A

Project Report

On

Measurement of Customer satisfaction with online-trading using

SERVQUAL Model

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE

AWARD OF DEGREEOF

MASTER OF BUSINESS ADMINISTRATION (MBA)

SESSION (2009-2011)

UNDER THE GUIDENCE OF: -

SUBMITTED BY:-
Dr. Deepak Verma
Pavnish
MBA Faculty
MBA ITM 4th SEM.

09092913

SUBMITTED TO:- Department of Management Studies

 DEENBANDHU CHHOTU RAM UNIVERSITY OF SCIENCE AND
TECHNOLOGY

DECLARATION

I, Pavnish, student of MBA(ITM), 4th Semester, studying at Deenbandhu Chhotu

Ram University of Science and Technology, Murthal, hereby declare that the project
report on the topic “Measurement of customer satisfaction with online-trading
using SERVQUAL model” submitted to DCRUST, Murthal in partial fulfillment of
Degree of Master’s of Business Administration is the original work conducted by me.
The information and data given in the report is authentic to the best of my
knowledge.
This project report is not being submitted to any other University for award of any
other Degree, Diploma and Fellowship.

Pavnish
MBA ITM 4th SEM.
09092913
 CERTIFICATE

This is to certify that Pavnish has prepared the project entitled “Measurement of
customer satisfaction with online trading using SERVQUAL model” under my
supervision. He has completed this project in partial fulfillment of the requirement for
the degree of Master of business administration of Deenbandhu Chhotu Ram
University of Science & Technology Murthal (Sonepat).

The report embodies the results of original empirical research carried out by
Pavnish.

In my opinion the Project report is for a standard expected of an MBA(ITM) Student

and is recommend that it may be sent for evaluation.

Dr. Deepak Verma

(Assistant Professor)
Department Of Management Studies
 ACKNOWLEDGEMENT

It is my pleasure to be indebted to various people, who directly or indirectly

contributed in the development of this work and who influenced my thinking,
behaviour, and acts during the course of study.
I express my sincere gratitude to Prof. Rajbir Singh for providing me an opportunity
to undergo project report at .
I am thankful to Dr.Deepak Verma (Guide) for his support, cooperation and
motivation provided to me during the project for constant inspiration, presence and
blessings.
Lastly, I would like to thank the almighty and my parents for their moral support and
my friends with whom I shared my day-to-day experience and received lots of
suggestions that improved my quality of work.

Pavnish
MBA ITM 4th Sem.
09092913
Abstract

Online services offer customers a splendid display of benefits such as

enhanced control, ease of use and reduced transaction charges. Consequently,
online services have grown rapidly and have emerged as a leading edge of service
industry. Providing online services in developed stock exchange such as
Japan, USA, France, Singapore, UK and India has lead market to become
more competitive. Therefore, brokerages compete in offering superior service
quality.

To understand the online trading we need to know the history of stock trading in
India and total exchange in India such has NSE and BSE. Stock markets refer to a
market place where investors can buy and sell stocks. The price at which each
buying and selling transaction takes is determined by the market forces (i.e. demand
and supply for a particular stock).

Let us take an example for a better understanding of how market forces determine
stock prices. ABC Co. Ltd. enjoys high investor confidence and there is an
anticipation of an upward movement in its stock price. More and more people would
want to buy this stock (i.e. high demand) and very few people will want to sell this
stock at current market price (i.e. less supply). Therefore, buyers will have to bid a
higher price for this stock to match the ask price from the seller which will increase
the stock price of ABC Co. Ltd. On the contrary, if there are more sellers than buyers
(i.e. high supply and low demand) for the stock of ABC Co. Ltd. in the market, its
price will fall down.

In earlier times, buyers and sellers used to assemble at stock exchanges to make a
transaction but now with the dawn of IT, most of the operations are done
electronically and the stock markets have become almost paperless. Now investors
dont have to gather at the Exchanges, and can trade freely from their home or office
over the phone or through Internet.
History of the Indian Stock Market - The Origin

One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years
old history.

East India Company was the dominant institution and by end

18th Century: of the century, business in its loan securities gained full
momentum

Business on corporate stocks and shares in Bank and Cotton

1830's: presses started in Bombay. Trading list by the end of 1839 got
broader

Recognition from banks and merchants to about half a dozen

1840's:
brokers

Rapid development of commercial enterprise saw brokerage

1850's:
business attracting more people into the business

1860's: The number of brokers increased to 60

The American Civil War broke out which caused a stoppage of

1860-61: cotton supply from United States of America; marking the
beginning of the "Share Mania" in India

1862-63: The number of brokers increased to about 200 to 250

A disastrous slump began at the end of the American Civil War

1865: (as an example, Bank of Bombay Share which had touched
Rs. 2850 could only be sold at Rs. 87)

Pre-Independance Scenario - Establishment of Different Stock Exchanges

With the rapidly developing share trading business, brokers

1874: used to gather at a street (now well known as "Dalal Street")
for the purpose of transacting business.

"The Native Share and Stock Brokers' Association" (also

1875: known as "The Bombay Stock Exchange") was established in
Bombay
 Development of cotton mills industry and set up of many
1880's:
others

Establishment of "The Ahmedabad Share and Stock Brokers'

1894:
Association"

Sharp increase in share prices of jute industries in 1870’s was

1880 - 90's:
followed by a boom in tea stocks and coal

1908: "The Calcutta Stock Exchange Association" was formed

Madras witnessed boom and business at "The Madras Stock

1920:
Exchange" was transacted with 100 brokers.

When recession followed, number of brokers came down to 3

1923:
and the Exchange was closed down

1934: Establishment of the Lahore Stock Exchange

Merger of the Lahore Stock Exchange with the Punjab Stock

1936: Exchange

Re-organisation and set up of the Madras Stock Exchange

Limited (Pvt.) Limited led by improvement in stock market
1937:
activities in South India with establishment of new textile mills
and plantation companies

Uttar Pradesh Stock Exchange Limited and Nagpur Stock

1940:
Exchange Limited was established

1944: Establishment of "The Hyderabad Stock Exchange Limited"

"Delhi Stock and Share Brokers' Association Limited" and "The

Delhi Stocks and Shares Exchange Limited" were established
1947:
and later on merged into "The Delhi Stock Exchange
Association Limited"

Post Independance Scenario

The depression witnessed after the Independance led to closure of a lot of

exchanges in the country. Lahore Estock Exchange was closed down after the
partition of India, and later on merged with the Delhi Stock Exchange. Bnagalore
Stock Exchange Limited was registered in 1957 and got recognition only by 1963.
Most of the other Exchanges were in a miserable state till 1957 when they applied
 for recognition under Securities Contracts (Regulations) Act, 1956. The Exchanges
that were recognized under the Act were:

1. Bombay
2. Calcutta
3. Madras
4. Ahmedabad
5. Delhi
6. Hyderabad

Types of Transactions

The flowchart below describes the types of transactions that can be carried out on
the Indian stock exchanges:

Indian stock exchange allows a member broker to perform following activities:

• Act as an agent,
• Buy and sell securities for his clients and charge commission for the same,
• Act as a trader or dealer as a principal,
• Buy and sell securities on his own account and risk.

Over The Counter Exchange of India (OTCEI)

Traditionally, trading in Stock Exchanges in India followed a conventional style where

people used to gather at the Exchange and bids and offers were made by open
outcry.

This age-old trading mechanism in the Indian stock markets used to create much
functional inefficiency. Lack of liquidity and transparency, long settlement periods
and benami transactions are a few examples that adversely affected investors. In
order to overcome these inefficiencies, OTCEI was incorporated in 1990 under the
Companies Act 1956. OTCEI is the first screen based nationwide stock exchange in
India created by Unit Trust of India, Industrial Credit and Investment Corporation of
India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance
Corporation of India, General Insurance Corporation and its subsidiaries and
CanBank Financial Services.
Trading Pattern of the Indian Stock Market

Indian Stock Exchanges allow trading of securities of only those public limited
companies that are listed on the Exchange(s). They are divided into two categories:

National Stock Exchange

In order to lift the Indian stock market trading system on par with the international
standards. On the basis of the recommendations of high powered Pherwani
Committee, the National Stock Exchange was incorporated in 1992 by Industrial
Development Bank of India, Industrial Credit and Investment Corporation of India,
Industrial Finance Corporation of India, all Insurance Corporations, selected
commercial banks and others.

NSE provides exposure to investors in two types of markets, namely:

1. Wholesale debt market

2. Capital market

Wholesale Debt Market - Similar to money market operations, debt market

operations involve institutional investors and corporate bodies entering into
transactions of high value in financial instruments like treasury bills, government
securities, commercial papers etc.

