Introduction

A Study on online trading system in exchanges
About the Industry:

INTRODUCTION TO STOCK MARKET
STOCK MARKET
A stock market is a public market for the trading of company stock and
derivatives at an agreed price; these are securities listed on a stock exchange as
well as those only traded privately. The stock market is one of the most
important sources for companies to raise money. This allows businesses to be
publicly traded, or raise additional capital for expansion by selling shares of
ownership of the company in a public market.
The size of the world stock market was estimated at about $36.6 trillion US at
the beginning of October 2008. The total world derivatives market has been
estimated at about $791 trillion face or nominal value, 11 times the size of the
entire world economy.
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 re at the fairest prices determined by the basic
laws of supply and demand.
DEFINITION OF STOCK EXCHANGE:-

Stock exchange means anybody or individuals whether incorporated or not,
constituted for the purpose of assisting, regulating or controlling the business of
buying, selling or dealing in securities.
HISTORY OF STOCK EXCHANGE:-

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-making associations of brokers to regulate and protect their
interests. Before the control on securities under the constitution in 1950, it was a
state subject and the Bombay securities contracts (control) act of 1925 used to
regulate trading in securities. Under this act, the Mumbai stock exchange was
recognized in 1927 and Ahmadabad in 1937. During the war boom, a number of
stock exchanges were organized. Soon after it became a central subject, central
legislation was proposed and a committee headed by Mr. A.D.Gorwala went
into the bill for securities regulation. On the basis of the basis of the
committees recommendations and public discussion, the securities contract
(regulation) act became law in 1956.
Following diagram gives the structure of Indian financial system:

FINANCIAL MARKETS:
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.
CAPITAL MARKET:
Capital market is a place where we can raise long-term capital.
Again the capital market is classified in to 2 types and they are
Primary market and
Secondary market.
E.g.: Shares, Debentures, and Loans etc.
My emphasis is more on capital market.
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).
FUNCTIONS:-
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 PRIMARY MARKETS:-
To ensure healthy growth of primary market, the investing public should be

protected. The term investor protection as a wider meaning in the primary
market. The principal ingredients of investors protection are
Provision of all the relevant information
Provision of accurate information and
Transparent allotment procedures without any bias.
SECONDARY MARKET:-
The primary market deals with the new issues of securities. Outstanding
securities are traded in the secondary market, which is commonly known as
stock market or stock exchange. The secondary market is a market where
scrips are traded. It is a market place which provides liquidity to the scrip
issued in the primary market. Thus, the growth of secondary market depend on
the primary market. More the number of companies entering the primary
market, the greater is 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, 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 mandatorily required to list their shares on one or more stock
exchanges in India including stock exchanges. Listing of scrips provides
liquidity and offers an opportunity to the investors to buy or sell the scrips.
The following intermediaries in the secondary market:
1. Broker/member of stock exchange buyers broker and sellers broker
2. Portfolio Manager
3. Investment advisor
4. Share transfer agent
5. Depository
6. Depository participants.
STOCK MARKETS IN INDIA
Stock exchanges are the perfect type of market for securities whether of
government and semi-govt bodies or other public bodies as also for shares and
debentures issued by the joint-stock companies. In the stock market, purchases
and sales of shares are affected in conditions of free competition. Government
securities are traded outside the trading ring in the form of over the counter
sales or purchase. The bargains that are struck in the trading ring by the
members of the stock exchanges re at the fairest prices determined by the basic
laws of supply and demand.
DEFINITION OF 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:
1. Shares, scrip, stocks, bonds. Debentures stock or other marketable
securities of a like nature in or of any incorporated company or other
body corporate;
2. Government securities; and
3. Rights or interest in securities.
HISTORY OF STOCK EXCHANGE:-

The only stock exchanges operating in the 19 th century were those
of Mumbai setup in 1875 and Ahmedabad 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 ahemedabad in 1937. During the war
boom, a number of stock exchanges were organized. Soon after it became a
central subject, central legislation was proposed and a committee headed by
a.d.gorwala went into the bill for securities regulation. On the basis of the basis
of the committees recommendations and public discussion, the securities
contract (regulation) act became law in 1956.
FUNCTIONS OF STOCK EXCHANGE:-

