRONIC16 SETTLEMENT OF TRADE DEFINATIONS AND28 EXPLANATIONS OUTCRY SYSTEM37 AND ONLINE TRADING SYSTEM COMPANY59 PROFILE ONLINE TRADING66 AT SHAREKHAN COMPARITIVE82 ANALYSIS QUESTIONNAIRES93 AND ANALYSIS CASE STUDY114 ARTICLE119 PROJECT122 ANALYSIS BIBILIOGRAPHY127

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EXECUTIVE SUMMARY
As per the title suggest the project report has been prepared regarding the growth and development of online trading in India. Online trading was initiated by NSE in India and soon after the other exchanges also followed it. There was a major boom in yr. 2000 when lots of online trading companies came with a bang but only few were survived because of lack of computer knowledge and low internet penetration. There are two types of online trading companies one is the banking online trading companies and the other is non-banking trading. A few examples of banking online trading companies are HDFC securities, ICICI direct.com, UTI securities etc. On the other hand non banking trading companies are sharekhan.com, Angel Broking, Reliance Money etc. Today online trading contributes are about 8-10%. It is continuously growing and has a huge market potential. A study was undertaken to determine the growth of various online trading companies in India in terms of trade done by them through online and services provided by them.

Major findings indicates that out of a survey of 50 respondents it was seen that major investors prefer online trading because of few major factors such as time saving convenience, protection through Freudian brokers etc. although during my research project Ive seen that most of the respondents feel online trading, a secure way of investing into stock market still a few of them feel it unsafe and a bit complicated but they posses information about online trading. Today the online trading companies having cut-throat competition in our offering whose brokerage discounts lower margin money and zero balance account. Due to the rising education awareness and use of internet there is a huge potential for online trading in future and companies must come up with innovative offerings to capture the untapped market.

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CHAPTER I OBJECTIVES AND METHODOLOGY OF STUDY

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CHAPTER-1
OBJECTIVES OF THE STUDY: It is to analyze the changes in trading after the exchange shifted from outcry to online trading system. It is to study the functions of SHAREKHAN through various departments. To know the online screen based trading system adopted by SHAREKHAN and about its communication facilities. The appropriate configuration to set the network, which would link the SHAREKHAN to individual / members. To know about the latest and future development in the stock exchange trading system. METHODOLOGY OF THE STUDY: The data collection methods include both primary and secondary collection methods.

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

Secondary method: The secondary data collection method includes: The lecturers delivered by the superintendents of respective departments. The brochures and material provided by Sharekhan Securities limited and Data collected through distribution of questionnaires from a sample. The data collected from the magazines of the NSE, economic times, and etc., various books relating to the investments, capital market and other related topics. AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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NEED FOR THE STUDY: The present study to review the online trading procedure a case study of ONLINE TRADING at SHAREKHAN., as the exchange has changed its trading from the outcry mode to online trading on 20th February 1997, there is need to assess the performance of the capital market. LIMITATIONS OF THE STUDY: The study is confined to online trading procedure only. Problems of listing are not covered due to limited time and to keep the study in manageable limits. SAM PLE SIZE: Questionnaire 1: sample size 30 Questionnaire 2: sample size 50 TIME LINE: Project started on 1st June 2010 and concluded on 15th July 2010.

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CHAPTER 2 INDUSTRY ANALYSIS


FINANCIAL SYSTEM DIFFERENT TYPES OF MARKETS STOCK EXCHANGES SEBI FRAMEWORK

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CHAPTER-2
Following diagram gives the structure of Indian financial system:

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FINANCIAL MARKET:

Financial markets are helpful to provide liquidity in the system and for smooth functioning of the system. These markets are the centers that provide facilities for buying and selling of financial claims and services. The financial markets match the demands of investment with the supply of capital from various sources. According to functional basis financial markets are classified into two types. They are: Money markets (short-term) Capital markets (long-term) According to institutional basis again classified in to two types. They are Organized financial market Non-organized financial market.

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

MONEY MARKET:

Money market is a place where we can raise short-term capital. Again the money market is classified in to Inter bank call money market Bill market and Bank loan market Etc. E.g.; treasury bills, commercial papers, CD's etc. AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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CAPITAL MARKET:

The capital market is the market for securities, where companies and the government can raise long term funds. The capital market includes the stock market and the bond market. Financial regulators ensure that investors are protected against fraud. The capital markets consist of the primary market, where new issues are distributed to investors, and the secondary market, where existing securities are traded. Capital market thus plays a vital role in channelizing the savings of individuals for Investment in the economic development of the country. As a result the investors are not constrained by their individual abilities, but by the abilities of the companies, which in turn enhance the savings and investments in the country, liquidity of capital market is an important factor affecting growth. Since projects require long term finance, but on the other hand, the investor may not like to relinquish control over their savings for a long time. A liquid stock market ensures a quick exit without incurring heavy losses or costs. Thus development of efficient market system is necessary for creating conductive climate for investment and economic growth.

Capital market is a place where we can raise long-term capital. Again the capital market is classified in to two types and they are Primary market and Secondary market. E.g.: Shares, Debentures, and Loans etc.

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PRIMARY MARKET:
Primary market is generally referred to the market of new issues or market for mobilization of resources by the companies and government undertakings, for new projects as also for expansion, modernization, addition, and diversification and up gradation. Primary market is also referred to as New Issue Market. Primary market operations include new issues of shares by new and existing companies, further and right issues to existing shareholders, public offers, and issue of debt instruments such as debentures, bonds, etc. The primary market is regulated by the Securities and Exchange Board of India (SEBI a government regulated authority). Function: The main services of the primary market are origination, underwriting, and distribution. Origination deals with the origin of the new issue. Underwriting contract make the shares predictable and remove the element of uncertainty in the subscription. Distribution refers to the sale of securities to the investors. The following are the market intermediaries associated with the market: 1. Merchant banker/book building lead manager 2. Registrar and transfer agent 3. Underwriter/broker to the issue 4. Adviser to the issue 5. Banker to the issue 6. Depository 7. Depository participant

Investors protection in the primary market:

To ensure healthy growth of primary market, the investing public should be protected. The term investor protection has a wider meaning in the primary market. The principal ingredients of investors protection are: AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD Provision of all the relevant information

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Provision of accurate information and Transparent allotment procedures without any bias.

SECONDARY MARKET
The primary market deals with the new issues of securities. Outstanding securities are traded in the secondary market, which is commonly known as stock market or stock exchange. The secondary market is a market where scrips are traded. It is a market place which provides liquidity to the scrips issued in the primary market. Thus, the growth of secondary market depends on the primary market. More the number of companies entering the primary market, the greater are the volume of trade at the secondary market. Trading activities in the secondary market are done through the recognized stock exchanges which are 23 in number including Over the Counter Exchange of India (OTCE), National Stock Exchange of India and Interconnected Stock Exchange of India.

Secondary market operations involve buying and selling of securities on the stock exchange through its members. The companies hitting the primary market are mandatory to list their shares on one or more stock exchanges in India. Listing of scrips provides liquidity and offers an opportunity to the investors to buy or sell the scrips.

The following are the intermediaries in the secondary market: 1. Broker/member of stock exchange buyers broker and sellers broker 2. Portfolio Manager 3. Investment advisor 4. Share transfer agent 5. Depository AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD 6. Depository participants.

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STOCK MARKETS IN INDIA:


Stock exchanges are the perfect type of market for securities whether of government and semi-govt bodies or other public bodies as also for shares and debentures issued by the joint-stock companies. In the stock market, purchases and sales of shares are affected in conditions of free competition. Government securities are traded outside the trading ring in the form of over the counter sales or purchase. The bargains that are struck in the trading ring by the members of the stock exchanges are at the fairest prices determined by the basic laws of supply and demand. Definition of a stock exchange: Stock exchange means any body or individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. The securities include:

Shares of public company. Government securities. Bo n d s History of Stock Exchanges: The only stock exchanges operating in the 19th century were those of Mumbai setup in 1875 and Ahmadabad set up in 1894. These were organized as voluntary non-profit-marking associations of brokers to regulate and protect their interests. Before the control on securities under the constitution in 1950, it was a state subject and the Bombay securities contracts (control) act of 1925 used to regulate trading in securities. Under this act, the Mumbai stock exchange was recognized in 1927 and Ahmadabad in 1937. During the war boom, a number of stock exchanges were organized. Soon after it became a central AMIA.DGLOBAlL BUSItNntSStSCHOlOor HecuEiRAs reDulation. On the basis of the TY .Gorwa a wen i E o he bil fL, s YD r tie BA g subject, central legislation was proposed and a committee headed by

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committees recommendations and public discussion, the securities contract (regulation) act became law in 1956. Functions of Stock Exchanges: Stock exchanges provide liquidity to the listed companies. By giving quotations to the listed companies, they help trading and raise funds from the market. Over the hundred and twenty years during which the stock exchanges have existed in this country and through their medium, the central and state government have raised crores of rupees by floating public loans. Municipal corporations, trust and local bodies have obtained from the public their financial requirements, and industry, trade and commerce- the backbone of the countrys economy-have secured capital of crores or rupees through the issue of stocks, shares and debentures for financing their day-to-day activities, organizing new ventures an d completing projects of expansion, diversification an d

modernization. By obtaining the listing and trading facilities, public investment is increased and companies were able to raise more funds. The quoted companies with wide public interest have enjoyed some benefits and assets valuation has become easier for tax and other purposes.

Various Stock Exchanges in India: At present there are 23 stock exchanges recognized under the securities contracts (regulation), Act, 1956. Those are: Ahmadabad Stock Exchange Association Ltd. Bangalore Stock Exchange Bhubaneswar Stock Exchange Association Calcutta Stock Exchange Cochin Stock Exchange Ltd. AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD Coimbatore Stock Exchange

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Delhi Stock Exchange Association Guwahati Stock Exchange Ltd Hyderabad Stock Exchange Ltd. Jaipur Stock Exchange Ltd Kanara Stock Exchange Ltd Ludhiana Stock Exchange Association Ltd Madras Stock Exchange Madhya Pradesh Stock Exchange Ltd. Magadh Stock Exchange Limited Meerut Stock Exchange Ltd. Mumbai Stock Exchange National Stock Exchange of India OTC Exchange of India Pune Stock Exchange Ltd. Saurashtra Kutch Stock Exchange Ltd. Uttar Pradesh Stock Exchange Association Vadodara Stock Exchange Ltd.

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MAJOR STOCK EXCHANGES: NSE


The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000 NSE's mission is setting the agenda for change in the securities markets in India. The NSE was set-up with the main objectives of: Establishing a nation-wide trading facility for equities and debt instruments. Ensuring equal access to investors all over the country through an appropriate communication network. Providing a fair, efficient and transparent securities market to investors using electronic trading systems. Enabling shorter settlement cycles and book entry settlements systems, and Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology, have become industry benchmarks and are being emulated by other market participants. NSE is more than a mere market facilitator. It's that force which is guiding the industry towards new horizons and greater opportunities.