Trading at NSE
• Fully automated screen-based trading mechanism
• Strictly follows the principle of an order-driven market
• Trading members are linked through a communication network
• This network allows them to execute trade from their offices
• The prices at which the buyer and seller are willing to transact will appear on
the screen
• When the prices match the transaction will be completed
• A confirmation slip will be printed at the office of the trading member
• Advantages of trading at NSE
• Integrated network for trading in stock market of India
• Fully automated screen based system that provides higher degree of
transparency
• Investors can transact from any part of the country at uniform prices
• Greater functional efficiency supported by totally computerized network
Table of contents Page

1. Table of contents…………………………………………………….7

2. Executive Intro……………………………………………………….8

3. Project Detail…………………………………………………………9

3.1 Project Title…………………………………………………………..9

3.2 Scope of the study………………………………………………….9

3.3 Research Objectives……………………………………………….9

3.4 Research Methodology……………………………………………10

3.5 Research design…………………………………………………..10

3.6 Sampling Methodology……………………………………………11

3.7 Limitations of the study…………………………………………….11

4. Literature review…………………………………………………….12

4.1 E-commerce………………………………………………………...12

4.2 Online trading………………………………………………………15

5. The growth of online trading……………………………………...18

6. The emergence of online trading in india………………………..23

6.1 ICICI Direct………………………………………………………….25

6.2 Reliance Money……………………………………………………27

6.3 Sharekhan………………………………………………………….29

6.4 Kotak Securities……………………………………………………31

6.5 India Bulls………………………………………………………….35

6.6 Motilal Oswal………………………………………………………36

6.7 Religare…………………………………………………………….38

6.8 India infoline………………………………………………………39

 7. Online trading booms in India……………………………………42

8. Effects of Online trading on the investment community………51-54

9. Analysis…………………………………………………………….64

10. Conclusion…………………………………………………………87

Executive Intro

As per the title suggest the project report has been prepared as a study to measure
customer satisfaction towards online stock trading in India using the current
technology which has a great influence in growth of primitive stock trading which was
earlier part of few specialized stock brokers has been thrown open to common
people in India and across the globe. 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 ICICDirect, RelianceMoney, ,
Indiabulls, Religare securities Angel Broking, Reliance Money etc. 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 75+ respondents, it was seen that
most of the investors prefer online trading because of few major factors such as time
saving convenience, protection through Freudian brokers etc. although during my
research project I’ve seen that most of the respondents feel online trading, a secure
way of investing into stock market still a few of them feel that it’s 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 accounts. 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.

3. Project Detail

3.1 Project Title

Measurement of customer satisfaction with online trading using SERVQUAL model

3.1.1 Title Justification

The above title is self explanatory. This study mainly deals with development and
usage of online trading in India since its inception in the year 2000. Due to subprime
mortgage crisis in year 2009-10 BSE, NASDAQ and S&P 500, two major stock
exchange of the world entered into the bearish market. It also affected the stock
market all over the world including India. It is the challenge for the growth and
development of trading in India that’s why I choose that particular topic to study how
online trading affect satisfaction of customers.

3.2 Scope Of The Study

Since the year 2000 a big boom has been witnessed in the Indian Stock Market
when the market showed the coming up of Online Trading System. Many online
stock trading companies came but initially due to lack of online trading some
companies vanished and some survived. The companies which survived are getting
the handsome returns also attracting the foreign Investment Companies. Nowadays
this sector is facing cut-throat competition and also provides huge growth prospects.
The study then goes to evaluate and analyze the findings so as to present a clear
picture of the trends in the online trading sector.

3.3 Research Objectives

The objectives of my research project is –

1. How online trading impacts on customer satisfaction in National stock

Exchange?

2. To find out factors which effect on traders dissatisfaction.

3. To find out potential abilities of online trading which affects customer

satisfaction.

4. To find out interest of people towards online trading.

5. To collect data from respondents using SERVQUAL model.

3.4 Research Methodology

The research methodology for the project completed in two phases:

• First Phase is the collection of Secondary Data:

This involves the collection of Secondary data using internet and internal sources for
comparison of Online trading account of other Broking houses in the market like
ICICI Direct, MOTILAL Oswal, Religare and Reliance Money etc. This also involves
talking to their executives regarding various features provided to the customer along
with their Brokerage structure.

• Second Phase is Collection of Primary Data and Analysis:

After collecting the Secondary data the next phase will be collection of primary data
using Questionnaires. The questionnaire will be filled by around 75 people who will
be mainly from Bangalore/Hyderabad/Mumbai region. The sample will consist of
people who are employed or work as free lancers dealing in investment options to
know their financial requirements. Based on these requirements different
investments will be informed to them for further perusal.
 3.5 Research Design

3.5.1 Non Probability

The non –probability respondents have been researched by selecting the persons
who do the stock trading. Those persons who do not trade in stocks have not been
interviewed.

3.5.2 Exploratory and Descriptive Research

The research is primarily both exploratory and descriptive in nature. The sources of
information are both primary and secondary. The secondary data has been taken by
referring to various magazines, newspapers, internal sources and internet to get the
figures required for the research purposes. The objective of the exploratory research
is to gain insights and ideas. The objective of the descriptive research study is
typically concerned with determining the frequency with which something occurs. A
well structured questionnaire was prepared for the primary research and personal
interviews were conducted to collect the responses of the target population.

3.6 Sampling Methodology

3.6.1 Sampling Technique

Initially, a rough draft was prepared a pilot study was done to check the accuracy of
the Questionnaire and certain changes were done to prepare the final questionnaire
to make it more judgmental.

3.6.2 Sampling Unit

The respondents who were asked to fill out the questionnaire. These respondents
comprise of the persons dealing in stock trading. The people have been interviewed
in the open market, in front of the companies, telephonic interviews and through
other sources also.

3.6.3 Sampling Size

The sample size was restricted to only 100 respondents.
 3.6.4 Sampling Area
The area of the research was Sonepat, NCR.

3.7 Limitation Of The Study

The various limitations of the study are:

1. People were not willing to answer the entire questionnaire due to the less time
available to them.
2. Some respondents might be hesitant to divulge personal and financial
information which can affect the validity of all responses.
3. There is lack of awareness among people about investing in stock market. So
the people who are aware of such things were found in specific areas for
survey purposes.
4. Most people are comfortable with traditional system in small towns and like to
trade from their respective brokers, hence not providing a true opinion of
theirs.
5. Some of the respondents who did not do online trading were able to respond
to only few questions.
6. The survey was done in the some major metro cities and may not truly
express the opinion of whole country.

4. Literature Review

This chapter brings up relevant literature required to find answers and connect to
our research questions. First, vital literature about online trading along with key
concepts of different terms, drivers of growth and the necessity of its
existence will be presented so that it becomes easier to understand the research
area.

4.1 Ecommerce
Electronic commerce, commonly known as e-commerce or eCommerce, or e-
business consists of the buying and selling of products or services over electronic
systems such as the Internet and other computer networks. The amount of trade
conducted electronically has grown extraordinarily with widespread Internet usage.
The use of commerce is conducted in this way, spurring and drawing on innovations
in electronic funds transfer, supply chain management, Internet marketing, online
transaction processing, electronic data interchange (EDI), inventory management
systems, and automated data collection systems. Modern electronic commerce
typically uses the World Wide Web at least at some point in the transaction's
lifecycle, although it can encompass a wider range of technologies such as e-mail
as well.

Background
This section is intended to offer sufficient background of the research area that
covers the general idea of e-commerce and the position of online trading as one of
the major element of each economy.

E-commerce and the Position of Online Trading

In business today electronic commerce (e-commerce) is one of the common topics
being discussed. Kalakota and Whinston (1996) defined e- commerce as "The
buying and selling of information, products and services via computer
networks, the computer networks primarily being the Internet. It is
streamlining business processes, restructuring whole industries and re-shaping of
customer and supplier relationship (Daniel et al., 2002). In order to perform one or
more of the business functions Internet based e-commerce systems use World
Wide Web based application solutions. In fact electronic commerce is a way of
conducting, managing and running business transaction using computer and
Internet. Based on the significant power of World Wide Web and global e-
commerce, the numbers of internet users' have been rapidly increasing and have
widely spread into all aspects of life. It has opened up tremendous business
opportunities for its users. The most common use of e-commerce is to replace or
enlighten conventional transaction methods and in the last few years a substantial
growth of internet-based services being experienced. According to an Angusreid
group study (2008) of Internet users in 44 countries nearly 220 million of the
estimated 500 million worldwide Internet users have already made a purchase or
transactions online. Stock exchange was influenced by Internet technology as
well as other business sectors. Stock exchange as a critical pillar of each
economy, acts exactly the same as a thermometer of economical condition of the
country. The volume of stock transactions, the index growth and tendency of
individuals and legal entities crystallized if the economy of a country is flourishing
or on the other hand continue recession conditions. Therefore, providing a flow
 trading process and accelerating the transaction settlement can create more
motivation for traders to join stock trading exchange likewise cooperate and invest
in companies and finally, in this manner, internet creates an opportunity of reaching
these goals.

Online Trading and Customer Satisfaction

Applying conventional trading systems in India leads to many aspects of
problems like manipulation, lot's of paperwork, insiders' illegal activities and etc.
These problems cause traders' dissatisfaction and the lack of
technological foundations creates an inefficient market. Stock market is growing up
and the number of traders rapidly increasing, therefore following conventional
method in handling and controlling the market, may in turn directs us to lose the
potential power of this market in order to integrate the traders' small capital. With
no doubt, traders leave the market where there is no appropriate surveillance over
the activities because the unsatisfied customer will not take all the risk in stock
market. So it is clear that if stock market as a supervision organization could not
offer suitable services to the traders, market expansion is meaningless. In other
words, it seems that providing and recovering service quality in this market may
enhance traders' satisfaction and encourage investing more and more. But how
the traders' satisfaction can be measured and how can be proved that, there is a
dramatically gap between what traders looking for and what traders receive as a
service?

Model used to measure service quality

Leading researcher (Parshuraman) came up with five determinants that can be

used to measure service quality. This scale named SERVQUAL and has been
developed for the service sector. It has five generic dimensions or factors and is
stated as follows:

1. Tangibles: Physical facilities, equipment and appearance of personnel.

2. Reliability: Ability to perform the promised service dependably and

accurately.
3. Responsiveness: Willingness to help customers and provide prompt service.
4. Assurance (including competence, courtesy, credibility and security):
Knowledge and courtesy of employees and their ability to inspire trust and
confidence.
5. Empathy (including access, communication, understanding the customer):
Caring and individualized attention that the firm provides its customers.