Stock exchanges provide liquidity to the listed companies. By giving
quotations to the listed companies, they help trading and raise funds from the
market, savings of investors flow into public loans and to joint-stock enterprises
because of this ready marketability and unequalled facility for transfer of
ownership of stocks, shares and securities provided by the recognized stock
exchanges as a result, 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, improvement trust, local bodies and state finance
corporations have obtained from the public their financial requirements, and
industry, trade an 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 and completing projects of
expansion, diversification and modernization. By obtaining the listing and
trading facilities, public investment is increased and companies were able to
raise more funds. The quoted companies with wide public interest have enjoyed
some benefits and assets valuation has become easier for tax and other
purposes.
Various stock Exchanges in India

OUT OF THESE MAJOR STOCK EXCHANGES ARE:-
NSE
The Organization
The National Stock Exchange (NSE) 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, debt instruments

and hybrids,
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 has
become industry benchmarks and is being emulated by other market
participants. NSE is more than a mere market facilitator. It's that force which is
guiding the industry towards new horizons and greater opportunities.
BSE
INTRODUCTION:
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 nine 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 (CEO) & a
Chief Operating Officer (COO).
The Executive Director as the Chief Executive Officer is responsible for the
day-to-day administration of the Exchange and the Chief Operating Officer and
other Heads of Departments 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 has been constituted. The Committee considers judicial &
quasi matters in which the Governing Board has powers as an Appellate
Authority, matters regarding annulment of transactions, admission, continuance
and suspension of member-brokers, declaration of a member-broker as
defaulter, norms, procedures and other matters relating to arbitration, fees,
deposits, margins and other monies payable by the member-brokers to the
Exchange, etc.
REGULATORY FRAME WORK OF STOCK EXCHANGE:
The Securities Contract Regulation Act, 1956 and Securities Exchange

Board of India 1952 provided a comprehensive legal framework. Three tier
regulatory structure comprising
Ministry of finance
The Securities And Exchange Board of India
Governing body
MEMBERS OF 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 educational is a pass in 12th standard examination.
SECURITIES AND EXCHANGE BOARD OF INDIA {SEBI}
The securities and exchange board of India was constituted in 1998 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
five other members appointed by the central government.
With thee 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
I. To protect the interest of investors in securities.

II. Regulating the business in stock exchanges and any other securities
market.
III. Registering and regulating the working of intermediaries associated
with securities market as well as working of mutual funds.
IV. Promoting and regulating self-regulatory organizations.
V. Prohibiting insider trading in securities.
VI. Regulating substantial acquisition of shares and take over of
companies.
VII. 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):
1. Board of Directors of Stock Exchange has to be reconstituted so as

include non-members, public representatives and government
representatives to the extent of 50% of total number of members.
2. Capital adequacy norms have been laid down for the members of
various stock exchanges depending upon their turnover of trade and
other factors.
3. All recognized stock exchanges will have to inform about transactions
within 24 hrs.
Types of order:
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 buy Reliance Petroleum at
Rs.50.Here, the orders 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.
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 ANDHRABANK at Rs.105 stops loss at Rs.100.
Buying and selling shares: The to buy and sell the share the investor has to
locate register broker or sub broker who render prompt and efficient to service
to him. The order to buy or sell specified number of shares of the company of
investors choice are placed with the broker. The order may be of any of the
above any mentioned 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 the 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.
Share groups: The listed shares are divided into 3 categories:

Group A shares, B1 shares, B shares. The last 2 groups are referred to cleared
securities or non specified shares. The shares that come under the specified
group can avail the carry forward transaction. In A group, shares are selected
on the basis of equity, market capitalization and public holding. Further it
should have good track record and dividend paying company. It should have
good growth potential too. The trading volumes and the investors base are high
in A group shares. Any company when it satisfies these criteria would be
shifted from B group to A group.
In the B1 group actively traded share are included. Carry forward transactions
are not allowed in this group. Settlement takes place through the clearinghouse
along with the A group shares. The settlement cycle and the procedure are
identical to A group security. The rest of the company shares listed from the
B group.
Rolling settlement system:

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 demat list and had daily
turnover of about Re.1 crore or more. Then it was extended to A stocks in
Modified Carry Forward Scheme, Automated Lending and Borrowing
Mechanism (ALBM) and Borrowing and lending Securities Scheme (BELSS)
with effect from dec 31, 2001.
SEBI has introduced T+5 rolling settlement in equity market from July 2001
and subsequently shortened the cycle to T+3 from April 2002. After the T+3
rolling settlement experience it was further reduced to T+2 to reduce the risk in
the market and to protect the interest of the investors from 1st April 2003.
Activities on T+1: conformation of the institutional trades by the custodian is

sent to the stock exchange by 11.00 am. A provision of an exception window
would be available for late confirmation. The time limit and the additional
changes for the exception window are dedicated by the exchange.
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.
T+2 activities: The depository permits the download of the paying in files of
securities and funds until 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.
STATEMENT OF PROBLEM
Online trading and Demat are the two emerging concepts in stock market. It
involves personal factors, technical factors, business factors and economic
factors. The interplay of these factors on stock market requires a deep study
about the pattern process and procedures and performance. This study is
intended to identify the various problems in online trading system that are being
faced by the traders.
LITERATURE REVIEW:
Dr. Ramesh onkareppa olekar

The term "market" can have many different meanings. One usage of the term
denotes the primary market and the secondary market. These two markets
distinguish between the market where securities are created and the market
where they are traded among investors. Their function is the key in
understanding how securities are traded. The primary market is where securities
are created. It's in this market that firms sell (float) new stocks and bonds to the
public for the first time. Secondary market is where most trading occurs, the
secondary market is the one in which securities are traded after having been
initially offered in the primary market. It is basically a market in which an
investor purchases an asset from another investor, rather than an issuing
corporation. This includes the NYSE, NASDAQ and all major exchanges
around the world. The defining characteristic of the secondary market is that
investors trade among themselves. For example, if you go to buy Microsoft