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BSE
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons (AOP) and is currently engaged in the process of converting itself into demutualised and corporate entity. It has evolved over the years into its present status as the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts (Regulation) Act 1956.The Exchange, while providing an efficient and transparent market for trading in securities, debt and derivatives upholds the interests of the investors and ensures redresses of their grievances whether against the companies or its own member-brokers. It also strives to educate and enlighten the investors by conducting investor education programmers and making available to them necessary informative inputs. A Governing Board having 20 directors is the apex body, which decides the policies and regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the broking community (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer. The Executive Director as the Chief Executive Officer is responsible for the dayto-day administration of the Exchange and the Chief Operating Officer and other Heads of Department assist him. The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to constitution of the Executive Committee of the Exchange. Accordingly, an Executive Committee, consisting of three elected directors, three SEBI nominees or public representatives, Executive Director & CEO and Chief Operating Officer AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD has been constituted. The Committee considers judicial & quasi matters in which

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the Governing Board has powers as an Appellate Authority, matters regarding annulment of transactions, admission, continuance and suspension of memberbrokers, declaration of a member-broker as defaulter, norms, procedures and other matters relating to arbitration, fees, deposits, margins and other monies payable by the member-brokers to the Exchange, etc. REGULATORY FRAME WORK OF STOCK EXCHANGE

A comprehensive legal framework was provided by the Securities Contract Regulation Act, 1956 and Securities Exchange Board of India 1952. Three tier regulatory structure comprising Ministry of finance The Securities And Exchange Board of India Governing body

MEMBERS OF THE STOCK EXCHANGE:

The securities contract regulation act 1956 has provided uniform regulation for the admission of members in the stock exchanges. The qualifications for becoming a member of a recognized stock exchange are given below: The minimum age prescribed for the members is 21 years. He should be an Indian citizen. He should be neither a bankrupt nor compound with the creditors. He should not be convicted for fraud or dishonesty. He should not be engaged in any other business connected with a company. He should not be a defaulter of any other stock exchange. The minimum required education is a pass in 12th standard examination.

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SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)


The securities and exchange board of India was constituted in 1988 under a resolution of government of India. It was later made statutory body by the SEBI act 1992.according to this act, the SEBI shall constitute of a chairman and four other members appointed by the central government. With the coming into effect of the securities and exchange board of India act, 1992 some of the powers and functions exercised by the central government, in respect of the regulation of stock exchange were transferred to the SEBI. OBJECTIVES AND FUNCTIONS OF SEBI To protect the interest of investors in securities. Regulating the business in stock exchanges and any other securities market. Registering and regulating the working of intermediaries associated with securities market as well as working of mutual funds. Promoting and regulating self-regulatory organizations. Prohibiting insider trading in securities. Regulating substantial acquisition of shares and take over of companies. Performing such functions and exercising such powers under the provisions of capital issues (control) act, 1947and the securities to it by the central government. SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK EXCHANGES): Board of Directors of Stock Exchange has to be reconstituted so as to include non-members, public representatives and government representatives to the extent of 50% of total number of members. Capital adequacy norms have been laid down for the members of various stock exchanges depending upon their turnover of trade and other factors. All recognized stock exchanges will have to inform about transactions within AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD 24 hrs.

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CHAPTER-3 ELECTRONIC SETTLEMENT OF TRADE

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CHAPTER-3
ELECTRONIC SETTLEMENT OF TRADE

A. Procedure for purchasing dematerialized Securities:The procedure for purchasing dematerialized securities is also similar to the procedure for buying physical securities. 1. Investor instructs DP to receive credits into his account in the prescribed form. There may be one time standing instruction or separate instruction each time to receive credits. 2. Investor purchases securities in any of the stock exchanges linked to depository through a broker. 3. Broker receives payment from investor and arranges payment to clearing corporation. 4. Broker receives credit to securities in clearing account on the payout day. 5. Broker gives instructions to DP to debit clearing account and credit clients account. Investor receives shares into his account by way of book entry.

B. Procedure of selling dematerialized securities The procedure for selling dematerialized securities in stock exchanges is similar as selling physical securities. The only major difference is that instead of delivering physical securities to the broker, the investor instructs his DP to debit his demat account with the number of securities sold by him and credit the brokers clearing account. The procedure for selling dematerialized securities is given below: 1. Investor sells securities in any of the stock exchange linked to depository through a broker. 2. Investor instructs his DP to debit his demat account with the number AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD of securities sold and credit the brokers clearing account.

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3. Before the pay-in-day, broker of the investor transfers the securities to clearing corporation. 4. The broker receives payment from the stock exchange. 5. The investor receives payment from the broker for sale of securities in the same manner as received in case of sale of physical securities.

REMATERILISATION OF SHARES Rematerialization is the process of conversion of electronic holdings of securities into physical certificate form. For rematerilisation of scrips, the investor has to fill up a demat request form (RRF) and submit it to the DP. The DP forwards the request to depository after verifying the investors balances. Depository in turn initiates the registrars and transfer agent or the issuer company. RTA/ Company print the certificates and dispatch the same to the investor. Market timings: Normal Market / Exercise Market Open time Normal market close Set up cut of time for Position limit/Collateral value Trade modification end time / Exercise Market : 09:00 hours : 15:30 hours : till 15:30 hrs : 16:15 hour

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INTERNET BASED TRADING THROUGH ORDER ROUTING SYSTEMS


Internet based trading on conventional exchanges, uses the Internet as a medium for communicating client orders to the exchange, through broker web sites. Brokers 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 brokers system receives this information.

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USE OF INTERNET AS ALTERNATIVE TRADING SYSTEMS (PROVISION FOR PRICE DISCOVERY AND MATCHING OUTSIDE CONVENTIONAL EXCHANGES)

In foreign jurisdiction, Alternative trading systems have been developing outside conventional securities markets, which provide investors with additional proprietary electronic trading facilities for securities that are traded principally on securities exchanges, or other organized markets. They have price discovery functions, matching systems and crossing systems. The systems that are currently in use in outside jurisdictions are closed systems and are not accessible to the general public through the Internet. The securities markets regulators abroad the maintained flexible and open policies designed to encourage innovation in the secondary securities markets. As a result, a number of market participants, usually brokerdealers, 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 AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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INVESTMENT ADVISORY SERVICES

Brokers as well as other service provides such as investment firms, research outfits etc. are using the Internet for marketing and advertising purposes, for presenting information on portfolio analysis and market information, and for communicating with and receiving orders from potential investors. The services offered by the service providers to the investors are generally the following: Advertising Providing investment information and investment advice; Underwriting Communicating with the investors; Customer orders; and Record keeping

WORKING GROUPS SET UP BY THE COMMITTEE

Considering the present state of capital markets in India and keeping in view the ongoing developments in Internet based securities business, it was felt that SEBI as a regulator could strive to identify areas where use of Internet in the capital market is possible within the existing legal framework. One such area identified by the Committee, which is also the central within the existing legal framework. One such area identified by the Committee, which is also the central theme of this report, is the area of Internet trading on existing electronic exchange. In this area, through early introduction of Cyber Laws would be highly describe but their existence is not a necessary precondition. To look into the existing regulatory scenario and to bring out some ground rules for use of the medium of Internet, the Committee therefore constituted the following two working groups to look into the area of: i. Security protocols and standardization of interfaces for Interest based securities trading, chaired by Prof. Deepak B. Phatak, IIT, Pawai, Mumbai se L r ti SI t E di g, c OO e by Shri. BA S AMITY GLOBAcuBiUesNraSSnSCHhairL,dHYDERAL.K.D inghvi, Sr. ED, SEBI ii. Surveillance and monitoring related issues arising due to Interest based

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

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RECOMMENDATIONS OF THE COMMITTEE

Application for Permission by Brokers

SEBI registered Stock Brokers interested in providing Internet based trading services will be required to apply to the respective stock exchange for a formal permission. The stock exchange should grant approval or reject the application as the case may be, and communicate its decisions to the number within 30 calendar days of the date of completed application submitted to the exchange. The stock Exchange, before giving permission to brokers to start Internet based services shall ensure the fulfillment of the following minimum conditions.

Net worth Requirement

The broker must have a minimum net worth of Rs. 50 lacs if the broker is providing the Internet based facility on his own. However, if some brokers collectively approach a service provider for providing the interest trading facility, net worth, criteria as stipulated by the stock exchange will apply. The net worth will be computed as per the SEBI circular no FITTC/DC/CIR-1/98 dated June 16, 1998.s

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

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System C pacity a The stock Exchange must ensure that the brokers maintain adequate backup systems and data storage capacity. The stock Exchange must also ensure that the workers have adequate system capacity for handling data transfer, and arranged for alternative means of communications in case of Internet link failure.

Qualified Personnel: The stock Exchange must lay down the minimum qualification fro personnel to ensure that the broker has suitably qualified and adequate personnel to handle communication including instructions as well as other back office work which is likely to increase because of higher volumes.

Written Procedures: Stock Exchange must develop uniform written procedures to handle contingency Tuitions and for review of incoming and outgoing electronic correspondence.

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

C ient Broker Relationship l Know Your C ient: l The stock Exchange must ensure that brokers have sufficient, verifiable information about clients, which would facilitate risk evaluation of clients.

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Broker- C ient Agreement: l Brokers must enter into an agreement with clients spelling out all obligations and rights. This agreement should also inter alia, the minimum service standards to be maintained by the broker for such service specified by SEBI/Exchange for the internet based trading from time to time. Exchange will prepare a model agreement for this purpose. The broker agreement with clients should not have

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

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

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

Handling C mplaints by Investors: o 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 AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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that exchanges should also have facility for on-line registration of complaints on their web site.

Risk M anagement: 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.

C ntract Notes: o Contract notes must be issued to clients as per existing regulations, within 24 hours of the trade execution.

C oss Trades: r As a matter of abundant precaution, the committee seeks to reiterate that as III the case of existing system, brokers using Internet based systems for routing client orders will also not be allowed to cross trades of their clients with each other. All orders must be offered to the market for matching. It is emphasized that in addition to the requirements mentioned above, all existing obligations of the broker as per current regulation will continue without changes. Exchanges may also like to specify more stringent standards as they may deem fit for allowing Internet based trading facilities to their brokers.