Motivation
As it was mentioned, stock exchange plays a critical role in each country's
economy and understanding of traders’ needs, as a main customer of this market,
becomes an important factor. In this situation, satisfaction has great effect on
traders retention and more important attract potential traders and as a result
reach to more efficient market and the possibility of market expansion will be
feasible. Good customer service quality is the main factor in creating satisfaction
and enhances the level of traders' satisfaction. So it is desirable for responsible in
stock exchange to uncover what attributes traders utilized in their assessment of
service quality and satisfaction and which attributes are more important.

Recently many stock exchanges all over the world have used the Internet as a new
tool to offer their customers a variety of services 24 hours a day and offer better
services to traders. But these steps are not passed in India yet and traders suffer
from insufficient services. Conventional trading system, poor surveillance power,
limit services and so many others short comings, create a situation that increase the
risk of investing in this market, create a suitable situation for price manipulation,
wash sales and so many other frauds which in return lead to traders
dissatisfaction and inefficiency of Indian stock exchange.

4.2 Online Trading

Countries all over the world have invested heavily to leverage the Internet and
transform their conventional businesses into e-businesses. E-businesses are
defined as the use of Internet based information and communication technologies
(ICT) by organizations to conduct transactions, share information and maintain
relationships. New technologies such as World Wide Web have made a profound on
all business around the world. E-business enables organizations to reduce cost,
increase demand and create new business models.
E-commerce is a subset of e-business and defined as buying and selling of goods
and services on the Internet, especially the World Wide Web www.dotcom-
productions.com). In fact, any commerce carried out using computer networks are
called electronic commerce and has created an opportunity to do business and
handle transactions electronically and stock trading domain makes the most of its
chance all over the world. As, the time factor play a critical role in this business,
internet quicken and streamline the trading process. Creating more convenience,
saving time and money and paperless process are the most significant goals of the
online trading.
 Definitions of Online Trading

The Internet revolution has been changing the fundamentals of the society. It
changes the shape of communication and also trading process. It shifts closer and
closer to vital sources of information and new trading environment by the name of
"online trading". It provides users with means to directly interact with service-
oriented computer systems tailored to their specific needs; therefore, they can serve
themselves better by making their own decisions. There are lots of definitions for
online trading. Hereby, four main definitions are mentioned:

Referring to two websites which are active in trading fields (www.investorwords.com

and www.advfn.com) they define online trading in this manner: The increasingly
popular activity of buying and selling securities over the internet, or to a lesser
extent, through a broker's proprietary software. Likewise Fan et al. define it in this
way: The 'online trading' is defined as a process of trading financial products
especially stocks over the Internet, and online stock trading site is a web site that
helps traders or customers to buy and sell the financial products over the Internet.
Also online trading is described as service offered on the internet for purchase and
sale of shares. In the real world you place orders with your stockbroker. In online
trading, you will access a stockbroker's website through your internet-enabled PC
and place orders through the broker’s internet-based trading engine. These orders
are routed to the Stock Exchange without manual intervention and executed thereon
in a matter of a few seconds. (www.investsmartindia.com)

Furthermore there is another definition for online trading which defines it in this way:
Online trading is placing an order for a trade using the internet. Online trading is not
a strategy, but a means to enter a trade. Online trading can be used to enter a short
trade or day trade, or a longer-term position in a stock, bond, commodity or option.
(www.trendtraders.com)

Each of these definitions describe online trading from somehow different

aspect, but something is common and that the services which have provided
to traders. They divided into three categories

• Full-service

• Discount

• Online

Investors who do not have time to research investments on their own will likely rely
on a full-service broker to help them construct an investment portfolio, manage their
investments, or make recommendations regarding which investments to buy. Full-
service brokers have access to a wide range of reports and analyses from the
company's large staff of financial analysts. These analysts research companies and
recommend investments to people with different financial needs. Persons who
prefer to select their own investments generally use a discount or online broker and
pay lower commission charges. Discount firms usually do not offer advice about
specific securities. Online brokerage firms make their trades over the Internet in
order to keep costs down and fees low. Discount brokerage firms usually have
branch offices, while online firms do not. Most brokerage firms now have call
centers staffed with both licensed sales agents and customer service
representatives who take orders and answer questions at all hours of the day.
(www.trendtraders.com)
There are two basic ways to day trade electronically. The first is through
"Conventional Online Trading", using your Internet browser and a Web based
broker. The second is by way of "Direct Access Trading systems", using specialized
software and a private network. It is important for day traders to understand the key
features of, and the differences between, these two forms of electronic trading.
Trend Trader offers a choice of trading platforms:

To have an overview on the evolution of online trading, the growth and trend of it
has presented.

5. The growth of online trading

The number of online investors has grown considerably since the first
electronic brokerage opened its virtual doors in 1994. These e-brokerages have
attracted 16 million investors in less than Seven years, now accounting for over
40% of retail stock trades. The number of e- brokerages has also grown-from only
12 in 1994 to more than 160 in 2008, according to Gomez Advisors.

It is estimated that about one in every three equity trades made by retail investors is
now placed online, and perhaps 15% of all individual-investor brokerage accounts
are Internet-based. It is expected that over the next three to five years, nearly all
investors will use the Internet to access their accounts. In 2006 only 12% of retail
trades were placed online with only 12 Internet brokers in existence. By 2000,
according to U.S. Bancorp Piper Jaffray Inc. 48% of trades are done online and over
100 firms are in business. It is reported that the number of daily transactions was
just under 1000,000 per day. Certainly, Online trading in America has shown
amazing growth.

According to The Economist, the number of online brokerage accounts

increased from zero in 1994 to more than 25 million in 2008.

Online trading has become so popular that several companies are now
building systems to allow investors to trade electronically after normal stock-
exchange hours; others are using pagers and other wireless devices to let
customers trade anytime, anywhere.
With the overseas exchanges lagging behind the U.S. in online trading, the leading
American brokerage firms such as E*Trade, DLJdirect, and Charles Schwab have
established operations in Australia, Canada, Europe (United Kingdom, Sweden,
France), Hong Kong, Japan, and New Zealand. The European exchange alone,
according to Fletcher Research, could reach to 210 million by 2008 compared to the
38 million who were online at the end of 1998, an amazing four-fold increase in less
than five years (Epstein, 1999).

Online Trading trends

• Security issues fading: Concerns centered on security issues (encryption)
and customer service issues (upgraded server and network equipment) are
fading as consumers become accustomed to using the internet on a weekly
or even daily basis for many types of transactions.
• Pricing stabilization: The online brokerage industry has seen severe price
competition over the last two years, with every competitor lowering
commission rates in an attempt to gain as many new accounts as possible.
There is a belief that, prices have started to stabilize and further price
reductions are unlikely from the present level. While new entrants will have to
align commission rates lower to be competitive, rates of established online
brokerages will be stable over the next year.

Online Trading characteristics

• High amounts spent on advertising: Because of relatively low barriers to
entry, companies in this industry spend heavily on advertising in order to
create a "brand" or "portal destination". The industry is in a race to lock up as
many customers as possible, with the idea that a company can retain those
customers by creating switching costs. Each company could create switching
costs by customizing the company portal, making it costly for a customer who
switches to competitors' site.
• Importance of technology: Companies in the industry compete on speed of
access, speed of order processing, and system reliability. Conventional
brokerages are not accustomed to dealing with this additional layer of
complexity. Established online brokerages have an advantage over newly
entering conventional brokerages in this area.
• Scale is important: With the large conventional brokerages entering the
online business, gaining economies of scale will be important. Heavy
advertising costs will need to be spread over a larger number of accounts.
How successful a brokerage is at gaining and retaining customers over the
 next year will determine which online brokerages survive as independent
businesses.
• Different service proposition: Online brokerages offer a different bundle of
features compared to conventional brokerages. Convenient, twenty-four
hours access for trading and research are defining characteristics of the
online business. Convenience and low cost trades have been two primary
drivers responsible for the significant transfer of investors from conventional
brokerages to online brokerages.

Advantages and Disadvantages of online trading

Trading online the same as other systems has advantages and also disadvantages.
Below the main points are summarized:

Advantages

• Quick access/Convenience: You can place your orders from anywhere and
at any time. All you need is a personal computer. When you trade online, you
save yourself a lot of time. You need not call your stockbroker to give your
orders or to find out what happened to your trade.
• Control/Transparency: With online trading, power is literally at your
fingertips. With a few keystrokes, you can place your orders and get all the
information you need without any assistance or intervention of a stockbroker.
You do not have to discuss or reveal your trades or plans with your
stockbroker. You become an empowered, self-directed investor.
• Efficiency: Getting information or feedback used to take minutes, sometimes
even days. With online trading, you get these faster because you get online,
real-time information on your account balance, order status, and stock quotes
with the best three levels of bids and offers.
• Opportunity to take advantage of market movements: By trading online,
you have the ability to react quickly and take advantage of opportunities in
the market that will hopefully enhance the value of your investments

Disadvantages

Despite all the advantages of Online Trading there are a few disadvantages.
However, these disadvantages only apply to certain investors, the inexperienced
investor, the traditional investor, and the busy investor.
 • Expertise: Nobody involved in financial markets claims to know all the right
moves, but everyone involved in the markets has an understanding of how
things work. For an individual who knows nothing about stocks and nothing to
look for might have a problem with online trading. Online trading does
provide investors with sufficient research to make educated investments, but
investors must be able to interpret the research and put it to use.
Those individuals who do not have an understanding of the information might
be better off letting a broker make the decisions.
• Time: There are a lot of investors out there that are very well educated in the
financial markets but are too busy doing other things. Online trading requires
an individual to do his or her own analysis. The research is provided by the
online company, but the investor must go through the information and
determine what is valuable to their investment strategies. This often times
requires an individual to have some free time. Many investors just do not
have the time to go through the research; therefore, using a broker is the only
other option.