stock, you are dealing only with another investor who owns shares in Microsoft.
Microsoft (the company) is in no way involved with the transaction. However
there was an improvement in the mechanism of trading whereby it was seen that
there was a shift from the traditional method of physical trading to the updated
the version of online trading.
Online brokerage has grown substantially since the introduction of Internet and
now account for 40%-50% of retail trade. This change has come in because
individual investors want to increase control over their finances and do not want
someone else to manage the money. Online trading has become very popular in
last couple of years because of convenience of ease and use. Numerous
companies have gone on-line to meet their customers demands enabling them
to trade when they want and how they want to. Online trade, which now
accounts for 50%60% of all retail trade, is forecasted to increase to 70% by
2008. At present online brokers hold $574billion in assets but this figure is
expected to grow to $4 trillion by end of 2007. The market has become
saturated and very competitive. As the number of players increase, it becomes
very difficult to differentiate. The volatility in US equity, market in 1999 and
September 11 World Trade Center attack has hurt the online brokerage trading
volumes. Established E-brokerage firms have created bearer to entry that makes
it difficult for new player to enter into the market. Dematerialization the process
by which physical certificates of an investor are converted to an equivalent
number of securities in electronic form and credited in the investor's account
with his (DP) Depository Party. Only those certificates that are already
registered in your name and are in the list of securities are admitted for
Dematerialization at NSDL/ CDSL. Demat shares are supposed to obviate all
the problems of physical trading. The biggest attraction of trading in Demat
shares is that the shares an investor buys comes with a clean title and
immediately after the settlement on the relevant stock exchange. Buying shares
in the Demat form always guarantees the investor a good title as soon as the
settlement is over and hence it is a preferred mode of trading today and will be
so in the future also.
EFFECT ON OFF-LINE BUSINESS
With the emergence of e-broking, which offers many benefits like, level playing
filled to all investors, comfort of the house, simplicity, low brokerage and value
added services it could be possible for some of the offline trade to shift to online
trade. The proportion of online broking business compare to off line broking is
miniscule about less than 1%. The offline player would not be affected unless
the figure reaches a minimum of 8-10%. Online trade has not started to eat the
volumes of, off line business till now. But at the same time it has created new
set of clients for e.g., NRIs who were not very active in the market due to lack
of transparency and information, have moved to use this facility. Housewives
are another new category. Net savvy students and retired persons are the next
expected category.
Depository services-beginning of the era of stocks at click Today it is a practical
reality that one can arrange delivery of securities (shares) sold anytime,
anywhere to anyone by a click of the mouse and it is possible to trade in
securities and settlement of the accounts from the convenience of a sitting room
or via a laptop. The depository is responsible to deliver and receive securities
trade at the stock exchange, which are the business partners of the depository. It
does not deal with financial aspect of the settlement of the trade.
Dematerialization of securities (shares) was the commencement of the era of
stocks. The beginning was made in 1996, with legislation of the depository act
1996 and SEBI regulations 1996.
INDIAN E-BROKING SCENARIO
The Indian stock broking business has gone through a sea of changes. From that
of a business dominated by few individual players to institutional members, as
did trading open outcry and hidden deeds to screen best and transparency. India
enters the cyber-trading era to equal the current market trends taking into
consideration the need to facilitate inflow of funds in the capital market. The
trading system will enable all categories of investors, resident and non-resident
Indian, to trade online. Online brokerage in India is still in its early days.
Though the trade through online broking is very miniscule compare to total
trading, the signs are that it will grow to 30%-35% in next few years.
Andrew B. Winston
University of texas at Austin
Anew electronic financial market is fast emerging. Connected by high-speed
networks, buyers and sellers are gathering in virtual marketplaces and
revolutionizing the way business is conducted. The nancial services industry,
among the most innovative and aggressive in its use of IT, has created an
entirely new online brokerage industry in just a few years. In 1996, there were
only 1.5 million online brokerage accounts. That number was estimated to be
5.3 million at the end of 1998, and today, these accounts are responsible for 25
percent of all retail trades.1 Future technological advances will introduce new
trading mechanisms and other new electronic markets.2 The principal functions
of nancial markets are to bring buyers and sellers together and to provide a
price discovery mechanism for the assets being traded. In this article, we
describe our nancial bundle trading system (FBTS), a Web-based continuous
electronic market that traders can use to execute bundle orders. With a bundle
order, a trader can order a combination of stocks or assets. We used a novel
bundle trading mechanism developed by the Center for Research in Electronic
Commerce at the University of Texas at Austin, described in the sidebar
Automated Matching Mechanism. FBTS provides universal access to traders
on the Internet, allows interactive information exchange between traders and
market makers, and executes trades using the automated matching mechanism.
FBTS is in an experimental stage and is being extensively used for research at

the University of Texas at Austin. We developed FBTS using a distributed
object model based on Java RMI (remote method invocation), which supports
interactive communication between trading applications and the market. This
approach has signicant advantages over CGI (Common Gateway Interface)
scripts because it improves interactivity by allowing continuous updates. We
implemented concurrent trading processes and concurrency controls using
Javas multithreading technique. We also implemented asynchronous
communication. Because the nancial sector has a sizable presence in the IT
market, these innovations and the subsequent institutional changes will also, in
turn, strongly inuence future IT development in areas such as distributed
computing and Web-based application development. We believe nancial
innovations such as the FBTS and its supporting information technologies will
greatly impact the organization of nancial markets.
Laveena M and Jindal.s, Diman .M:

Chitkara University, India
Online trading is conducting stock transactions on the internet via several
websites. Such businesses have a great role in emerging trends and online
business has a great impact over many financial services consists of check
writing, credit and debit cards, electronic bill paying. Over years the emerging
businesses have a brief history of success all due to internet. The online
transaction processes of finance inclusive of buying and selling of bonds, stocks
and other investments, these all comes under online trading. The actual scenario
of all the business trends have diversified their business into online transaction
of their goods and services and literally it has a great impact on their sale of
business. For instance we can take the example of any website which deals in
several goods and services provided by them over the website and we see that
all the perspective relating to the business is avail on the website whether it may
concern to the discount, lump sum amount, certain taxes, etc. Consumers plays
an important role and their zest, zeal and desire are being fulfilled by online
business. This is the reason why the online trading businesses are on the pace to
the success. Moreover analyzation of the process becomes out of risk and risk
management process be easily handled time to time.
Current Scenario of Online Trading Dealings outside the country have reached
to such a success for the enterprises that the amount of tax has been lowering
gradually and results to their profit in every quarter. As the economy is growing
with a pace forward, the desire of each and every individual is showing a
greater ease in terms of financial transaction, possession, delivery and every
aspect. Online trading is fruitful not only for the consumers but for the suppliers
as well because they wont require the possession of goods to be further sold. A
product is full of questions before being sold and those all question can be
availed with the answers at the website online for everyone. In the stock market,
the competition is on such a level of mastery that it can be accessed by every
individual via various peripherals.
Role of the Online Websites There are several bodies designated for the
different purposes of online trading which may conclude the coordination of
information/ requirements and these are time to time simultaneously intimated
under various departments of the business. The online website has its delegation
structure for the supply and discount as per product and as per coupon applied,
as the transaction or the instrument is duly categorized by the website itself for
the virus detection program so that the amount paid/unpaid might not mismatch.
Re-deployment gets structured as per the stipulations and all the departments or
option on the websites are instructed time to time. Each organization dealing
with similar goods and services have other major players with them online but
almost all the websites are in the access due to the competition increase. The
part of advertisements of their products or services have been shown a decrease
in the costs over the couple of years since the online trading business came on
existing because earlier the most heightened competition was being faced by all
such organization was due to the advertisement cost they spend. However, the
online stock market business took place in South India at the initial stage and
then gradually expanded as a whole.
Now a days, a separate focus is being put on reengineering the business
processes around the internet. With the increasing convergence of IT Sector,
networking sector, technology sector; the online trading in the stock exchange
companies plans to venture into IT enabled services and as a first step they will
try to leverage the infrastructure of the service companies for net related
services. These will include internet access, content development, web hosting
and E-commerce applications. The retail channel will be used to push bundle of
services to the consumers in the country. This business is bound to grow
keeping in mind the phenomenal growth in internet subscribers and E-
commerce revenues the world over. For a couple of years, this online business
trend has been profit making in the world over, a lot many dividend paying
companies being established since 1980 with a consistent growth in online
business volume each year.
Nidhi Walia and Ravinder Kumar
Proposed that online trading is all about cost saving. However, majority of
Indian investors have not realized its benefits so it only targets the educated
investors.
Sarika Srivastava
Examined the impact of internet on online trading. She remarked on the
availability of high speed internet that can remove all hassles related to the field
as it is a major problem.
Dr. A Abdul Rahim
Discovered the pitfalls related to online trading. He suggested that investors
should be protected from all hassles and problems so as to remain confident
while trading online.
Madan Lal
Reviewed certain facts related to online brokers. He stressed upon the
importance of online brokers and the problems they face while trading.
Nidheesh KB
Reviewed upon the role of the NSE and BSE in online trading and about the
regulations on trading by these Stock Exchanges about how they regulate the
trade account of investors and various brokers.
Brad M Barber and Terrance Odean
Studied the deep relationship between the investor and his major weapon, the
internet, suggesting that a combination of internet and shareholders voting could
become a new tool for organizations promoting special society welfare like
corporate social responsibility, environmental actions and consumer help.
Arwinder Singh
Claimed that online trading is highly beneficial and cheap in terms of money
and time. Certain alterations are however required to make it more fruitful.
Yannis Bakos
Stated that online trading is on a rising track and is gaining its momentum very
fast.
Allen
Shared his thoughts and stated the process which goes simultaneously in the
business during online transactions. The ordered items get dispatched after
identification process immediately. Softwares used in application process by
the online traders.
HILL stated there are many options in online trading to access every corner of
real world in the online trading business. The emerging trends of online options
has exploded over the recent years and is now being popularized well. The
internet has fuelled a booming business of small investors throwing money at
the derivatives market. The investors who have the skills of daily trading can
expand their finance array. For an amateur investor who is ready to learn how to
trade stock options the derivatives market can be enticing, but also frightening.
Chandan Swamy
In India, the Securities Exchange Board of India (SEBI) has allowed internet