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

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CHAPTER-4 DEFINITIONS AND EXPLANATIONS

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CHAPTER-4
DEFINITIONS AND EXPLANATIONS 1. SHARES:In everyday language, when we talk of shares we normally refer to equity shares or ordinary shares of a company. The terms shares and stock essentially means the same things, the letter being a more common American usage. An equity share is evidence of ownership in a company. The physical evidence of this ownership of this document is called the Share Certificate. Now days, shares are usually kept in electronic, or dematerialized, form with a depository participant (Banks, brokers, financial institutions) of the National Securities Depository Limited (NSDL). However, if one wants one can still hold the share in the physical form which has your name endorsed on it, and is proved that you are a part owner of the company. Your ownership rights are proportionate to the number of share you own. Companies issue shares of a certain fixed denomination, called face value or par value of that share, which is clearly indicated on a share certificate in the physical form.

2. INVESTM ENT: Investment essentially refers to what you do with your savings in order to preserve them and make them grow or yield an income. If you keep your savings in the form of cash, they are certainly going to diminish in value because the purchasing power of money is constantly going down as a result of inflation. (The value of money is judged by the quantity of goods and services you can buy with it). Therefore, if you want to maintain or increase AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD the value of your savings, you have to keep them in forms other than cash.

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This is what investment is all about, deployment of your saving with the intentions of preserving or increasing their value. This deployment can be done by using your savings to buy land, residential properties, commercial properties, gold, jewelry, works of art, fixed deposits in banks and companies, shares, bonds, infact, anything whose value is likely to either remain constant or appreciate with time. Investment also refers to using one's savings with the intention of earning an income.

3. DEM AT A/ C :On doing an online business ever customer has to open and demat account in any bank whichever he likes. Demat account is the account in which the trading done by the customer is mentioned. If the customer sales or purchases any share the details of this sale and purchasing are in demat account. This account contents the name of the shares and also the number of shares held Or sold and also the rate of the share with this demat account. It is also compulsory for every customer to open a saving account in the bank because the amount which is to be received when the customers sales the shares are transferred from the demat account to the saving account. It is the responsibility of the customers that the share which he purchased or sales are properly transferred in demat account from the stock exchange whichever he deals. The amount of dividend whichever to be received on the shares when held for one or more year are also transferred in this demat account. It is compulsory for every customer to have a PAN no. For opening a demat account. If PAN no. Is not there is no chance for the customer to do any trading on line. There is no limit of amount to deal in this account.

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4. CIRCUIT LIMIT:While issuing the shares to the public the company has to fix a particular limit of the rate of the per share this limit is called as circuit limit. This circuit limit is generally fixed on the percentage basis. This circuit limit is applied to both the ends of the share. That is to the upper limit also and also to the lower limit actually circuit limit is of two types 1) Upper limit 2) Lower limit It is compulsory for every company to fix the circuit limit. This limit is beneficial to both. The customer and also to the company generally every company fix below 10%of the rate of per share.

5. UPPER LIMIT: While issuing the shares to the public the company has to fix the upper limit this limit is also calculated in percentage the limit is also beyond which the rate of the shares cannot exceed nor that the customer doing the trading can sell above the level. For ex. Customer wants to sell a share which is of Rs10 and its upper limit is fixed at 10% so in this case the person will have to sell it at Rs11 or the rate which ever he wants but the person cannot sell it beyond this Rs 11 because by addition of upper limit to the rate of share the maximum amount of the shares is Rs 11 only and not above.

6. LOWER LIMIT: At the time of issuing share the company has to fix the lower limit also. This lower limit is calculated on the basis of the rate of the shares. This limit bears the same percentage, which is mentioned for the upper limit of the share. Like upper limit in this limit also the share minimum rate of the share is fixed the customer who wants to see; the holding shares has to first consider the upper & lower limit of the AkeIthY GpperAiL BtUSIrcEntaSCHeneL, Hy iDERiABmD also the percentage is below li M T e uLOB l mi Pe Ne SS ge gOO rall Y n th s liA it share he cannot sell the share below the lower limit and not above the upper limit

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10% of the face value of the shares the percentage is below 10% of the face value of the shares the percentage of the upper &lower limit is equal to every type of share For ex. Suppose the person wants to sell the shares and the rate of the share is Rs. 10/- and the lower limit percentage is 10% of the rate. So in this case the person cannot sell the share at below Rs. 9/-. He will have to sell at above Rs. 9/- or up to the upper limit of the share.

7. SENSEX:When the shares are issued to the public the stock exchange gives a particular group to the company. For ex. The Reliance Group is given the group A like this there are several companies which fall in A Group. The weightage mean is calculated according to its equity when all the companies of Group A has calculated this weightage mean they are added all together when this addition is done the result which comes down is known as Sensex. The trading of shares of A group is totally depended on this sensex value. The price of the share rises this sensex value also rises and when the price of this share comes down the sensex value also comes down. With the sensex 8. SCRIPTS:The company, which has more than one working area, it has to issue the share separately than that company is the company which has the script of its name. For Ex. The Reliance this company has its several working area Namely Reliance, Capital Reliance, Infocom Reliance Energy, Reliance Industry. So reliance company issues separate share for separate working area but the bold name which is given to the working area is Reliance. So in this case Reliance has its own scripts. Other example Ambuja, Birla, Etc.

9. GROUPS:When the shares are issued by the company they are given the particular group by the Stock exchange according to its demand in the market. There are mainly 7 grMuTY. GLOBAL BUSINESS SCHOOL, HYDERABAD A o I ps

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

10. TYPES OF ORDERS: Buy and sell orders placed with members of the stock exchange by the investors. The orders are of different types.

Limit orders:

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

Best rate order:

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

Discretionary order:

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

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Stop loss order:

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

11. BUYING AND SELLING SHARES:

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

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12. ROLLING SETTLEMENT SYSTEM: SETTLEMENT CYCLE SCHEDULE SR. NO. 1 2 3 4 5 T T +2 T +2 T +3 T +5 D AY DESCRIPTION OF ACTIVITY TRADE Trading Day PAY IN BY 10.30 am. PAY OUT BY 2 pm. Auction of shortage in deliveries Auction pay-in by 10.30 (1 am/ pay Out by 2 pm.)

Under rolling settlement system, the settlement takes place n days (usually 1, 2, 3 or 5days) after the trading day. The shares bought and sold are paid in for n days after the trading day of the particular transaction. Share settlement is likely to be completed much sooner after the transaction than under the fixed settlement system. The rolling settlement system is noted by T+N i.e. the settlement period is n days after the trading day. A rolling period which offers a large number of days negates the advantages of the system. Generally longer settlement periods are shortened gradually. SEBI made RS compulsory for trading in 10 securities selected on the basis of the criteria that they were in compulsory demats list and had daily turnover of about Rs.1 crore or more. Then it was extended to A stocks in Modified Carry Forward Scheme, Automated Lending and Borrowing Mechanism (ALBM) and Borrowing and lending Securities Scheme (BELSS) with effect from Dec 31, 2001. SEBI has introduced T+5 rolling settlement in equity market from July 2001 and subsequently shortened the cycle to T+3 from April 2002. After the T+3 rolling settlement experience it was further reduced to T+2 to reduce the risk in the market and to protect the interest of the investors from 1st April 2003.

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Activities on T+1:

Conformation of the institutional trades by the custodian is sent to the stock exchange by 11.00 am. A provision of an exception window would be available for late confirmation. The time limit and the additional changes for the exception window are dedicated by the exchange. The exchanges/clearing house/ clearing corporation would process and download the obligation files to the brokers terminals late by 1.30 p.m on T+1. Depository participants accept the instructions for pay in securities by investors in physical form up to 4 p.m and in electronic form up to 6 p.m. the depositories accept from other DPs till 8p.m for same day processing.

Activities on T+2:

The depository permits the download of the paying in files of securities and funds till 10.30 am on T+2 from the brokers pool accounts. The depository processes the pay in requests and transfers the consolidated pay in files to clearing House/clearing Corporation by 11.00am/on T+2. The exchange/clearing house/clearing corporation executes the pay-out of securities and funds latest by 1.30 p.m on T+2 to the depositories and clearing banks. In the demat mode net basis settlement is allowed. The buy and sale positions in the same scrip can be settled and net quantity has to be settled.

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CHAPTER-5 OUTCRY SYSTEM AND ONLINE TRADING SYSTEM

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CHAPTER-5 OUTCRY SYSTEM


The broker has to buy or sell securities for which he has received the orders. For this, the broker or his authorized representatives goes to the stock exchange. This method is called the open outcry system. Basically the brokers shout while buying or selling the securities. The floor of the stock exchange is divided into a number of markets also known as post pit or wing based on particular securities dealt there. In the post pit or wing, the broker using open outcry method makes an offer or bid price. For making the necessary bargain, he quotes his purchase or sale price, also known as offer or bid price. The dealer, to whom the price is quoted, quotes his own price when the quotation of the dealer suits the broker, he may loose the bargain. If he is not satisfied with the quote price, he may turn to some other dealer. On the close of the bargain, the dealer as well as the broker makes a brief note of the particulars of the deal. Such notes are made on some pad and on it the number of shares, the price agreed upon, the name of the party, what membership number etc., are noted.

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

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MANUAL TRADING Trading procedure before introduction of online trading Trading on stock exchanges is officially done in the trading ring. In the trading ring the space is provided for specified and non-specified sections, the members and their authorized assistants have to wear a badge or carry with them an identity card given by the exchange to enter the trading ring. They carry a sauda book or confirmation memos, duly authorized by the exchange and carry a pen with them. The stock exchanges operations are floor level are technical in nature .Non-members are not permitted to enter in to stock market. Hence various stages have to be completed in executing a transaction at a stock exchange .The steps involved in this method of trading have given below: Choice of broker: Sell shares and transact business, have to act through member brokers only. They can also appoint their bankers for this purpose as per the present regulations.

Placement of order:

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

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Execution of order or contract: Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30 P.M on all working days Monday to Friday, and a special one-hour session on Saturday. The members or the authorized assistants have to wear a badge given by the exchange to enter into the trading ring. They carry a sauda Block Book or conformation memos, which are duly authorized by the exchange when the deal is struck; both broker and jobber make a note in their sauda block books. From the sauda book, the contract notes are drawn up and posted to the client. A contract note is written agreement between the broker and his clients for the transaction executed. Drawing Up and Bills: Both sale and purchase bills are prepared along with the contract note and it is posted on the same day or the next day. This in a purchase transaction, once the shares are delivered to the client effects payment for the purchases and pays the stamp fees for transfer, a bill is made out giving the total cost of purchase, including other expenses incurred by the broker in the price itself. With this, the process ends. DEMATERLIZATION: Dematerialization is the process by which physical certificates of an investor are converted to an equipment number of securities in electronic from and credited in the investor account with his DP. In order to dematerialize the certificates, an investor has to first open an account with a DP and then request for the Dematerialization Request Form, which is DP and submit the same along with the share certificates. The investor has to ensure that he marks Submitted for Dematerialization on the certificates before the shares are handed over to the DP for demat. Dematerialization can only be done to those certificates, which are already registered in your name and belong to the list of securities admitted AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD for Dematerialization at NSDL.