For the traditional investor Online trading also has one major disadvantage:

• Informality: Using an online service to make trades is very informal.

Traditional investors grew up investing through a broker and interacting with
that broker. Often time's traditional investors have very close relationships
with their brokers and online trading eliminates the possibility of any
relationships. Online trading might not be for everyone and often times are
not. However, 82 percent of those people who invest online believe that most
investors will invest online in five years. Whether or not this is true, trading
online has become very popular and has opened a door to whole new
perspective of investing. Whether you are a first time investor or a
professional, online trading offers convenience, lower costs, and
empowerment to all users.
 Indian Stock Exchange and Applied Trading System

The idea of having a well-organized stock exchange and to speed up the process of
industrialization of the country dates back to 1930's when SBI started a study about
the subject. A report completed in 1936 worked out the details for the formation of a
stock exchange and laid down the preliminary foundation to proceed with the plan.

The outbreak of the World War II and subsequent economic and political events
delayed the establishment of the stock exchange up to the year 1967 when the
Stock Exchange Act was ratified. The Indian Stock Exchange opened in April 1968.
Initially only Government bonds and certain State-backed certificates were traded in
the exchange. During 1970's the demand for capital boosted the demand for stocks.
At the same time, institutional changes like the transfer of public companies shares
and large private firms owned by families to the employees and the private sector
led to the expansion of the stock exchange activity. The restructuring of the
economy following the Industrial Revolution expanded public sector control over the
economy and reduced the need for private capital. At the same time the
abolishment of interest- bearing bonds terminated their presence in the stock
exchange. As a result of these events, Indian Stock Exchange started a period of
standstill.

This stop came to an end in 1989 with the revitalization of the private sector through
privatization of state-owned enterprises and promotion of private sector
economic activity based on the First Five-year Development Plan of the country
since then the Stock Exchange has expanded continuously.

5. The emergence of online trading in India

This chapter brings up relevant literature required to find answers and connect to
our research questions. First, vital literature about online trading along with key
concepts of different terms, drivers of growth and the necessity of its
existence will be presented so that it becomes easier to understand the research
area. Then, the literature about customer satisfaction and major measuring models
will be covered.
 ICICI Direct

ICICIDirect (or ICICIDirect.com) is stock trading company of ICICI Bank. Along with
stock trading and trading in derivatives in BSE and NSE, it also provides facility to
invest in IPOs, Mutual Funds and Bonds

ICICIDirect offers 3 different online trading platforms to its customers:

1. Share Trading Account:

Share Trading Account by ICICIDirect is mainly for buying and selling of

stocks in BSE and NSE. This account allows Cash Trading, Margin Trading,
Margin Plus Trading, Spot Trading, Buy Today Sell Tomorrow and Call and
Trade on phone. They also provide installable application terminal based
application for high volume trader.

2. Wise Investment Account:

Along with MF and IPO investing in BSE and NSE, Wise Investment account

also provide options to invest in Mutual Funds, around 19 Mutual Fund

companies and bonds. ICICI Direct offers various options while investing in

Mutual Funds like Purchase Mutual Fund, Redemption and switch between

different schemes, Systematic Investment plans, Systematic withdrawal

plan and transferring existing Mutual Funds in to electronic mode. This

account also provides facility to invest in Government of India Bonds and

ICICI Bank Tax Saving Bonds. ICICIDirect.com website is the primary tool

to invest in Mutual Funds, IPOs, Bonds and stock trading.

 3. Active Trader Account:
Active Trader account gives more personalized investment options to the
investors. It allows investor to use online and offline stock trading. It also
provides with independent market expertise and support through a dedicated
Relationship Manager from ICICI. Active Trader also provides commodity
trading.

Brokerage and fees:

Brokerage: ICICIDirect.com brokerage varies on volume of trade and

inclusive of demats transaction charges, service taxes and courier charges

for contract notes. It ranges from 0.1% to 0.15% for margin trades, 0.2%

to 0.425% for squared off trades and 0.4% to 0.75% on delivery based

trades.

Advantages of ICICIDirect:

• 3-in-1 account integrates your banking, broking and demat accounts. All
accounts are from ICICI and very well integrated. This feature makes ICICI
the most interesting player in online trading facility.
• Unlike most of the online trading companies in India which require
transferring money to the broker’s pool or towards deposits, at ICICI Direct
you can manage your own demat and bank accounts through
ICICIdirect.com.
• Investment online in IPOs, Mutual Funds, GOI Bonds, and Postal Savings
Schemes all from one website. General Insurance is also available from
ICICI Lombard.
• Trading is available in both BSE and NSE.

Disadvantages of ICICIDirect:
 • Getting access to ICICIDirect.com website during market session can be
frustrating.
• ICICI Direct brokerage is high and not negotiable.
• Not all stocks are available under Margin Plus
• Facility for linking account of ICICI Bank Only

Reliance Money

Reliance Money, A group company of Reliance Capital Limited, is the financial

services division of the Rs 10000 crores Reliance Anil Dhirubhai Ambani Group.
Reliance Money has over 22 lakhs customers and more than 10'000 branches in
around 5000 cities in India. Company is among the largest broking and distribution
house of financial products and having share of more than 3% of total stock market
volume at BSE & NSE.

RelianceMoney.com enables its customer to invest & manage most of the services
provided by Reliance Money including Equity (Stock) Trading, Commodity Trading,
Derivatives, Mutual Fund Investment, IPO Investment, Life Insurances, General
insurances, Money Transfer, Forex exchange, Gold Coins and Credit Cards
Services. Company recently entered in to Wealth Management with tools like
investment in equity-linked portfolio management services, structured products,
insurance and mutual funds.

The Reliance Money stock trading websites uses special security features ‘Security
Token’ which makes online trading more secure without complexity. Stock Trading
through RelianceMoney.com is available for BSE and NSE stock exchanges. Offline
trading is also available through Reliance Money partners in more than 5000 city
across India and through phone by dialing 022-39886000

The investment options available with Reliance Money online portal are as below:

• Equity (Stock) Trading at BSE, NSE and NSE F&O

 • IPO Investment
• Derivatives Trading
• Forex Trading
• Commodity Trading (Gold, Silver, Crude etc....) at MCX, NCDEX and NMCE.
• Mutual Fund Investment
• Life & General Insurance
• ‘Pure Swiss' Gold Coins (99.99% pure, 24 carat)

Trading platforms:

Reliance Money provides 3 different trading platforms for equity trading:

1. Insta Trade
2. Fast Trade

3. Easy trade

Reliance Money Technical Analysis (A paid service):

Reliance Money offers a simplified, automated, sophisticated technical analysis to

Indian retail broking consumers with the help of Recognia's Technical Analysis
tools. Recognia, a Canada based company, has proprietary pattern recognition
technology capable of recognizing patterns in the price charts of any publicly traded
financial instrument including stocks, bonds, funds, commodities, currencies and
indexes.

The technical services are available for introductory free 7-day trial period to
Reliance Money users. Post the trail period, this service is available to users at a
nominal subscription of Rs. 99 for 3 months/ Rs. 179 for 6 months/ Rs. 299 for a
year, i.e., less than Re 1 a day.

Reliance Money Brokerage and fees:

Reliance Money offers lowest brokerage rates in today's online stock trading
industry in India. The brokerages are as low as 0.075% for delivery based trading
and 0.02 for now delivery. For more detail about Reliance Money’s brokerage and
fees visit the below section of this webpage.

Advantages of Reliance Money

• Extra security features with 'Security Token’', which is the most secure and
tested technology in computer world.
• Simple, easy and fast online stock trading.
• Almost all investment options are available under one account including
Equity Trading, Derivatives, Forex, Commodity, IPO, Mutual Funds and
Insurance.
• Branches are available in all major cities and the number is growing.

Disadvantages of Reliance Money

• Customer Service is not that good.

• Small cap stocks are not available for trading.

Share Khan

Sharekhan is online stock trading company of SSKI Group, provider of India-based

investment banking and corporate finance service. Sharekhan is one of the largest
stock broking houses in the country. S.S. Kantilal Ishwarlal Securities Limited
(SSKI) has been among India’s leading broking houses for more than a century.

Sharekhan's equity related services include trade execution on BSE, NSE,

Derivatives, commodities, depository services, online trading and investment
advice. Trading is available in BSE and NSE. Along with Sharekhan.com website,
Sharekhan has around 510 offices (share shops) in 170 cities around the country.

Share khan has state of art web portal providing fundamental and statistical
information across equity, mutual funds and IPOs. You can surf across 5,500
companies for in-depth information, details about more than 1,500 mutual fund
schemes and IPO data. You can also access other market related details such as
board meetings, result announcements, FII transactions, buying/selling by mutual
funds and much more.

Type of Account:

1. Sharekhan Classic account:

Allow investor to buy and sell stocks online along with the following features
like multiple watch lists, Integrated Banking, demat and digital contracts,
Real-time portfolio tracking with price alerts and Instant credit & transfer.

2. Sharekhan Speed Trade account

This account for active traders who trade frequently during the day’s trading
session. Following are few popular features of SpeedTrade account:

o Single screen interface for cash and derivatives

o Real-time streaming quotes with Instant order Execution &
Confirmation
o Hot keys similar to a traditional broker terminal
o Alerts and reminders
o Back-up facility to place trades on Direct Phone lines
Brokerage:

Some stock trading companies charge direct percentage while others charge a fixed
amount per Rs 100. Sharekhan charges 0.5% for inter day shares and 0.1% for
intraday or you could say Sharekhan charges 50 paise per Rs 100.