trading of stocks in a limited form. In internet stock trading, the net is used as a
medium to communicate orders to the stock exchange through the brokers
website. The user cannot directly trade in the exchange because trading is
permitted only for registered brokers. The user can, however, place orders
through a brokers site. These E-broking sites also provide the client with an
opportunity to buy and sell securities from the confines of ones home or office.
The client is able to track the fluctuations in a particular stock and the market as
a whole while deciding to execute the order and also while the order is being
executed. The confirmation of the executed order will be available in real time.
Natarajan (2000) feels that prices will be determined by market forces and the
availability of a particular product. Depending on the supply and a comparative
list of similar products, the customer will be able to choose the best stocks
available in the market. Internet trading started in India on 1st April 2000 with
as many as 79 members seeking permission to do so. Geojit Securities was the
first to go online. On February 1, 2000, the National Stock Exchange (NSE)
opened up the internet-based trading system for its members, the first stock
exchange in India to do so. However, after two years of trading, only a dozen
brokers continue to remain ahead in offering online service. According to NSE
data, there are around 2.3 lakh registered online traders. The SEBI Committee
on Internet-based Securities Trading and Services has allowed the net to be used
as an Order Routing System (ORS) through registered stockbrokers on behalf of
their clients for execution of transactions. Under the ORS, a client enters his
requirements (security, quantity, price, and buy/sell) in the brokers site which
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. At the same time, the customers
portfolio and ledger account gets updated to reflect the transaction [Figure 1].
Since all orders have to necessarily be routed through the exchange mechanism,
it ensures transparency and security. The sites ensure security in the following
way. The system permits only a registered client to log in using a user id and
password. This unique combination of user-id and password will permit entry
into the electronic ring. Most sites use encryption technology to ensure that the
transmitted information is safe and cannot be accessed by any outsider.
The net can help lower the cost of transactions, improve customer data, increase
cost-selling opportunities, and integrate new financial products. Although the
initial development costs may be high, it can be overcome by volumes which
can be created by encouraging more and more empowered customers to click on
to the site. The Indian online brokerage sites are in a state of flux with new
additions taking place rapidly. The sites which were studied have done value
additions in a span of six months. Online trading requires a certain amount of
sophistication on the part of the investor. It offers a distinct advantage to small
time investors who are otherwise not entertained by the offline brokers. The
client has to be self-motivated and self-directed and be familiar with computers
as well as trading signals/languages. Online trading empowers the educated
investor to make his own decisions. The results of the survey also show that
educated investors usually take their own decisions and do their own research
by browsing through various sites. This is where online sites can make the
difference by allowing the investor access to variety of information about
different avenues of investments (securities, debentures, bonds, mutual fund
units, IPOs) and mass customization (ability to customize information by
having personalized home pages). The period between June 2001 and December
2001 saw an increase in the average daily turnover in online trading from Rs 10
crore to Rs 60 crore. This sudden spurt in online trading can partly be attributed
to the introduction of rolling settlement by the SEBI. The present volume of
online trading on the NSE is about 2 per cent of its total turnover. With the
growth of the educated working class and business class and support from the
SEBI, online trading in India is bound to grow at a faster pace than it is now.
David Whitely
has started that the use of the internet is taking off among private investors in
stocks and shares. The internet can make available to the private investors the
minute information. The use of online brokerage services automates the process
of buying and selling and hence allows a reduction of commission charges. Also
the commodity being traded is intangible; the ownership of stocks and shares
can be recorded electronically so that there is no requirement for physical
delivery.
Antony Saunders and Marcis Million Cornett
has stated that, the major stock markets currently start functioning at 9.30 a.m.,
Eastern standard time and closes at 4.00 p.m. Eastern standard time. Extended,
hours trading involve any securities transaction that occurs outside these regular
trading hours. Almost all extended hours trading are processed through
computerized Alternative Trading System, [ATS], also known as Electronic
Communications Network [ECNS]. ECNS are computerized systems that
automatically match orders between buyers and sellers and serve asan
alternative to traditional market making and floor trading. They are also the
major vehicles for extended hours trading.
Rajagopalan, V,
expressed the problem faced by him on online share trading. What he cannot
stomach is how his ID number was interchanged with another client, and his
account debited to pay for derivatives, while he did not order. Worse his scripts
were sold to cover losses which he had not incurred. Luckily, the broker
admitted his mistake and compensated him, but the episode has left Rajagopalan
extremely chary of online trading.
Objectives:
To identify the problems in the online trading system that are adopted by
the exchanges and what are their
It is to analyze the changes in trading after the exchange shifted from
outcry
o to online trading system
To know about the latest and future development in the stock exchange
Trading system
To know the online screen based trading system adopted by exchanges
and about its communication facilities. The appropriate
configuration to set the network, which would link the Exchanges
to individual / members.
To study the awareness level of various concepts of Demat &
online trading.
o To identify the benefits of online trading.
o To study percentage of savings of online trading.
o To identify the market leaders in this segment
1) To analyze and conclude what is customers perception towards online trading, its
usefulness and its ease in availability.
2) To study the procedure of trading in online trading and finding its advantages over
the manual trading
SCOPE OF THE STUDY:

It understands stock market operation through window based online
trading system
It helps to know where the traders or brokers exactly facing the problem
while doing the trading on internet
To study the mechanism of online trading system
To understand how the trading is going on online trading
To study related to derivatives and stock market
LIMITATIONS OF THE STUDY

1) For performing these king of research large data base is required. The data
collected for this study is not sufficient to analyze the investment pattern of
retail investors in India.
2) There may be many variables which influences the result but this analysis
reveals only few variables.
3) There can be some deviations in the data as the human psychology changes
from time to time.
4) The feedback we got may not be correct as the respondent might have filled
in the information with no interest or in hurry.
5) Scientific research on the part of research is also required.
6) Accuracy level may be effected when data is subjected to weighing.

Time was the biggest constraint as these studies cannot be completed with
accuracy in two month.
8) Understanding the psychology of human is not the cup of every one tea so,
might be some interpretations go wrong.
9) Some respondents might have taken the question in different sense which can
change the data collected.
10) Cost was also the constraint as collection of Primary data required huge
amount of spending.
Methodology:
Primary data:
FINDINGS
After the introduction of dematerialization the stock market has become

more transparent and it attracts more investors day by day.
If the volume increases continuously, DPs will be in a position to

decrease the charges for opening and maintenance of demat a/c.
It is observed that banks normally levy a lower service charge compared

to other depository participants.
There are some other banks which charges less services charges for demat
services than other securities companies.
When the numbers of users are more on line, the speed of the transaction
is affected.
Since the rolling settlement is one day, people who are speculating
without having full amount of money or shares with their DP, tend to face
higher degree of risk.
Some securities have not yet started with the Interactive Voice Response
(IVR) units and demat on net.
Even though online trading provides privacy to the clients, trends