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Most of the active scrips in the market including all the scrips of S&P CNX NIFTY and BSE SENSEX have already joined NSDL. This list is steadily increasing. Briefly, the process is as follows: after completion of transfer, the investor gets the option to dematerialize such shares. Investors willing to exercise this option sends a Demat request along with the option letter sent by the company to his DP. The company or its R&T agent would confirm the Demat request on its receipt from the DP to reduce risk of loss in transit. Dematerialized shares do not have any distinctive or certificate numbers. These shares are fungible-which means that 100 shares of a security are the same as any other 100 shares of the security. Odd lot shares certificates can also be dematerialized. Dematerialization normally takes about fifteen to thirty days. To get back dematerialized securities in the physical form, request DP for Rematerialization of the same is made. Rematerialization is the process of converting electronic shares in to physical shares.

BENEFITS OF DEMAT:

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

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

ONLINE TRADING

Before getting in to the online trading we should know some things about the internet, e-commerce and etc. 1. What is Internet? Internet is a worldwide, self-governed network connecting several other smaller networks and millions of computers and persons, to mega sources of information. This technology shrinks vast distances, accelerating the pace of business reforms and revolutionizing the way companies are managed. It allows direct, ubiquitous links to anyone anywhere and anytime to build up interactive relationships. A combination of time and space, called the Internet promises to bring unprecedented changes in our lives and business. Internet or net is an interconnection of computer communication networks spanning the entire globe, crossing all geographical boundaries. It has re-defined the methods of communication, work study, education, business, leisure, health, trade, banking, commerce and what not it is virtually changing every thing and we are living in dot.com age. Net being an interactive two way medium, through various websites, enables participation by individuals in business to business and business to consumer commerce, visit to shopping arcades, games, etc. in cyber space even the information can be copied, downloaded and retransmitted. The use of Internet has grown 2000 percent in last decade and is currently growing at 10 percent per month. In India, growth of Internet is of recent times. It is expected to bring changes in every functional area of business activity AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD including management and financial services. It offers stock trading at a lower

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cost. Internet can change the nature and capacity of stock broking business in India.

2. E-commerce Electronic commerce is associated with buying and selling over computer communication networks. It helps conduct traditional commerce through new way of transferring and processing of information. Information is electronically transferred from computer to computer in an automated way. E-commerce refers to the paperless exchange of business information using electronic data inter change, electronic technologies. It not only reduces manual processes and paper transactions but also helps organization move to a fully electronic environment and change the way they operated.

PCs and networking attempts to introduce banks of the tools and technologies required for electronic commerce. The computers are either workstations of individual office works or serves where large databases and information reside. Network connects both categories of computers; the various operating systems are the most basis program within a computer. It manages the resources of the computer system in a fair and efficient manner. Now we can enter in to the concept known as online trading. In the past, investors had no option but to contact their broker to get real time access to market data. The net brings data to the investor on-line and net broking enables him to trade on a click of mouse. Now information has become easily accessible to both retail as well as big investor.

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MEANING OF ONLINE TRADING

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

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There are, of course, additional risks relative to performing transactions over the Internet especially on a shared computer. Those people whom investors have provided their account number and password can freely trade that account while the investor will have little, if any, resource against the brokerage firm for the breach of security.

WHY ONLINE TRADING ENTERED LATE IN INDIA?

The Indian exchanges and brokering houses have been very slow in moving their transactions online and the major reason has been the lot government regulations. The initial delay was due to laying down the specifications for creating Closed User Groups (CUGs). This issue was resolved between the Department of Telecommunications (DoT) and the Finance Ministry around 1998 and after that soon came the online trading portals like IL&FS invests mart, ICICIDirect.com, motilaloswal.com, sharekhan.com etc. Connectivity related issue was perhaps the most important technological factor.RBI made regulation that it is mandatory for company to store at least 7 year financial and transactional data. In the non-stop, 24 hours a day, seven days a week world of investing, we are able to Obtain investment news around the clock Check quotes on exchanges all over the world day or night Easily compare one investment to another via numerous ratios, charts, graphs, and tables Screen for the best investments to fit our individual goals and requirements Trade stocks as easily and quickly as professional traders Calculate retirement needs based on various scenarios Regularly monitor portfolios and make necessary changes quickly and almost effortlessly Control the routing of individual trades for the best possible price and execution remain l U g NE nt nge O of HYDERA inve AMITY GLOBALaBarSIe coSS iSCHntOL,i ndividual BADstors who still pick up the phone Even many years after the launch of the first online brokerage firm, there

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and call their stock broker to buy and sell investments. However, every year a growing number of investors are placing their trades using online brokers.

EVOLUTION OF BROKING IN INDIA:

The evolution of a broking in India can be categorized in three phases Stockbrokers will offer on their sites features such as live portfolio manager, live quotes, market research and news, etc. to attract more investors. Brokers will offer online broking and relationship management by providing and offering analysis and information to investors during broking and non-broking hours based on their profile and needs, i.e. customized services. Brokers (now e-brokers) will offer value management or services like initial public offering online, on-line asset allocation, portfolio management, financial planning, tax planning, insurance services, etc. and enables the investors to take better and well considered decisions. The actual definition of Online Trading is as explained below: Online trading is a service offered on the internet for purchase and sale of shares. In the real world you place orders on your stockbroker either verbally (personally or telephonically) or in a written form (fax). In online trading, you will access a stockbrokers website through your internet enabled PC and place orders through the brokers internet based trading engine. These orders are routed to the stock exchange without manual intervention and executed thereon in a matter of a few seconds. The net is used as a mode of trading in internet trading. Orders are communicated to the stock exchange through website.

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

ONLINE TRADING BY NSE & BSE

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

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Provide management information system, Introduce flexibility in system, so as to handle growing volumes easily and to support nationwide expansion of market activity.

Besides, through internet trading three fundamental objectives of securities regulation can be easily achieved, these are: Investor protection Creation of a fair and efficient market, and Reduction of the systematic risks. Some of the brokers offering net trading include ICICI direct, kotakstreet, etc.

REQUIREMENTS FOR NET TRADING: For investors:


1. Installation of a computer with required specification 2. Installation of a modem 3. Telephone connection 4. Registration for on-line trading with broker 5. A bank account 6. Depository account 7. Compliance with SEBI guidelines for net trading

The following should be produced to get a demat account and online trading account: As identity proof & address proof any one of the following: Voter ID card Driving license PAN card( in case of to trade more than 50000) Ration card Ba n k p a s s b o o k Telephone bill

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Other requirements, which are necessary First page of the bank pass book and last 6 months statement. Bank managers signature along with banks seal, manager registration code on photograph.

For stock brokers:


1. Permission from stock exchange for net trading 2. Net worth of Rs. 50 lac 3. Adequate back-up system 4. Secured and reliable software system 5. Adequate, experienced and trained staff 6. Communication of order (trade confirmation to investor by e-mail) 7. Use of authentication technologies 8. Issue of contract notes within 24 hours of the trade execution 9. Setting up a website. The net is used as a medium of trading in internet trading. Orders are communicated to the stock exchange through website. Internet trading started in India on 1st April 2000 with 79 members seeking permission for online trading. The SEBI committees on internet based securities trading services has allowed the net to be used as an Order Routing System (ORS) through registered stock brokers on behalf of their clients for execution of transaction. Under the Order Routing System the client enters his requirements (security, quantity, price, and buy/sell) in broker's site. They are checked electronically against the clients account and routed electronically to the appropriate exchange for execution by the broker. The client receives a confirmation on execution of the order. The customer's portfolio and ledger accounts get updated to reflect the transaction. The user should have the user id and password to enter into the electronic ring. He should also have demat account and bank account. The Order can be placed using place order window of the website. AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD system permits only a registered client to log in using user id and password.

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PROCEDURE FOR NET TRADING


Step 1: Those investors, who are interested in doing the trading over internet system i.e. NEAT-IXS, should approach the brokers and get them self registered with the Stock Broker. Step 2: After registration, the broker will provide to them a Login name, Password and personal identification number (PIN). Step 3: Actual placement of an order. An order can then be placed by using the place order window as under: (a) First by entering the symbol and series of stock and other parameters like quantity and price of the scrip on the place order window. (b) Second, fill in the symbol, series and the default quantity. Step 4: It is the process of review. Thus, the investor has to review the order placed by clicking the review option. He may also re-set to clear the values. Step 5: After the review has been satisfactory, the order has to be sent by clicking on the send option. Step 6: The investor will receive an "Order Confirmation" message along with the order number and the value of the order. Step 7: In case the order is rejected by the Broker or the Stock Exchange for certain reasons such as invalid price limit, an appropriate message will appear at the bottom of the screen. At present, a time lag of about 10 seconds is there in executing the trade. Step 8: It is regarding charging payment, for which there are different mode. Some brokers will take some advance payment from the investor and will fix their trading limits. When the trade is executed, the broker will ask the investor for transfer of funds to his account. Internet trading provides total transparency between a broker and an investor in the secondary market. In the open outcry system, only the broker knew the actually transacted price. Screen based trading provides more AMIwY iGh OBAL BlUSINs SS Se.HOOL, HYDERABAD T h c L the dea takeE placC transparency. With online trading investors can see themselves the price at

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The time gap has narrowed in every stage of operation. Confirmation and execution of trade reaches the investor within the least possible time, mostly within 30 seconds. Instant feedback is available about the execution. Some of the websites also offer; News and research report BSE and NSE movements Stock analysis IPO and mutual fund centers

STEP BY STEP PROCEDURE IN ONLINE TRADING:


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

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ONLINE TRADING HAS LEAD TO ADDITIONAL FEATURES SUCH AS:

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

ADVANTAGES OF ONLINE TRADING:


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

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FEATURES OF ONLINE TRADING:

The Online Trading is having many features which make it most suitable for the investors to go for. Some of these features are as follows:

Freedom of information The Internet can provide a new sense of control over your financial future. The amount of investment information available online is truly astounding. It's one of the best aspects of being a wired investor. For the first time in history, any individual with an Internet connection can: Know the price of any stock at any time 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 AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD available. Also due to the high level of transparency with regard to display of

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information relating to the specific stocks and company profiles, you will be able to get the best quote for your orders.

Online trading offers you greater transparency by providing you with an audit trail. This involves a complete integrated electronic chain starting from order placement, to clearing and settlement and finally ending with a credit into your depository account. All these stages are subject to inspection, thus bringing in transparency into the system.