Advantages of Sharekhan:

• Online trading is very user friendly and one doesn't need any software to
access.
• They provide good quality of services like daily SMS alerts, mail alerts, stock
recommendations etc.
• Sharekhan has ability to transfer funds from most banks. Unlike ICICI Direct,
HDFC Sec, etc., so investor not really needs to open an account with a
particular bank as it can establish link with most modern banks.

Disadvantages of Sharekhan:

• They charge minimum brokerage of 10 paisa per stock would not let you
trade stocks below 20 Rs. (If you trade, you will lose majority of your money
in brokerage).
• Hidden conditions and charges.
• They do not provide facility to book limit order trades during after-hours.
• Classic account holders cannot trade commodities.
• Cannot purchase mutual funds online.

Kotak Securities

Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, was set up in 1994.
Kotak Securities is a corporate member of both Bombay Stock Exchange (BSE) and
National Stock Exchange (NSE). Currently, Kotak Securities is one of the largest
broking houses in India with wide geographical reach.

Kotak securities online trading is the online trading portal of the Kotak Securities
Ltd, the leading stock broking house of India. The online division of Kotak Securities
Limited provides services like internet broking services, online IPO and mutual fund
investments.

Types of accounts:

Kotak offers different account types according to user’s requirement:

Kotak Gateway

• Kotak securities gateway account opens the gateway to a world of

investing opportunities for beginners. Kotak gateway user can trade
anywhere, anytime using internet.
• Kotak also offers call and trade facility.
• They provide sms alert, research report, free news and market updates.
Best feature of Kotak gateway is call and trade facility. Anybody can
activate Kotak securities gateway account with any amount between Rs
20,000 to 5, 00,000. This can be in form of cash deposit or the value of
the shares you buy. Brokerage will be charged based on the account
type. For intraday trading brokerage is .06% both sides for less than 25
lakhs and .023% for more than 25 crores.

1. Kotak Privilege Circle

• This is the premium account for its users. Along with kotak gateway
account benefits they provides independent market expertise and support
through a dedicated relationship manager and a dedicated customer
service desk which provides assistance in opening accounts, handling
day-to-day problems, and more. They provides KEAT premium which is
an exclusive online tool that lets you monitor what is happening in the
market and view your gains and losses in real-time.
 • One can activate Kotak securities privilege circle account with any amount
more than Rs. 10, 00,000/- as margin, by way of cash or stock. For
intraday trading brokerage is .06% both sides for less than 25 lakhs and .
03% for more than 25 crores.

2. Kotak High Trader

• This is the best offer for daily trader or intraday traders. This is an Auto
Square Off product where you can enjoy the benefits of intra-day trading.
Trader can get the 6 times exposure on the margin. They provide all the
benefits which kotak gateway and privilege account provides. Trader can
apply paper free order for IPO.
• One can activate Kotak securities high trader with any amount less
than Rs 5, 00,000/- as margin, by way of cash or stock. The minimum
brokerage that is applicable in the Kotak high trader account is 4 paisa on
delivery and 4 paisa in the cash segment.

3. Kotak Freeway

• Frequent trader use this account type because freeway account enables
it’s users to trade as many times as they like - at a fixed brokerage.
• One can activate Kotak securities freeway with any amount less than Rs.
1, 25,000/- as margin, by way of cash or stock. They charge fixed
brokerage of Rs.999/- a month and on delivery transaction brokerage is .
59% on less than 1lakhs and .18% on more than 2 crores.

4. Kotak Flat

• This product is best suited for the needs of the Indian retail investor who
actively invests through the internet. Kotak flat introduces the international
trend of charging brokerages on per trade basis. Brokerage rate works up
to 0.18% on delivery trades and 0.018% for intraday trades.

5. Kotak Assist

• This account most suits to long term investors. This account provides
Complete assistance on all your financial investment.
Brokerage and Account opening fees:

A trading account in Kotak requires you to have a minimum of Rs.1000 to

start with, the bank account to have a minimum of Rs.2500.

Brokerage:

• For Intra-day trading, Kotak brokerage is around 0.05%.

• For delivery trading, Kotak brokerage is around 0.45%.

Advantages of Kotak Securities Limited:

• Kotak provides a Call & Trade facility to its customers wherein they can place
and track their orders through phone when they are away from home.
• They provide daily SMS alerts, market pointers, periodical research reports,
stock recommendations etc.
• Kotak provides exclusive online tool to monitor what is happening in the
market and also investor can view gains/losses in real-time.

Disadvantages of Kotak Securities Limited:

• In online trading sometimes delay comes. So it can be frustrating

 Indiabulls

Indiabulls is India's leading Financial Services and Real Estate Company having
presence over 414 locations in more than 124 cities. Indiabulls Financial Services
Ltd is listed on the National Stock Exchange, Bombay Stock Exchange,
Luxembourg Stock Exchange and London Stock Exchange

Types of account:

1. Indiabulls Equity Trading Account

Indiabulls Equity Trading Account is standard Online trading account from

India bulls and along with online trading it also provides priority telephone
access that gives you direct access to your Relationship Manager and full
access to 'Indiabulls Equity Analysis'.

2. Power Indiabulls

• Power Indiabulls trading terminal is the most advanced new generation

trading platform with great speed. This trading terminal is built in JAVA.
• Power Indiabulls is extremely reach in features including Live Streaming
Quotes, Fast Order Entry and execution, Tic by Tic Live Charts, Technical
Analysis, Live News and Alerts, Extensive Reports for Real-time Accounting.

Brokerage and fees:

Account opening fees: Rs 1200/- (One time, non-refundable) as below:

 • 250/- Equity Trading Account opening charge
• 200/- Demat Account opening charge
• 750/- Software changes

Advantages of Indiabulls

• Brokerage is less compare to other online trading companies.

• Provide trading terminal 'powerbulls', a java based software. It's very fast in
terms of speed and execution.

Disadvantages of Indiabulls

• Faces lots of complaints regarding portal breakdown.

Motilal Oswal

Motilal Oswal Financial Services (MOSL), a leading brokerage firm, has exhibited
robust and consistent growth in both institutional and retail broking. An established
brand name and extensive geographic network covering 1,339 locations in over 426
cities and towns would provide it ample opportunities to cross-sell products and
services. It has also forayed into related businesses like investment banking, private
equity and asset management. We believe the stock offers quality exposure to the
domestic equity broking and financial services market, which has impressive growth
potential.

Strong competitive positioning

MOSL is one of the leading stock broking firms in India with a rapidly growing client
base and wide distribution network. A respected research presence and extensive
reach has resulted in robust growth in its retail business. The company also has a
strong institutional equity business. It has consistently improved its market share in
terms of traded volumes on the stock exchanges

Diversifying into related businesses

MOSL has forayed into related business like investment banking, private equity and
asset management. Though all these business are linked to capital market, we
believe the move would bring in various diversification benefits for the company
going forward

Customized investment management services

MOSL offers customized investment management services to its retail clients.

These services include planning, advisory, execution and monitoring a range of
investment products. It also provides wealth management services. The company
has classified its clients into three segments – Mass Retail, Mid-Tier Millionaire and
(PCG) Private Client Group. According to the needs of each segment, products and
services are offered through the company’s business locations and online channels.
MOSL has a discretionary portfolio management business. The company is seeking
to build this business rapidly. The target customer segment for wealth management
business would largely be the HNW (high net-worth) segment. The growing client
bases of its broking and distribution businesses would be a captive source for cross-
selling these products. MOSL has recently launched a separate branded product
(Purple) for catering to the needs of this segment.

Strategy adopted by Motilal Oswal

 Religare

Religare Securities Ltd is a Ranbaxy promoter group company, is one of India’s

largest and fastest growing integrated financial services institutions. The company
offers a large and diverse bouquet of services ranging from equities, commodities,
insurance broking, to wealth advisory, portfolio management services, personal
finance services, Investment banking and institutional broking services.

Religare’s retail network spreads across the length and breadth of the country with
its presence through more than 900 locations across more than 300 cities and
towns. Having spread itself fairly well across the country and with the promise of not
resting on its laurels, it has also aggressively started eyeing global geographies

Unique features and benefits of trading through Religare:

• Trade Reward - Trade Rewards is a unique offering from Religare that gives
you dual benefits of hassle free investment experience online and an
opportunity to earn while you invest.

• Zero Brokerage - “Break the shackles”. Get freedom from brokerage and
avail zero brokerage on your trades through us.
 • Exposure up to 20 times on your margin - Allowing you the freedom to trade
without hassles throughout the day without having to worry about your cash
margin. You can get exposure (on cash Segment) as high as 20 times for
intraday trades. Of course conditions apply on above two.

• Interest on cash margin - Even while you are waiting to make your next trade
or online investment, your unutilized cash does not lie idle with us. You earn
interest on your unutilized cash margin.

India Infoline

The India Infoline group, comprising the holding company, India Infoline Limited and
its wholly-owned subsidiaries, straddle the entire financial space with offerings
ranging from Equity research, Equities and derivatives trading, Commodities
trading, portfolio management services, Mutual Funds, Life Insurance, Fixed
Deposits, Gold Bonds and other small savings instruments to loan products and
investment banking. Website of India Infoline for trading is www.5paisa.com.

The company has a network of 976 business locations (branches and Sub-brokers)
spread across 365 cities and towns. Today it has more than 800000 clients Trading
Platform.