available from the trading room will not help most of the online traders.
Investors dealing online must possess good knowledge for analyzing the
information passed on by the companies through net.
Conclusion
Things have changed for the better with the exchanges 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.
BROKERS have suddenly been thrown to intense competition from their counter
parts across the country.
The Regional Stock Exchanges have their own advantages like being nearer to the
retail investors and to let the Brokers perish would be detrimental to stock market
system there is no brokerage firms with in India with national reach.
In the present scenario and to compete the BROKERS would require sound
infrastructure and trading as per international standards. The concepts of business
have changed and today this has become service to client or to provide the best
possible service to client or to engage into new business from the regional center to
the metro centers and to impart liquidity introduction of on-line trading is necessary.
The introduction of on-line trading would influence in 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 Fs. 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, it
will inspire confidence in investors resulting in increased business of the exchange.
The BROKERS has a greater scope than compared to the earlier times because of
invention of online trading.
The concept of business has changed today this is a service oriental industry hence the
survival would require them to provide the best possible service to the client.
The longer trading time had helped the investors as well as the broker to take much
interest in the trading of the securities as they had extra time to take in the security
market.
The existing system can be further improved by introduction of stop loss facility that
will help to reduce investors losses.
Also there is need for an exchange to setup standing committee into breakdown of
online trading.

Introduction

Transféré par

Informations du document

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Introduction

Transféré par

Droits d'auteur :

Formats disponibles

A Study on online trading system in exchanges

About the Industry:

DEFINITION OF STOCK EXCHANGE:-

HISTORY OF STOCK EXCHANGE:-

Following diagram gives the structure of Indian financial system:

According to functional basis financial markets are classified into two

Money markets (short-term)

According to institutional basis again classified in to two types.

The organized market comprises of official market represented by

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

My emphasis is more on capital market.

INVESTORS PROTECTION IN PRIMARY MARKETS:-

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

Secondary market operations involve buying and selling of securities on

STOCK MARKETS IN INDIA

DEFINITION OF STOCK EXCHANGE:-

Stock exchange means any body or individuals whether incorporated or

HISTORY OF STOCK EXCHANGE:-

FUNCTIONS OF STOCK EXCHANGE:-

Various stock Exchanges in India

OUT OF THESE MAJOR STOCK EXCHANGES ARE:-

On its recognition as a stock exchange under the Securities Contracts

(Equities) segment commenced operations in November 1994 and operations in

Establishing a nation-wide trading facility for equities, debt instruments

Ensuring equal access to investors all over the country through an

Providing a fair, efficient and transparent securities market to investors

Enabling shorter settlement cycles and book entry settlements systems,

Meeting the current international standards of securities markets.

The Stock Exchange, Mumbai, popularly known as "BSE" was

The Exchange, while providing an efficient and transparent market for

A Governing Board having 20 directors is the apex body, which decides

Executive Committee, consisting of three elected directors, three SEBI

REGULATORY FRAME WORK OF STOCK EXCHANGE:

The Securities Contract Regulation Act, 1956 and Securities Exchange

MEMBERS OF STOCK EXCHANGE:-

He should be neither a bankrupt nor compound with the creditors.

SECURITIES AND EXCHANGE BOARD OF INDIA {SEBI}

OBJECTIVES AND FUNCTIONS OF SEBI

I. To protect the interest of investors in securities.

SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK

1. Board of Directors of Stock Exchange has to be reconstituted so as

Share groups: The listed shares are divided into 3 categories:

Rolling settlement system:

Activities on T+1: conformation of the institutional trades by the custodian is

files to clearing House/clearing Corporation by 11.00am/on T+2. The

Dr. Ramesh onkareppa olekar

investors trade among themselves. For example, if you go to buy Microsoft

FBTS is in an experimental stage and is being extensively used for research at

Laveena M and Jindal.s, Diman .M:

SCOPE OF THE STUDY:

LIMITATIONS OF THE STUDY

5) Scientific research on the part of research is also required.

6) Accuracy level may be effected when data is subjected to weighing.

After the introduction of dematerialization the stock market has become

If the volume increases continuously, DPs will be in a position to

It is observed that banks normally levy a lower service charge compared

Even though online trading provides privacy to the clients, trends

Vous aimerez peut-être aussi