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

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

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

This method of trading reduces the settlement risk for the investor, as in this case all short sell orders are squared off at the specified cut-off time and not allowed to be carried forward. In the case of a demat account your demat account is checked by us before executing your sell transaction. This reduces the settlement risk for the buyer, who is assured of the delivery of the securities and for you as a seller of the securities

Every trade is confirmed immediately and you will receive an on-screen avoB s costly N r S s t CH wou H hDE been d AMITY GLOidAL BUSIerEorS ShatOOL,ld YaveRABAD iscovered when it is too late. confirmation following every trade with full details for your records. This

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Your Bank, Depository and online account are integrated for your convenience. Various broking houses provide access to many of the popular b a n ks .

INVESTORS REASONS TO TRADE ONLINE:


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

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BENEFITS OF ON LINE BROKING

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

2) Peace of Mind: One can never have complete peace of mind but online investing does away with the hassles of filling up instruction slips, visits to the broker for handing over these slips and consequent costs.

3) Keeping Records: The site one trades on keeps a record of all transactions down to unexecuted orders and cancelled orders thus keeping one abreast of all your transactions 24 hours a day. No paperwork means more time at ones 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 b Mom GLOB il L le o h ES when OO r H l k E from D AecITYi ng avaAabBUtSINim S SCHeveL,heYiDe RABAhis trading account. Conversely in free. Most partner banks offer Internet banking as well. This results in ones money

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case he spots an opportunity in the market he can immediately allocate money from his savings account to his trading account and make profits.

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

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

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

9.) Ease of trade: It is the ease of doing the trade through net, with a click of mouse; one can buy or sell any share that is dematerialized. Other than the above-mentioned advantages, Internet trading provides some channe ize t BAL s US ces N S trading HYDd incr AD AMITY lGLOhe reBourINE.SSetCHOOL, woulERABease competition in the market additional advantages to the investors, brokers and also helps the nation to

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hence increase in the bargaining power of the investors. The entire communication between the investor, broker and exchange would take place within milliseconds.

HERE ARE THE POSSIBLE DISADVANTAGES:

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

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CHAPTER 6 COMPANY PROFILE

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CHAPTER 6 COMPANY PROFILE SHAREKHAN


Sharekhan, Indias leading stock broker is the retail arm of SSKI, an organization with over eighty years of experience in the stock market with more than 280 share shops in 120 cities and big towns, and premier online trading destination www.sharekhan.com. Share khan offers the trade execution facilities for cash as well as derivatives, on BSE and NSE, depository services, commodities trading on the MCX(Multi Commodity Exchange of India Ltd) and NCDEX (National Commodity and Derivative Exchange) and most importantly, investment advice tempered by eighty years of broking experience. Share khan provides the facility to trade in commodities through Sharekhan Commodities Pvt.Ltd-a wholly owned subsidiary of its parent SSKI. Sharekhan is the member of two major commodity exchanges MCX and NCDEX.

SSKI

Apart from Sharekhan, the SSKI group also comprises of institutional broking and corporate finance. The institutional broking division caters to domestic and foreign institutional investors, while the corporate finance division focuses on niche areas such as infrastructure, telecom and media. SSKI owns 56% in Sharekhan and the balance ownership is HSBC, First Caryl and Intel Pacific. SSKI has been voted as the top domestic brokerage house in the research category, twice by Euro money survey and four times by Asia money survey. Share khan, Indias leading stockbrokers the real arm of SSKI, an organization with over eight decades of stock market experience. With more AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD than 175 share shops in over 80 cities, and a presence on internet through

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

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COMPANY BACKGROUND:

Share khan is the retail broking arm of SSKI, securities pvt ltd. SSKI owns 56% in share khan, balance ownership is HSBC, first caryle, and Intel pacific Into broking since 80 years Focused on providing equity solutions to every segment Largest ground network of 210 branded share shops in 90 cities

ONLINE ACCOUNT TYPES Commercial Terms and Conditions to open online trading account Account Opening Fees: CLASSIC ACCOUNT:750/-(Life Time opening charges) SPEED TRADE: 1,000/-up with 9 top international banks. (City Bank, HDFC, IDBI, Oriental Bank of Commerce, UTI, Indus Ind Bank, UBI, Yes Bank& ICICI)

Brokerage:
0.10 %( Each leg) + Turnover Tax +Stamp Duty+ Service Tax For each leg of Intra-day trades. 5paise (Each leg) +Turnover Tax +Stamp Duty+ Service Tax For each leg of Intra-day trades. (Minimum brokerage for shares below Rs.50,) 0.50 %( Each leg) + Turnover Tax +Stamp Duty+ Service Tax for trades resulting in delivery. 10paise (Each leg) +Turnover Tax +Stamp Duty+ Service Tax For each leg of Intra-day trades. (Minimum brokerage for shares below Rs.20). A minimum brokerage Rs.18 for delivery trades.

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Exposure: You will be given a Trading account with 25% margin i.e. 4 Times your margin With SHARE KHAN.

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

SPEED TRADE PREPAID A/C: Account Opening Charges: 2000/Brokerage: Delivery - 0.25% Intraday 0.05%

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CLASSIC / WEBSITE FEATURES

Facility to integrate choice of 4 banks / DP / trading account Instant credit for shares sold from DP Automatic pick-up of shares from linked DP for pay-in Automatic deposit of shares into linked DP after pay-out 4 times leverage on margin trades Margin trading available for entire market session Slab wise brokerage structure for delivery and margin trades, shortly Free calls for order placement on toll-free Trusted, professional advice of tele-brokers Facility to enter after market orders online & via phone Daily research newsletter (investor eye) via e-mail Access to new IPO without any paperwork Advanced portfolio monitoring tools Integrated DP account with trading account Option of linking additional 4 DP accounts to trading account Choice of linking 4 banks to trading A/C for online payments Cash and derivatives trading in a single account E-mail confirmations for all transactions Choice of electronic/ physical contracts AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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SPEEDTRADE EXE FEATURES:

All the features of classic Trade execution in 2-3 seconds Instant order / trade confirmations in the same window Hot keys similar to a brokers terminal Multiple tic-by-tic intra-day charts \ with multiple indicators Availability of 2 ISP & 6 Servers ensuring maximum uptime Customized alerts based on multiple parameters Cancel all / square off all facility Window for top gainers, top losers, and most active updated live.

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CHAPTER-7 ON-LINE TRADING AT SHAREKHAN

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CHAPTER-7 ON-LINE TRADING AT SHAREKHAN


THE MECHANICS OF ONLINE TRADING

CLIENT

BROKER

STOCK EXCHANGE

Places an order on th e n e t o n th e brokers website through the distinctive I.D. c ode

A c c e p ts th e order, Checks the clients Id e n ti ty a n d places the order with the stock ex c hange

Accepts the order after checking the scrip limit of the broker for the day Executes the order

The settlement of the deal (buy/sell order) gets reflected in his Demat account. The client is intimated about the execution of the deal by e-mail. Pays the broker pending physical delivery.

Pays the E x c hange Though his owns account and receives it from the client a c c o u n t.

Receives the money and completes the settlement

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TRADING AND SETTLEMENT AT SHARE KHAN

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

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

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

TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING

Share Khan deals in buying and selling equity shares and debentures on the National Stock Exchange (NSE), the Bombay Stock Exchange (BSE) and the OverThe-Counter Exchange of India (OTCEI). Share Khan is provided with a computer and required software from their registered stock exchanges. These centers are called Broker Work Stations. These computers are connected to the server at the stock exchanges through cable. The member or broker sitting in his office can send the quotations, orders, negotiations, deals, in-house deals, auction orders etc., through the computer. The Central trading system (CTS) will accept these orders and send it for match. If there is any mistake in the order, CTS will reject the orders and send respective AMImY iGLOBALi veUSICTS iS So HOOiLoHtheERockADchanges operations. T a n object B of NES s t C mon t, r YD St AB Ex error message to the member concern. All these operations are in built. The

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

TRADING SESSION

Trading timings are from 9:00 A.M. to 3:30 P.M. on all 5 days of the trading period. Monday to Friday is the trading period in all the stock exchanges. SEBI has stipulated that all the stock exchanges in India must have same trading period.

BROKER WORK STATION:

At the broker workstation the BBOs, the last traded price, the days opening price, previous days closing price, highest and lowest prices, the weighted average price and total trade value will be available continuously, as the BBO for each scrip. Other information will be available on query from the BWS. These include top gainers /losers of the day. Trader-wise, scrip wise net position, client wise net position, top scrip by the volume/value, market summary etc. Brokers are also provided with information relating to the companies in the matter of Book closure, Dividend declarations, resolutions in board meeting, information about liquidated companies, company report etc.

ORDERS:

Orders can be done one at a time or in a batch mode. The submitted order AMIisY GLrn bac k toSthe BWSCwOh Lh e apprRpriatD error message. If T retuOBAL BU INESS S, Hit O t , HYDE o ABAe will be accepted at the CTS, after validation if it finds any invalid reason the order

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

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

GOOD FOR THE DAY:

This is also called as market order. For an order if the member selects the deal as good for the day, the order is treated as market order. If a best bid founds match with best order then the transaction gets executed. If the match is not found then after trade time the order gets cancelled that day. Next day he has to place a new order. For example if a member wants to purchase 1000 shares of satyam info @ 400 each through Good for Day order. If the correct match is not found, order gets cancelled automatically and new quotation has to be placed the next day.

GOOD TILL CANCELLATION:

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

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

SETTLEMENT OF TRANSACTIONS:

Clearing of transaction in the form of shares and cash is called settlement. Buyers will take the delivery of shares through the depository participants like SHARE KHAN and others. Finally, the settlement is made by means of delivering the share certificates along with the transfer deeds. The transferor (or the seller) duly signed transfer deed. It bears a stamp of the selling broker. The buyer then fills up the certificates fills up the particulars in the transfer deed. Settlement can be done in the following way.

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

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

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DETAILS OF PROCEDURES:

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

Pay-in: The member who is in paying position shall pay for value of shares with in the trading settlement period (T+2). Payout: The cheques paid in the clearinghouse will be paid to members who are in paying position. All disputes arising between members regarding non-deliveries, non-payments, good and bad deliveries pertaining to the settlement will be settled by the settlement committee of the exchange.