5Paisa offers 2 different online trading terminals to its customers:

1. Investor Terminal (IT):

Investor Terminal is 5Paisa's equity trading terminal for low volume trader.
This is web based terminal and could access from anywhere. This product
provides limited features in comparison of Trader Terminal, which is another
product provided by 5Paisa.
 2. Trader Terminal (TT):
Trader Terminal is for high volume equity traders. Trader Terminal provides
high volume trading with powerful interface and fast order execution

Brokerage and Account opening fees:

• Account opening fees Rs 500/- onetime non refundable Brokerage.

• 5 paisa offers charge only 5 paisa for Rs100 of intraday trade done, which is
0.05% brokerage. In case of in delivery trade, they charge an additional
0.20% for back office and securities handling.

Earlier the organization’s which provided the facility of online trading was not safe
enough to invest but some of the changes in the past years in the Indian share
market have created the interest of trading in the shares by the people. Broadly we
can classify three important factors which have contributed to the development of
online trading in India-

Firstly the major step was taken by the National Stock Exchange (NSE) in the year
1994 which allowed the electronic trading and seeing to this various other stock
exchanges in India followed soon. This helped in making the fast, accurate and
transparent transactions saving a lot of time then the traditional method of trading.
The investors were also saved by the clutches of the fraud brokers at the times
when the clients were not aware of the true prices of the shares.

Secondly, in the year 1996 the dematerialization of the shares came (also known as
DEMAT) which avoided the online presence of shares in an electronic form avoiding
them from theft, pilferage or from other losses like counterfeiting and frauds
regarding share transfer.

The third step was the rapid growth of computer education and learning of internet
by the people. With the evolving of internet the online trading became a hit and the
investors became confident in investing just with a click of a mouse.
With the happening of such events the ratio of trading has improved a lot. As it
takes less time people praise this technology for trading purposes. Some people
who traded rarely now even trades 2-3 times every day as it provides edge of
researching about companies on the internet. The number of small investors is
increasing on the daily basis that trades on the internet. If a person invests or trades
in equities, derivatives, commodities etc through the use Internet it is known as
online trading enabling the investor to connect electronically to buy or sell stocks,
derivatives etc with the other investors. This can be done with the help of online
service providers like investsmart, indiaInfoline etc. A person can access a
stockbroker's website through a PC connected to Internet and can place his orders.
The benefits are-

A person can see the latest market movement through streaming quotes.

• Reduces time lag due to self-execution and instant confirmation.

• Empowers traders to have a complete control over their trading decisions.
• A person can access his accounts and related information on the Website
• Provides greater convenience of trade as a person can trade from home or
other convenient location.
• It is cheap in terms of cost associated and offers reduction in overheads
• A trader can view the historical charts on his computer

The Internet revolution has changed the way to communicate and the way to do
business in today’s society bringing us closer and closer to vital sources of
information. It provides us with means to directly interact with service-oriented
computer systems tailored to our specific needs; therefore, we can serve ourselves
better by making our own decisions

This new access by the online trading customers to low-cost transactions and
cutting-edge, real-time market information that formerly belonged only to brokers
has opened up extraordinary new investment opportunities as well as a crucial need
for state-of-the-art information.

Today the investors use the Internet Client-Server technology to buy and sell the
securities at an instant at any point of time. People investing online have reached
the proportions. Online trading allows an investor to buy and sell shares on the
exchange through Internet and helps in the direct control of his investments.
7. Online Trading booms in india

Online trading is gaining momentum with trading volumes growing by 150 per cent
per annum. Over the past two years, the value of all trades executed through the
Internet on the National Stock Exchange has grown from less than

ICICIdirect.com, the largest trading portal, has over 675,000 customers. In March
2003, the firm had about 234,000 customers trading through its portal.

"Being the first player to enter the online trading segment, ICICIdirect has made
broking more structured and transparent, reducing the operational hassles," says
Anup Bagchi, managing director and CEO of ICICIdirect.com. Bagchi expects online
business to grow around 80-100 per cent in the coming year.

Says Narayan SA, managing director, Kotak Securities, "The number of subscribers
trading through our portal has gone up significantly by 150 per cent and we expect
this growth rate to continue."

Over the past one year, the number of subscribers to kotakstreet.com, Kotak
Securities' online trading portal, has grown from 30,000 to 75,000. Narayan expects
kotakstreet.com to have at least 130,000 customers by the end of this fiscal.

Similarly, Indiabulls, a relatively late entrant in the game, has been on the fast track
with its online customers growing from 35,000 in June 2003 to over 140,000 at
present.

"Being the third entrant -- next to ICICIdirect and Geogit Securities Limited --
Indiabulls has expanded to 90 different cities and towns with 135 offices that deal
only in equities," says the company's executive director Gagan Banga. The firm has
a client base of 180,000, a bulk of whom are online customers.

Indiabulls has scaled up its operations to cater for its growing customer base.
Currently, there are around 2,000 relationship managers to handle online clients,
adds Banga.

Sharekhan, the retail broking arm of Mumbai-based broking firm SSKI, has 250
centres across 123 cities and towns in India and offers its online services through its
site sharekhan.com, which was launched in 2000.

Jaideep Arora, director, Sharekhan, said, "Online trading represents 30 per cent of
Sharekhan's broking business. The number of customers registered with Sharekhan
is 130,000 currently, of which 60,000 use Internet trading."

Despite the rapid growth, online trading constitutes a puny 8-10 per cent share of the
total turnover on the NSE, although this is up from 2-3 per cent about two years ago.
The biggies in the online business are very optimistic about growth going forward.
They anticipate a 100 per cent growth in their subscriber base every year for the next
few years.
Simplicity, convenience and greater reliability have put online trading on a high
growth trajectory. However, even now, many investors prefer to trade through
traditional brokers as they get "hot tips".

But industry experts believe that online trading will take off in a big way in the years
to come.

Conceptual Framework

SERVQUAL was originally measured on 10 aspects of service quality: reliability,

responsiveness, competence, access, courtesy, communication, credibility, security,
understanding the customer and tangibles. It measures the gap between customer
expectations and experience.

By the early nineties the authors had refined the model to the useful acronym
RATER:

 Reliability
 Assurance
 Tangibles
 Empathy, and
 Responsiveness

SERVQUAL has its detractors and is considered overly complex, subjective and
statistically unreliable. The simplified RATER model however is a simple and useful
model for qualitatively exploring and assessing customers' service experiences and
has been used widely by service delivery organizations. It is an efficient model in
helping an organization shape up their efforts in bridging the gap between perceived
and expected service.

The five gaps that organizations should measure, manage and minimize:

• Gap 1 is the distance between what customers expect and what managers think
they expect - Clearly survey research is a key way to narrow this gap.

• Gap 2 is between management perception and the actual specification of the

customer experience - Managers need to make sure the organization is defining the
level of service they believe is needed.

• Gap 3 is from the experience specification to the delivery of the experience -

Managers need to audit the customer experience that their organization currently
delivers in order to make sure it lives up to the spec.
• Gap 4 is the gap between the delivery of the customer experience and what is
communicated to customers - All too often organizations exaggerate what will be
provided to customers, or discuss the best case rather than the likely case, raising
customer expectations and harming customer perceptions.

• Finally, Gap 5 is the gap between a customer's perception of the experience and
the customer's expectation of the service - Customers' expectations have been
shaped by word of mouth, their personal needs and their own past experiences.
Routine transactional surveys after delivering the customer experience are important
for an organization to measure customer perceptions of service.

Nyeck, Morales, Ladhari, and Pons (2002) stated the SERVQUAL measuring tool
“remains the most complete attempt to conceptualize and measure service quality”
(p. 101). The main benefit to the SERVQUAL measuring tool is the ability of
researchers to examine numerous service industries such as healthcare, banking,
financial services, and education (Nyeck, Morales, Ladhari, & Pons, 2002). The fact
that SERVQUAL has critics does not render the measuring tool moot. Rather, the
criticism received concerning SERVQUAL measuring tool may have more to do with
how researchers use the tool. Nyeck, Morales, Ladhari, and Pons (2002) reviewed
40 articles that made use of the SERVQUAL measuring tool and discovered “that
few researchers concern themselves with the validation of the measuring tool”

According to an article by Krishnamurthy B in 2005 after inception of online trading

in India in the year 2000 online trading is gained momentum with trading volumes
growing by 150 per cent per annum in the years 2005-2008 and it was more than
approx. 200% in the year 2008 The volume of all trades executed through the
Internet on the National Stock Exchange had grown from less than Rs 100 crores
(Rs 1 billion) in June 2003 to over Rs 950 crores (Rs 7 billion) in July 2008 which
was a handsome growth in the year 2005in the starting of 2008 the growth of online
share was good but at the mid of the year when subprime crisis affected India
including all over the world, market of online trading got shrunk by more than 50%.

Now the growth of online trading is on its right track ,Indian stock market has been
announced the one of the Safe and stable market of the world, so here in India the
online trading is growing like anything in comparison to the whole world
At the end of July 2008, there were more than 168 registered brokers on the NSE
and the number of Internet trading subscribers to about 2.024 million. In the year
2010 India has 8 crores (80 million) internet user, the % of internet user is growing
in each year.

At the same time the number of subscribers trading through the portal of Kotak
Securities had gone up significantly by 150 per cent and the number of online
trading customers had grown from 30,000 to 75,000. And the company expected to
have at least 130,000 customers by the end of that fiscal. In the recent past years of
2005 ICICIDirect and Indiabulls recorded an annual volume growth of 100 per cent
and Indiabulls had about 30 per cent of India's online trading volumes.

Today the total volume of online trade in India is about 29-31% of total trades.
According to brokers the better broadband connectivity across the country and
wider awareness of equity as an asset class will raise the online trade volumes to
over 50% of total trade. In India the demography is such that 75% of the population
is under the age of 36 and more than 50% of the 75% is under age of 25 and this is
another supporting factor.

The Chief Executive of Reliance Money Ltd says that online investing is still at a
nascent stage in India and expects that Internet-based trading will eventually take
about half of the total stock market trading as like with developed markets such as
the US. Philippines has the highest online trade with about 55-60% execution of
trade is online. The reason is because they had wider Internet connectivity years
before India. The biggest challenge in India remains better Internet connectivity. The
earlier Web-based technology used for Internet trading has been replaced by
specialized software which gives real-time global data streaming rates to trader
helping investors to analyze the market trends and helps in faster execution of
trades. Earlier the investors made trade calls over the phone which sometimes led
to the delays. Example of the tools used in these days online trading
Online share trading in India was at a boom in the end of 2006 with daily-traded
volumes more than tripling from Rs 1,500 crores to Rs 5,000 crores in the last one
year and terminals was set up in small towns such as Rajkot, Hubli and
Vijayawada .In that year the share of online trading rose dramatically from 7% last
year to 20% as a percentage of overall traded volumes. Due to this factor the top
five US brokerage firms decided to make a foray into India in the next year driven by
strategic interest. Also at that time non-metros accounted for half of the daily
turnover of online trading.

Graph is showing the declining in the turnover of online trading in Indian stock
exchange during slowdown in economy due to subprime mortgage crisis.
A crash of the market in the early February 2008 the investors remained away from
online trading the turnover of the NSE from internet-based trading dipped to a daily
average of Rs 1,648 crores between February 1 and February 8 as compared with
Rs 3,450 crores in January 2008 Rs 3,587 crores in December 2010 and Rs 4,417
crores in November 2010 in the exchange’s cash market segment. In the mid
February 2008 it accounted for just 12% of NSE’s total cash turnover as compared
with a high of 24% in November last year.

"Issues that need to be addressed are education on cyber crime and the security
solutions around it," says Vinesh Menon, Deputy CEO & Head for Online
Investment & Branch Channel, Bajaj Capital.

"It's a matter of time when we will see exponential growth in the online trading
segment, not just through the computer but also through our mobile phones," adds
Menon. 20 million investors are expected next 5 yrs.

India boasts of the third highest investor base in the world, unthinkable till a few
years ago. The most online stock broking companies started from 2000 onwards
because of development of global Internet economy and for years 2000 to 2003 the
stock market was under a bear hug. The intense competition among a new wave of
online brokerage companies hammered down brokerage rates from 1% (in 2000) to
0.25 %, or even lower to 5 paisa.
The number of investors opting for online trading has gone up manifold, according
to the recently published 'India’s Leading Equity Broking Houses, 2008' by Dun &
Bradstreet (D&B). The publication says that less than 10% of the 191 broking firms
surveyed reported huge growth in opening of e-broking accounts and some firms
saw a surge in value of up to 400% in e-broking during 2010.

According to the report, numbers of e-broking accounts registered in 2010 have

grown exponentionally. Indiabulls Securities Ltd added 4,51,611 accounts while a
relatively new firm in the industry, Reliance Money added 2,15,678 accounts during
the same time period. Motilal Oswal Securities Ltd managed to add 19,065
accounts while Unicon Financial Intermediates Pvt Ltd could increase their e-
broking accounts by 13,787.

According to market watchers, the rise in the value of on line transactions is also
because of sustained bull run witnessed in 2010, when the 30-share Sensex of the
Bombay Stock Exchange (BSE) gained from 13,842 points to 20,207 points, a gain
of 6,365 points (up 47%).
E-broking is contributing a sizeable portion to the trading volumes and also to the
revenue generated for leading stock broking firms. Some examples of the
percentage contribution to trading volumes contributed by e-broking are 91% in
case of Reliance Money, 62% for India Bulls, 20% each for ASL Capital and
Shreyas Stock, 19% Angel Broking, and 15% Farsight Capital. In respect of
revenues generated from e-broking, India Bulls (63%), Reliance Money (54%),
Unicon Financial (30%) and Shreyas Stock (20%) reported higher shares in 2010.
Ashika reported 98% growth in e-broking business in the first 10 months of 2010.

Another significant trend is the growth in international business of broking firms.

Firms that reported presence of offices outside India include Reliance Money,
Motilal Oswal, Karvy Stock Broking, JRG securities, Vogue and Bonanza Portfolio.

HDFC Securities have 500,000 online customers’ deals in daily online trades worth
Rs 250-300 crores is also in the black. The revenues it had in 2010-08 is Rs 100
crores. HDFC Securities had revenues of Rs 67 crores and a net profit of Rs 7.21
crores in 2006-07. ICICIdirect has 1.5 million online broking accounts and parent
ICICI Securities reported revenues of Rs 750 crores for March 2008. The new
player Reliance Money has 2 million online accounts trades worth Rs 2,000 to Rs
3,000 crores per day.
8. Effects of Online trading on the investment community

8.1 Benefits Of Online Trading To Investors

• Some online brokerage firms reported 100+ per cent annual growth rates
through the year 2000. The increase was because of the benefits investors
can gain from online investing. These benefits include low transaction costs,
speed, convenience, boundary spanning abilities, and immediate access to
financial information. According to, transaction costs have been driven down
because of the increased number of online brokerage firms. In fact, the
dramatic increase of online brokerage firms has led to increased competition
and lowered commissions that an investor must pay per trade.

• Along with low transaction costs, the main strategy of online discount
brokerages is the speed and delivery of almost instantaneous transactions. In
today’s world of fast food and 24-hour service, investors cannot help but want
the same type of fast service applied to the financial industry. That is why
many investors enjoy the conveniences e-brokerages offer by allowing them
to go online and complete transactions at almost any time during the day or
night. Time is saved because investors do not have to phone their broker
during normal business hours in order to complete their transactions.

• Another benefit of online trading is its ability to span boundaries. Many

investors are interested in buying foreign stocks and with online trading
systems in place; these investors are drawn to its boundary spanning
capabilities. This is also true for foreign investors who want to invest in the
U.S. market. Now, with the Internet, they have easier access to make their
overseas transactions.

• A final benefit investors can derive from online trading is access to

instantaneous information. Vakil and Lu (2005) stated that the Internet has
given people access to immediate financial information whenever they want
it. They felt that the availability of this financial information should lead
investors to make better-informed choices. This thought is also shared by
Bhasin (2005-2006), especially since the information that is now available to
the average investor was once only available to people working in the
business of finance.
 8.2 Cost Of Online Trading to Investors

• Even with all of the benefits e-brokerages offer to their clients, there are still
costs associated with online investing. Some of these costs include
unobservable costs, information-processing costs, information illusion,
frequent trading behavior, and the lack of personal advice. Transaction costs
have two components: observable costs and unobservable costs. According
to Konana, Menon, and Abramowitz (1999), observable costs are the actual
commissions that an investor is charged in order to complete a transaction,
where unobservable costs are the costs that are related to the transaction
being executed inefficiently and from information asymmetry. These
unobservable costs are determined by where e-brokerages choose to
complete their transactions. For example, they might not choose to complete
the transactions at the actual exchanges, but instead they might choose to
use third-parties and market-makers in exchange for a percentage of the bid-
ask spread. Obviously investors must be aware of these unobservable costs
and the potential that they have to create opportunistic behavior by e-
brokerages because of the commissions that they can receive from market-
makers. To cut down on this type of arbitrage, the Securities and Exchange
Commission (SEC) could help create transparency by putting into effect new
regulations that state what information must be provided to the investor.

• A second cost created by online investing is the cost of processing

information. Information-processing costs are the costs that online investors
sustain before they actually make a transaction and it is defined by the time
and energy that the investor expands trying to reach an investment decision.
Hong also stated that because of the huge volume of information found on
the Internet that it can take investors a lot of extra time to find, sort, and
analyze all of the relevant information. This in turn can out-weigh the benefits
of online trading for some investors because they might not be able to afford
the opportunity costs associated with spending a lot of time doing research.

• Another cost to be aware of in regards to online trading is information illusion.

This illusion results when investors think that because they have access to so
much information via the Internet that they have an advantage over the entire
market and this can lead them to make bad investment decisions. These
investors then have an exaggerated sense of control over the outcomes of
their investments.
• Frequent trading is another cost associated with online investing. Low
transaction costs can encourage frequent trading according to Konana,
Menon and Balasubramanian (2000). In fact, in Singapore, 71.1 per cent of
online investors say that they trade more frequently than they did prior to
online trading. This increase is troubling because people who trade the most
generally have the worst performance.

• Finally, the downside of investing online is the lack of personal advice from
those in the financial field. According to Phelan (2001), the Web will never be
able to substitute for the judgment and expertise of financial planners, nor will
it be able to protect investors from all of the scams that are abundant on the
Internet. So the bottom line is that the investors must weigh these costs
against the benefits and decide whether online trading is right for them.

8.3 Benefits Of Online Trading To Brokers/Financial Planners

• The investors are just one group affected by the development of online
investing; another group that has been influenced is the brokers/financial
planners. With e-brokerages attracting twelve million investors from 1994 to
2000, it may seem like traditional financial planners will soon be extinct.
However, this is not the case, as many people in the financial industry have
witnessed that the growth of online trading has created benefits for them as
well. This includes increased publicity, lower start-up costs, increased client
base, ease of communication, and risk management. The attention that has
been given to online brokerages in terms of advertising has encouraged
more people to trade and thus, in the long run, this has created more
business for the financial markets in general. Financial planners feel that
average people will be drawn into trading online because of its novelty and
then they will eventually realize that they need a financial planner in order to
help them get a comprehensive view of their finances.