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

Login

Buy trans cation


The syste m will check buying limits

Sell trans cation


The syste m will check your dp acco unt quantity

Orde rs accepted

Rejec ted order s w ould be c ommunic ated along w ith r eas ons

orde rs accepted

your order is transmitted to exchange for execution

pending buy orders would be displayed on your s creen

on execution of your orders

pending sell orders would be displayed on your s creen

you may edit your you may d elete pending order you r p e nd ing o rd er

you may ed it you r p e nd ing o rd er

you may delete your pending order

flashed on your s creen immediately on execution

conformationcoul d be send to your e-mail and mo bile

contract note would be sent to by mail or hand delivery

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SCREEN SHOTS: BUYING AND SELLING OF SHARES ONLINE BY USING TRADE TIGER SOFTWARE

CHECKING SCRIPTS

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VIEWING SELECTED SCRIPTS

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SELECTING SCRIPTS BY TYPING KEY WORDS

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BUYING OF SHARES

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BUYING THROUGH SELECTING PRICES

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SELLING OF STOCKS

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MODIFYING ORDERS

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CHAPTER 8 COMPARATIVE ANALYSIS

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CHAPTER 8 COMPARATIVE ANALYSIS


THE MAJOR PLAYERS IN ONLINE TRADING

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

HDFC SECURITIES:
Company Background:

HDFC Securities Ltd is promoted by the HDFC Bank, HDFC and Chase Capital Partners and their associates. Pioneers in setting up Dial-a-share service with the largest team of Tele-brokers. Online Account Type: HDFC Online Trading A/c: advantage. Pricing of HDFC Account Account Opening: Rs 750 Demat: NIL, 1st year charges included in Account Opening Initial Margin : Rs 5000/- for non HDFC Bank Customers (AQB) Brokerage: Trading 0.15%* each side + ST Delivery 0.50%** each side + ST AMIT**GLOBAiL BrokIerEge perHOOLaHYDERABAD Y Rs 8 M n BUS Na SS SC trans, ction *Rs 25 Min Brokerage per transaction Plain Vanilla Account with focus on 3 in 1

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ICICI DIRECT:
Account Opening: Rs 750 Schemes: For short periods Rs 750 is refundable against brokerage generated in a qtr. These schemes are introduced 3-4 times a year. Demat: NIL, 1st year charges included in Account Opening Plus a facility to open additional 4 DPs without 1st yr AMC. Only Rs 100 as linking charges per DP Initial Margin : Nil Brokerage: ICICIs brokerage rates are inclusive of Stamp duty (0.002%) for trading and 0.010% for delivery while service tax (10.2%) on BROKERAGE land turnover tax is EXTRA.

Delivery Vol per QTR < 10 lakhs 10 25 lakhs 25 50 lakhs 50 lakhs - 1 Cr 1 Cr 2 Cr 2 Cr 5 Cr > 5 Cr

Brokerage 0.75% 0.70% 0.55% 0.45% 0.35% 0.30% 0.25%

Square Vol P.M. < 50 lakhs 50 lakhs 2 C 2Cr-5Cr 5Cr- 10 Cr 10Cr -20 Cr > 20 Cr ----

Brokerage .10% Both Sides .08% Both Sides .05% Both Sides .04% Both Sides .035% Both Sides .03% Both Sides --------

INDIABULLS:
Company Background:

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

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Online Account Type: Signature Account: Plain Vanilla Account with focus on Equity Analysis. The equity analysis is a paid service even for A/c holders. Power India bulls: Account with sophisticated trading tools, low commissions and priority access to R.M. Pricing of IB Accounts: Signature Account * Account Opening: Rs 250 * Demat: Rs 200 if POA is signed, signed, No AMC for this DP * Initial Margin: NIL * Brokerage: Negotiable Power India Bulls * Account Opening: Rs 750 * Demat: Rs.200 if POA is No AMC for this DP * Initial Margin: NIL * Brokerage: Negotiable

PAID Research: SCHEME WebBased-1-Month-500: WebBased-1-Month-6000 PrintReport-1-Month-750: FACILITY View & Print on Website View & Print on Website View & Print on Website + 10 Reports Delivered PrintReport-1-Month-9000: View & Print on Website + 10 Reports Delivered

KOTAKSTREET:
Company Background: Kotakstreet is the retail arm of Kotak Securities. Kotak Securities limited is a joint venture between Kotak Mahindra Bank and Goldman Sachs. Online Account Type Twin Advantage / Green Channel : 2 DPs, Limit against shares AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per transaction High Trader : 6 Times Exposure Cash & Derivatives, Auto sq off 2:55 Cash Expressway : Spot payment, additional 0.5% charges For Kotak Fast Lane / Keat Lite / Keat Desktop are trading interfaces. Keat Desktop with advanced tools comes at a charge of Rs 500 p.m, Non refundable. PRICING OF KOTAK Account Opening : Rs 500 Demat: Rs 22.5 p.m Initial Margin : Rs 5000(Compulsory) Min Margin Retainable : Rs 1000 Brokerage Slab wise: Higher the volume, lower the brokerage. Even older customers (on 0.25% & 0.40%) have been moved to the slab wise structure w.e.f 1/4/2004 Slab structure of Kotak Delivery Vol p m < 1 lakhs 1 lakhs 5 lakhs 5 lakhs 10 lakhs 10 lakhs - 20 lakhs 20 lakhs 60 lakhs 60 lakhs - 2 Cr >2 Brokerage * 0.65% 0.60% 0.50% 0.40% 0.30% 0.25% 0.20% Square Vol P.M. < 10 lakhs 10 lakhs 25 lakhs 25 lakhs - 2 Cr 2 Cr - 5 Cr > 5 Cr ---do-----Brokerage ** 0.10% Both Sides 0.08% Both Sides 0.05% Both Sides 0.04% Both Sides 0.035% Both Sides 0.03% Both Sides --------

* Brokerage is inclusive of All Taxes * DP Charges Extra AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD * Min Brokerage of Rs 0.05 per share

* Brokerage is inclusive of All Taxes

* Min Brokerage of Rs 0.01 per share

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Derivatives Vol off p m < 2 Cr 2 Cr - 5.5 Cr 5.5 Cr 10 Cr > 10 Cr

Brokerage 0.07% Both Sides 0.05% Both Sides 0.04% Both Sides 0.03% Both Sides

* Brokerage is inclusive of All Taxes.

INDIA INFOLINE
Company Background Indiainfoline was founded in 1995 and was positioned as a research firm. In 2000 e-broking was started under the brand name of 5paisa.com. Apart from offering online trading in stock market the company offers mutual funds online. It also acts as a distributor of various financial services i.e. GOI securities Company Fixed Deposits, Insurance. Limited ground network, present in 20 cities.

Online Account Types Investor Terminal : Investors / Students Trader Terminal : Day Traders / HNIs

PRICING FOR RETAIL CLIENTS Investor Terminal

Account Opening : Rs 500 Demat 1st Yr : Rs 250 Initial Margin : Rs 2500 (Compulsory) Min Margin Retainable : Rs 1000 Brokerage : Trading 0.10% each side + ST Delivery 0.50% each side + ST AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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PRICING FOR HNI CLIENTS Trader Terminal Account Opening : Rs 500 Demat 1st Yr : Rs 250 Initial Margin : Rs 5000(Compulsory) Min Margin Retainable : Rs 1000 Brokerage : Trading 0.10% each side + ST Delivery 0.50% each side + ST (Negotiable to 0.05% each side & 0.25%) Account Access Charges Monthly Rs 800, adjustable against Brokerage Yearly Rs 8000, adjustable against brokerage

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

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

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PRICING FOR HNI CLIENTS

Speed Trade

Account Opening : Rs 1000 ( Refundable against brokerage in Month + 1) Demat 1st Yr : Incl in Account Opening Initial Margin : Nil Min Margin Retainable : NIL Brokerage : Trading 0.10% each side + All Taxes Delivery 0.50% each side + All Taxes (Negotiable based on volume) Account Access Charges Monthly Rs 500, adjustable qtrly against brokerage of Rs 9000/- for qtr. No access charges for gold customers (Above 1 lac brokerage p.a)

Pricing for Retail Customers

Classic / Applet

Account Opening : Rs 750 D e mat 1 s t Y r : N I L Initial Margin : NIL Min Margin Retainable : NIL Brokerage: Trading 0.10% each side + All Taxes Delivery 0.50% each side + All Taxes

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Sharekhan online Trading Interfaces

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

CLASSIC / APPLET The website is meant for customers who Invests in Equities

SPEEDTRADE The speed trade is meant for customers who trade in Equities

DIAL-N-TRADE Toll Free The DNT is a value added services meant for all customers who Want to transact but are not online.

DNT TOLL FREE FERTURES

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

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

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

CLASSIC/WEBSITE FEATURES

Daily Research newsletter (Investor Eye) Via e-mail Access to new IPO without any paperwork Advanced portfolio monitoring Tools Integrated DP account with trading account Option of linking additional 4 DP accounts to trading account Choice of linking 4 banks to trading a/c for online payments Cash and Derivatives trading in a single account E-mail confirmations for all transactions Choice of electronic/Physical contracts SPEEDTRADE EXE FEATURES ALL THE FEATURES OF CLASSIC *Real time streaming quotes using 2 Marker Watches *Trade Execution in 2-3 seconds * Instant Order/trade confirmations in the same window AMI*M ULTIPLELTBUSy-TESIS trCHOOLhHrYs wRh BAD iple indicators TY GLOBA ic-b IN ic n S a-day c , a t DEit A mult *Hot keys similar to a Brokers Terminal

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* Availability of 2 ISP & 6 Servers ensuring maximum uptime * Customized alerts based on multiple parameters * Cancel All/Square off All Facility * Window for Top Gainers, Top Losers, and Most Active updated Live

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CHAPTER 9 QUESTIONNAIRES AND ANALYSIS

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CHAPTER 9 QUESTIONNAIRES Questionnaire 1

Questionnaire
On the customers perception about investment in share market. (Sample size 32) 1. Gender? Analysis:
MALE 27 FEMALE 5

A) Male

B) Female

MALE FEMALE

From the sample size of 30, 27 are males and 5 are only females. Interest of female investors has to be improved.

2. A GE A) 18-28 B) 29-39 C) 40-49 D)>49


18-28 18 29-39 12 40-49 2 >4 9 0

20 15 10 5 0 18-28 29-39 40-49 >49 Series1

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From the above data most of them are young and middle aged persons. It shows that participation of youth is major.

3. MARITAL STATUS? A) MARRIED B) UNMARRIED


MARRIED UNMARRIED 1814

20 15 10 5 0 MARRIED UNMARRIED

Series1

Married is 60% and unmarried is 46%. This means most of them are having families.

4. EDUCATIONAL QUALIFICATION? A) HSC B)10+2 C)GRADUATE D)POST GRADUATE


HSC 1 10+2 GRADUATE POST GRADUATE Column1 21811

20 15 10 5 0

Series1

60% are graduates and 36% are post graduates. This means the sample is well e d u c a te d . AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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5) OCCUPATION A) BUSINESS B)SERVICE C)STUDENT 4)RETIRED


BUSINESS 1 SERVICE 31 STUDENT 0 RETIRED 0

40 30 20 10 0

Series1

96.8% are in to service. This means most of them are working.

6. INCOME A) BELOW ONE LAKH B) 1-2 LAKH C) 2-5 LAKH D) >5 LAKHS
<1LAC 0 1-2 LACS 2-5 LACS>5LACS 31712

20 15 10 5 0 <1LAC 1-2 LACS 2-5 >5LACS LACS

Series1

From the above status 53% are earning in the range of 2-5 lakhs of rupees and 32% earning more than 5 lakhs per annum. That the average income of the sample is very high.

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7. Idea about Trading or investment in shares? A) YES B) NO


Y ES 19 NO 13

20 15 10 5 0 YES NO Series1

60% of the samples have idea about Trading but the rest of 40% say they have no idea. Hence scope of attracting new investors is high.

8. Are you interested in DEMAT account? A) YES B) NO


Y ES 20 NO 12

20 15 10 5 0 YES NO

Series1

Out of 60% having idea about trading 62% are interested in taking DEMAT a/c. The rest 37% are not interested out of 40% who are not having any idea about trading.

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Correlation Between question7 and question8


Y ES 20 NO 12 CORELATION Column1 Y ES 19 NO 13

1 POSITIVE CORRELATION

There is a positive correlation between people who have idea about Trading and willing to Trade as well as people who have no idea about trading and not will to have a demat a/c.

9(a). Are you trading any where? A) yes B) NO


Column1 Q9 A Y ES 14 NO 18

Q9A
20 0 YES NO Q9A

56% are not trading any where so there is possibility of getting customers from this sample. 43% are trading.

9(b). IF YES? A)INDIA INFOLINE B) RELIGARE C) ANAND RATHI D) STEEL CITY E)KARVY F) ICICI G) RELIANCE H) N/A
INDIA INFOLINE ANAND RELIGARE RATHI 20 STEEL CITY 4 KARVY ICICIRELIANCE N/A 214118

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20

Series1

12% in icici direct, 12% in anand rathi, 6% in India infoline, 6% in steel city securities and 3% in religare and reliance.

10. IF YOU ARE INTERESTED THEN WHERE YOU WOULD LIKE TO INVEST YOUR MONEY? A) EQUITY B) DERIVATIVES C) FOREX TRADING D) COMMODITY E) N/A
EQUITY 17 DERIVATIVES 1 FOREX TRADING 1 COMMODITY 1 N/A 12

20 15 10 5 0 Series1

53% are interested in Equity markets. This shows that derivatives, forex and commodity Trading is too risky.

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11. If you are interested in DEMAT account then what% of INCOME you would like to invest in shares? A) <5% B) (5-10)% C) (10-20)% D) >20 E) N/A

<5 % 4

(5-10)% 6

(10-20)% 6

>2 0 3

N/A 12

12 10 8 6 4 2 0 Series1

Most of them wanted to invest between (5-20) % of there income in to shares. This can bring in greater volumes of trade.

12. Do you think investment in shares market is better than any other investment?
A) YES Y ES 20 B) NO NO 12

20 15 10 5 0 Series1

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YES

NO

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62% believe that share market better than any other investment. 38% believe they are other sources of investment than share market.

Correlation between Q12 and Q7


Y ES 20 Y ES 19 CORELATION 1 *POSITIVE CORELATION* NO 13 NO 12

There is a positive correlation that means people who idea about share markets believe its better than other investments but the rest believe it is not.

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QUESTIONNAIRE 2
CUSTOMER AWARENESS ON ONLINE TRADING (Sample size 50) 1.How long have you been doing online-trading? (a)1 year(b) 2 year (c) 3 year(d) 4 year
1year 18 2years 15 3years 7 4years 10

4years 1 3years 2years 1year 0 5 10 15 20

From my survey people who are trading since 1year is 36%, since 2years is 30%, since 3years is 14% and since 4years is 20%. This means the numbers of investors are increasing at a greater speed during the recent trend. 2.How will you describe your experience with on-line trading till date? (a) Very easy to operate (b) Very difficult to operate (c) Not secure (d) Any other
(a) 30 (b) 5 (c) 8 (d) 7

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30 25 20 15 10 5 0 (a) (b) (c) (d) Series1

Almost 60% of the sample says Online Trading is easy and 16% of sample says Online Trading is not secure. Hence we can say Online Trading is easy to operate and it should be made more secure. 3. What is your annual income? (a) Below 100000 (c) 2,00,000 3,00,000
A 10 B 18

(b ) (d )
C

1,00,000 2,00,000 3,00,000 4,00,000


D 12 10

D 1 C B A 0 5 10 15 20

36% of the sample has moderate income level of 1lakh to 2lakh, 44% of the samples earn an annual income of more than 2lakhs and 20% percent of the sample is below 1lakh. The above figures say that per-capita income level is quite high and has good opportunities for investments. 4. What amount of money do you invest normally? (a) >50000 (b) 50000 to 150000 (c) 150000 to 2000000 (d) any other amount AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD
12 20 <50000 50000-150000 150000-200000 8 >200000 10

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20 15 10 5 0 1 <50000 50000-150000 150000-200000 >200000

From the above data 40% of the sample says they invest around 150000-200000. 64% of people invest less than 50000 but 36% invest in more than 150000 in share market. This trend shows that investors want to invest in share markets for more returns even though there is risk. 5. What percentage of your monthly household income could be available for investment? (a) Less than 5%(b) 5% to 10% (c) 10% to 15%
>5 % 9 (5-10)% 20 (10-15)% 12

(d) 15% to 20%


(15-20)% 9

20 15 10 5 0 >5% (5-10)% (10-15)% (15-20)% Series1

From the above trend we can say that 40% of the investors have 5-10% of household income available for investment and more than 40% say they have 1020% of income for investments. The income level trends in the above question also prove that effective amounts of investments can made. Only 20% have 5% of income for investment. 6. How often do you trade? (a)Daily (b) Weekly (c) Monthly (d) More than one month AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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DAILY 20

WEEKLY 12

MONTHLY

MORE THAN ONE MONTH 414

20 15 10 5 0 Series1

From the above trend 40% of people trade daily, 24% trade weekly and 36% trade for more than a month or monthly. This trend shows that there is mixture of investors who trade daily and also investors who hold for long term. 40% of the traders are daily traders so Online Trading will be very helpful to them.

7. Which trading do you prefer? (a) Online trading (b) offline trading (c) Both
on-line 22 offline 12 Both 16

30 20 10 0 on-line offline Both Series1

From the above trend we can say that 44% of people say that they prefer online trading, 24% prefer offline trading and 32% prefer both. This shows that people are aware of online trading. AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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8. According to you, is online trading settled in Indian investor psyche? (a) Yes (b) No
y es 16 no 34

40 30 20 10 0 yes no Series1

From the above trend we can say that 32% say that online trading has settled in Indian investor psyche and 68% say that it is not yet settled in Indian psyche.

10. Which media do you prefer the most as an investor? (a) T.V (b) Newspaper (c) Magazines (d) Journals
T.V 18 NEWS PAPPER 25 MAGZINES 2 JOURNALS 5

25 20 15 10 5 0

Series1

50% of the sample prefer news paper media, 36% prefer T.V media and rest 14% prefer journals and magazines.

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11. Where do you often invest your money? (a) Equity (c) (e) Insurance Others
MUTUAL FUNDINSURANCE 1510

(b ) (d )

Mutual fund Term deposits

EQUITY

TERM DEPOSITS 10 15

15 10 5 0 Series1

30% of the sample invests in equity and 30% of the sample says they invest in Term deposits. 20% in mutual funds and 20% in insurance. This status says that equity has an equal priority to Term Deposits. 12. What is the primary objective of your investment? (a) Capital appreciation(b) Source of income (c) Retirement planning (e) Education funding /others
(A) 8
20 15 10 5 0

(d) Wealth preservation

(B) 19

(c) 1

(D) 14

( E) 6

Series1

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

(A)

(B)

(c)

(D)

(E)

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

13. Online trading is a secure way of trading ( a)Strongly agree(b) Agree (c) Cant say (d) Disagree

STRONGLY AGREE 18

AGREE 12

CANT'T SAY

DISAGREE 812

20 15 10 5 0 Series1

From the above data 36% strongly say online trading is secure 24% agree it is secure and 24% say its not secure. Most of the people believe Online Trading as safe and secure but there are few who think it is not. May because Online Trading works with internet platform.

14. Online trading is an easy and fast way of trading ( a)Strongly agree(b)Agree (c) Cant say (d ) Disagree
CANT'T SAY 14 DISAGREE 812

STRONGLY AGREEAGREE 16

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20 10 0 Series1 Series1

Almost 60% believe that Online Trading is faster way of trading. Hence there is a wide scope of opportunities in Online trading in this fast moving world.

15. Introduction of online trading helped attract new Investors thus increasing the trading volumes at Stock Market ( a) (c) Strongly agree Cant say (b ) (d ) Agree Disagree

STRONGLY AGREEAGREE 25

CANT'T 10

DISAGREE 510

30 20 10 0 STRONGLY AGREE AGREE Series1 CANT'T DISAGREE Series1

Almost 70% of the samples agree that Online Trading has attracted new investors and increasing trading volumes. Only 20% disagree with above statement. Hence Online Trading has brought reforms in to markets. AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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TESTS:
CROSS TABS: Between question 2 and 6

Chart Title
18 16 14 Axis Title 12 10 8 6 4 2 0 D C B A

A 3 2 3 10

B 2 2 1 9

C 1 1 0 2

D 1 3 1 9

Interpretation Most people who think online trading is easy to operate are very frequent Traders. People who think online trading difficult are not frequent traders. Few people who think online trading is not secure hold for long term. Only very few have other reasons for not choosing online trading. The interpretation of the data says that online trading is easy to operate and good for daily trading. CORRELATION: Between questions 1 and 4 Value=0.603806 It is a positive correlation. Interpretation Longer the trading more the amount invested in the markets.

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CHI-SQUARE TEST: Between question 2 and 7 H0= the type of trading does not depends upon the experience the person has in online trading. H1= the type of trading depends upon the experience the person has in online trading.

Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio N of Valid Cases 6.548 a 6.927 51 df 6 6 sided) .365 .328

a. 9 cells (75.0%) have expected count less than 5. The minimum expected count is 1.27.

Chi-square value is greater than 0.05 so we reject H0.

Interpretation Therefore the type of trading depends upon the experience the person has in online trading. Interpretation from Questionnaire2:
The numbers of investors are increasing at a greater speed during the recent trend. Online Trading is easy to operate and it should be made more secure. Per-capita income level is quite high and has good opportunities for investments. Investors want to invest in share markets for more returns even though there is risk. Trend shows that there is mixture of investors who trade daily and also investors who hold for long term. 40% of the traders are daily traders so Online Trading will be very helpful to them.

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD


psyche.

People are aware of online trading but 68% say that it is not yet settled in Indian

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50% prefer news paper media, 36% prefer T.V media and rest 14% prefer journals and magazines. Hence most of them follow television broadcasting. Equity has an equal priority to Term Deposits. Hence people can be attracted towards investment in Capital markets. Objective of investment is source of income as well as for wealth preservation. Many are making trading as a source of income hence investments can increase. Most of the people believe Online trading as safe and secure but there are few who think it is not. May because Online Trading works with internet platform. Hence care should be taken to make internet safer. Almost 60% believe that Online Trading is faster way of trading. Hence there is a wide scope of opportunities in Online trading in this fast moving world. Online Trading has brought reforms in to markets. Longer the trading more the amount invested in the markets. The type of trading depends upon the experience the person has in online trading. Most people who think online trading is easy to operate are very frequent Traders. People who think online trading difficult are not frequent traders. Few people who think online trading is not secure hold for long term. Only very few have other reasons for not choosing online trading. The interpretation of the data says that online trading is easy to operate and good for daily trading.

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CHAPTER-10 CASE STUDY

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CHAPTER-10 CASE STUDY-1

CASE STUDY ON KSE

Capital Markets: Khambata and Khambata against 16% for the market. The high dividend payments are probably used by the parent company as a means of repatriating profits. As of 1986, the market share price of multinationals reflects the high dividend payments; the market-to-book value ratio of multinationals was over 4, compared to less than 2 for the market as a whole. The fundamental characteristics of the Pakistani stock market and those of other developed and emerging markets. As of end 1986, 37 public sector companies are listed on the Karachi Stock Exchange (KSE) with a market capitalization of Rs l0 million or 32% of total market capitalization. The number of shares traded on the Karachi Stock Exchange has shown a secular increase from 24.6 million shares in 1977 to 100 million shares in 1986. Turnover in the 25 most active shares accounted for 48.4% of total market turnover in FY87, while in the case of 58 shares less than 5,000 shares each were traded during the same period. Interestingly; multinationals (generally regarded as blue chips) did not figure at all in the 25 most active shares. While forming 28% of market capitalization, they accounted for only 5.8% of market turnover probably because they are closely held and there is relatively little float in these shares.

The Companies Ordinance (1984) provides for: (i) declaration of holdings in companies by directors, principal officers and their families; and (ii) a submission of information on sales/transfer of shares and profits if arising in less than six months from date of purchase. It should be noted that insiders not only include management but also others associated with the company having access to AMInamesOBake s iUSIiNiESS ,SiCHotOmpoYsiblR, tBADove insider trading. There is also TY GL m AL B t d ff cult f n O i L, H sDE eA o pr sensitive information. However, the prevalence of transactions in nominee

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a growing controversy as to whether members of the Exchange should be permitted on the boards of directors of companies.

CONCLUSIONS AND RECOMMENDATIONS

The pricing of both equity and debenture capital in Pakistan is not determined by market forces but is administratively set by the Government. In the case of equity, all issues of new companies are priced at par. The initial issue price of closely-held companies going public is set by CCI and is determined on historic data with future prospects not being taken into account. This has resulted in the shares of well-managed companies being issued at below marketclearing price so that the new shareholders benefit at the expense of the original shareholders.

Such policies have denied underwriters any useful function in setting issue prices or in distributing securities. In addition, as both the issue price and underwriting commission are fixed, underwriters have almost no role in determining a market price for the issue nor does the underwriting commission reflect perceived issue risk.

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CASE STUDY-2 CASE STUDU ON SAXO BANK

Today, Saxo Bank is an undisputed world leader in online trading of Foreign Exchange (FX), Stocks, Stocks on Margin (CFDs), Futures and fixed income products. The reputation of Saxo Bank as an award-winning and technology-driven European Internet-bank is built thanks to the modern and reliable software systems that support the Saxo Bank business model.

In the beginning of 2003 Saxo Bank decides to offer online investment services for a completely new customer segment - private investors, who would benefit from a full range of investment products. Since the time-to-market of new banking software products is a real challenge in the highly competitive financial services market, Saxo Bank decides to find a software development services company in the near shore zone that specializes in portal solutions and has expertise in serving the Financial Services sector.

After strict pre-screening of near shoring locations and companies, Saxo Bank had turned to Russia's leading software development services provider - Reksoft that has a software development centre located in the largest city of Eastern Europe - St. Petersburg, Russia.

The two key concerns for Saxo Bank were the optimal time-to-market indicator and the highest standards in information security - both in relation to product and personnel. Reksoft provides Saxo Bank with a full range of application life-cycle services application architecture development, software development, application testing, support in platform implementation and continuous maintenance (3rd level application support services). AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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CONCLUSIONS AND RECOMMENDATIONS The SaxoBank MiniTrader online platform, enters operations offering entry-level trading on a popular selection of instruments from the Saxo Bank product range, including: Direct trading on live tradable prices through the professional online trading platform Low trading costs and spreads Reputable fully regulated EU bank where the Saxo Bank multinational staff offer personal service in 18 languages Wealth of trading recommendations and market predictions from the Bank's own analysts and major financial institutions Saxo MiniTrader online trading platform fully meets the needs of the Bank's clients, combining a highly secure online environment with a wealth of trading modules. Saxo MiniTrader helps private investors make successful trading decisions with real-time execution.

Saxo Bank outsourcing to Reksoft has allowed roll-out the operational system within a very tight time frame. Thanks to that, Saxo Bank was able to grow its customer base, greatly benefiting from the launch of this innovative solution for a new market segment.

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CHAPTER-11 ARTICLE

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CHAPTER-11 ARTICLE
Sharekhan, one of India's leading brokerage houses, is the retail arm of SSKI. With over 510

share shops in 170 cities, and India's premier online trading portal

www.sharekhan.com, our customers enjoy multi-channel access to the stock markets. Sharekhan offers you trade execution facility on the BSE and NSE, for both cash and derivatives market, commodity trading facility on the MCX and NCDEX, automated IVRS-based trading facility from your telephone, depository services and most importantly, investment advice tempered by 80 years of research and broking experience. The event titled Empower is an attempt made by Sharekhan to offer financial education to their clients. They offer their analysis on the stock market its ups and downs, which shares to hold or to sell. In short they serve as a common mans guide into the sensex providing financial tips depending on the present market scenario and their perspective on what it holds for tomorrow. This detailed analysis and financial education is possible and made available to all by using the technology of Live Webcasting with PPT and Chat Interactivity.

1. 5-6 speakers give presentations on variable topics of financial interest through the u se o f P P T .

2. The presentations are streamed live using the Webcast technology, enabling interactivity so that the geographically distanced viewers could post in their queries on the presentation as well and after the live session the edited version of the same is enabled on the website thereby enabling the viewers who would have missed out on the live proceedings to benefit from the Process through a Video on Demand of the proceedings.

3. Given the criticality of the situation and the effort that has been put in there has to be enough redundancy or contingency plan for ensuring a smooth flow of the eveITY nd OBthL tBUSINESS StcHOs. L,rHYDEthABAent atleast two rounds of testing AMnt a GLso A a there no gliC he O P ior to R e evD

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(internet connectivity) is essential if there is sufficient time at hand, if not one test would suffice.

4. 2 Encoders for the purpose of encoding are used 1 main and the other as back up. The content is then streamed through the internet connectivity. In Sharekhan the Connectivity available is from two different service providers namely Tata and Reliance. The bandwidth available is 1 mbps and 512 kbps respectively.

5. A separate login page is created. The viewer has to fill up all the fields in login page like user name, location, section email ID.

6. After entering all the information accurately, user will be redirected to the user.htm where user can ask questions.

7. The viewers would then post their question/ queries/ comments in the feedback/chat window provided

8. The webcast team along with client team members would take a look at the questions and the ones which were unique and relevant questions would be passed on to the concerned presenters, the presenter would thus address the questions

9. As many questions as possible within the given time frame are answered. The remaining questions are posted on their website along with answers for the same.

Hence, for a client like Sharekhan wanting to create awareness about the current market scenario to its clients, brokers, retailers etc, the combination of the technology of Webcasting along with Chat Integration proved to be cost effective, time saving and at the same time eliminating the monotony of repetitive.

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CHAPTER-12 PROJECT ANALYSIS

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CHAPTER-12 PROJECT ANALYSIS

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

Weaknesses

Inadequate product awareness among the retail investors. Brokerage is high when compared to its competitors like Indiainfoline and Religare. Brand awareness is low in the financial market. AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD

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Promotional activities conducted by the company are not at par with the other firms. Opportunities

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

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

OBSERVATIONS:

Fluctuations are more in secondary market than any other market.

There are more speculators than investors.

Information plays a vital role in the secondary market.

AMITY GLOBurt BUSt NESbe ChaOOiL,gHYDE1 Aay. D f ALher i I will S Sc H ng n to T+ R d BA

Previously rolling settlement is T+5 days, now it changed to T+2 days and

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It was also observed that many broking houses offering internet trading allow clients to use their conventional system as well just ensure that they do not loose them and this instead of offering e-broking services they becomes service providers.

The number of players is increasing at a steady rate and today there are over a dozen of brokerage houses who have opted to offer net trading to their customers and prominent among them are SHARE KHAN, India bulls, kotakstreet, ICICI direct and indiainfoline.

CONCLUSION:

Things have changed for the better with the SHAREKHAN going on-line coupled with endeavor to stream line the whole trading system, things have changed dramatically over the last 3 to 4 years. New and advanced technologies have breached geographical and cultural barriers, and have brought the countrywide market to doorstep. In the present scenario to compete with the Brokers would require sound infrastructure and trading as per international standards. The introduction of on-line trading would influence the investors resulting in an increase in the business of the exchange. It has helped the brokers handling a vast amount of transactions and this can be an efficient trading, delivering, settlement system with adequate protection to investors. The trading of SHAREKHAN of the first day was Rs. 1.8 crores. Due to invention of online trading there has been greater benefit to the investors as they could sell / buy shares as and when required and that to with online trading. The brokers has a greater scope than compared to the earlier times because AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD of invention of online trading.

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The concept of business has changed today, this is a service oriented industry hence the survival would require them to provide the best possible service to the clients.

RECOMMENDATIONS:

I recommend the exchange authorities to take steps to educate Investors about their rights and duties. I suggest to the exchange authorities to increase the investors confidences. I recommend the exchange authorities to be vigilant to curb wide fluctuations of prices. The speculative pressures are responsible for the wide changes in the price, not attracting the genuine investors to the greater extent towards the market. Genuine investors are not at all interested in the speculative gain as their investment is based on the future profits, therefore the authorities of the exchange should be more vigilant to curb the speculation. Necessary steps should be taken by the exchange to deal with the situations arising due to break down in online trading. Effective monitoring of transaction have to be done in avoid uncertainties. Internet cost have to be reduced in order attract online trading users. Transparency has to maintain in the Share Markets.

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CHAPTER-13 BIBILOGRAPHY

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BOOKS:

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

WEBSITES: www.Share Khan.com www.bseindia.com www.sebi.com www.moneycontrol.com www.economictimes.com www.nseindia.com

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