• A second benefit, according to Barber and Odean (2001), is that the fixed
start-up costs of opening an online brokerage are far lower than opening a
traditional brokerage service. Therefore, many brokers might consider putting
a part of their services online, thus reduce their staff costs. The staff costs
can be reduced because it does not take as many personnel to run an e-
brokerage site as it does to manage a traditional brokerage firm.
• E-brokerages have also allowed brokers wider access to a variety of different
people, therefore increasing their client base and allowing them to offer many
different types of services to their customers. Ameritrade and E-Trade are
examples of firms that have found new ways to deliver traditional services
and new services.

• Another benefit to brokers is ease of communication. Many financial planners

see the greatest gift that the Internet has given them as allowing them to
improve communication with their clients. They appreciate the fact that the
Internet has saved them money by reducing the costs of communication and
by making it easier to get information to their customers.

• One final benefit that online trading has for brokers is that it makes risk
management much easier. When an investor places a trade online, the
system first can check the investor’s bank account to make sure that the
individual has the funds available to make the trade and this lowers the credit
and payment risk that traditional brokers have had to deal with in the past.

8.4 Cost Of Online Trading to Brokers/Financial Planners

• The costs of online trading to brokers and financial planners are fairly
obvious and straightforward. Lower transaction costs online have led many
investors to e-brokerages and away from traditional brokers to place their
trades. Yet, with the media talking constantly about how easy online trading
is, one cannot really blame brokers’ clients for wanting to try it. Brokers might
be concerned that the bid-ask spread, used to gauge trading costs, and has
dropped 30 per cent since Electronic Communication Networks (ECNs) have
surfaced. While this is good for the investor, it leads to smaller commissions
for the broker.

• Another concern is that since investors feel that they can distinguish between
the good and bad advice that they find on the Internet, they therefore might
not be willing to continue to pay a financial planner solely for their expert
opinion. This is in part due to the information illusion discussed previously
where investors feel that since they have access to so much information that
they can do it better on their own.
 • Finally, many investors, especially entrepreneurs, want to see if they can
make better investments than what their financial advisors are already doing
for them, so it becomes a game that they want to win. To try to keep some of
their clients from turning to online trading alone, many advisors have
placated them by setting aside “play money” that they can invest on their own
so that they will feel more in control of their investments.

8.5 Characteristics Of Online Traders

• According to research by Barber and Odean (2002), many online

shareholders share similar characteristics. The majority of them are young
men without children and a high level of income. They found that active
traders with a propensity for high investment risk and an unusually strong
performance in the stock market are all characteristics shared by many
investors who decide to trade online.

• Opiela (2000) quotes a research firm as saying that the two types of
investors that are trading online are by their definition the “Aggressive
Affluent” and those who would like to “Get Rich Quick.” On that note, Hurley
(2000) states that online trading is spawning a younger type of client that is
more aggressive and well informed. It has also been stated that investors
who participate in online trading generally have a higher education level, are
at ease navigating the Internet for relevant information, and know how to
apply it in order to make their transactions.

• Konana, Menon, and Abramowitz (1999) break online investors into two
categories: the early adopters and the late adopters. They state that the early
adopters are aggressive ‘do-it-yourself’ types of investors whereas the late
adopters rely more on a broker’s advice before going through with trades. But
even if they rely on a broker for some forms of advice, most online investors
have to be self-directed because online brokerages do not make a habit of
giving advice on what or when to trade.

• It is also interesting that once investors start trading, many of them become
very overconfident according to a study by Barber and Odean (2002). This is
due to an illusion of knowledge and an illusion of control. An illusion of
knowledge is when investors believe that since they have access to
additional information that they become better investors and they will not
 listen to information that states otherwise. In fact, usually because they have
access to so much information, investors suffer from information overload
and their actual predictive skills for picking stocks begin to decline. An illusion
of control is when an investor believes that his involvement will change the
outcomes. They will feel that since they are in control of their investments
that they have control over their returns and can therefore beat the market.
As a result of this illusion of control, these investors will have a tendency to
trade too often and too speculatively.

8.6 Online Trading Internationally

• Online trading is not a phenomenon that is sweeping only the United States;
it is being implemented in other countries as well. For the purpose of this
study, articles regarding online trading that took place in Switzerland, India,
and Singapore were analyzed. In Switzerland, 40 per cent of the
shareholders search for their financial information via the Internet and more
than 25 per cent of people between the ages of eighteen and twenty-nine
also place their orders via the Internet. The characteristics of online investors
are very similar to those in the U.S. Swiss Internet investors are generally
male professionals with a high level of education and income. They also are
very self-directed individuals that make decisions regarding their finances on
their own.

• In India, trading via the Internet refers to giving your orders to brokers via a
website and not directly on an exchange. Goswami (2003) also explains how
the Internet in India acts as an Order Routing System since all orders must
be routed through the same exchange mechanisms – this helps to ensure
transparency and security. India investors are professional self-directed
people that are highly educated. Goswami rates convenience, low cost, and
speed as the benefits of online trading that are most important to the Indian
investors.

• Finally in Singapore, the self-investing trend has led to many e-brokerages

with lower fees than traditional brokerages. The majority of investors in
Singapore are young professional males with at least one college degree.
However, since stock trading on the Internet has become so accepted in
Singapore, it is not correct to say that investors are only the young and the
educated. Instead, Internet trading is appealing to investors across different
age levels and different educations. Nevertheless, according to Teo, Tan and
 Peck, the one characteristic that almost all online investors have is high-level
incomes. They found that this was because most local online brokerages
require a deposit of at least $1000 (Singapore dollars) in order to start
trading.

8.7 The Future Of Traditional Brokers And Online Trading

• Even though the Internet is being used more and more for investing purposes,
it is highly unlikely that “virtual” brokerages will replace full service traditional
brokerages over the long run. In fact, many financial planners feel that online
trading will not hurt their businesses since the greater part of them work with
the wealthiest portion of the population who do not have time to do their own
investing.

• It was interesting to discover that in the late nineties, when the market was
going strong, many investors made large returns by trading individual stocks
and wondered why they should even pay for financial advice from an advisor.
These investors became overconfident and suffered from the illusion of
control that Barber and Odean (2001) researched in their study. However,
after the market drop in 2001, many online investors continued to trade online,
but they went back to financial planners for advice (Vakil & Lu, 2005).
According to Hurley (2000), for the first time in 2000 since the mid-nineties,
the highly diversified low risk portfolios that financial planners created have
produced better results than portfolios that their clients were managing by
themselves online. This is because many online traders only focus on the
here and now and do not look at the whole picture or at the future as financial
advisors are trained to do.

• Many brokers may have clients that want to try to invest on their own but do
not have a large amount of “play money” to set aside to invest, as was
mentioned in a previous section. One option for this type of client is for the
broker to open an account online for the customer that the broker can oversee
and step in if it looks like his client is heading for trouble.

• With regards to online investing, many e-brokerages are trying to expand to

offer newer and better services to clients. One option is for e-brokerages to
offer more knowledge and information support and in turn raise the
commissions in order to cover the costs associated with offering this service.
 This can be done by adding knowledge-based transaction processing
systems to e-brokerages that can give investors more personalized advice. By
simply adding artificial intelligence systems to the original transaction
processing systems that are already found on most online investing websites,
e-brokers can create a knowledge-based system. Online investing firms might
also consider adding educational web pages and other services that will teach
beginning investors how to invest online.

8.8 Discussion And Implications For The Future

• Has online investing benefited or impaired the financial industry? The purpose
of any efficient market is to bring all possible buyers and sellers together so
that all the preferences are reflected in the market price. Online investing
benefits the financial industry by helping the stock market to reach this goal. It
allows more buyers and sellers to come together to carry out transactions.

• Some fear that online investing will increase market fragmentation, which is
when too many competitive suppliers enter an active or new market. Although
that may happen over a short period of time, in the long run, the number of
suppliers and consumers should even out as more people start using the
Internet to trade.

• Whether to switch to online trading is something that investors will have to

decide for themselves. At this time, average Internet traders might fall into the
category of young highly educated men with larger incomes, but this is sure to
change. Women are now beginning to use the Internet more for online
shopping and paying bills so using the Internet to invest should follow. Also a
number of inexperienced investors have started trading online because of the
amount of publicity touting its ease and convenience. These immature
investors will need a lot of knowledge and advice from e-brokerages, and
online investing firms must take a step up and be available for more personal
advice. That may mean that transaction costs will go up for more naïve
investors who request more personalized service, but it will be worth it for
them in the long run.

• It is also important to educate new investors that investing online tends to

make them look to the short term instead of investing for the long term, and
that this can cause them to trade more frequently, thereby lowering their
 returns. Buying individual stocks can be very risky and without the right advice
on how to diversify investments, a naïve investor could end up losing a lot of
money.

• Since no online investing firms are the same, investors will value certain ones
over others based on their needs. The new breed of investor that enjoys risk
and likes to trade frequently will favor sites that gives them low transaction
costs and lots of control. However, beginning investors will want sites that
give them more advice and handholding tools. More value-added knowledge
should be added to as many sites as possible.

• As the Internet becomes available to more people all over the globe, foreign
investors will increase their purchases of U.S. stock and U.S. investors will
begin to diversify by including more foreign stocks in their portfolios. These
foreign investors will appreciate the opportunity to invest in U.S. stocks more
conveniently and at lower costs. Foreign investors will now be able to pay
lower transaction fees and stop paying higher fees to their brokers for
international trades. The same can be said about U.S. investors trading
foreign stocks. Many advisors suggest holding foreign stocks in a portfolio as
it actually reduces undiversifiable risk, so online investing will give investors
an easier way to acquire these international stocks.

• More traditional brokers will need to start offering services via the Internet if
they have not already. However, they should not go completely online as a
majority of the investors like the security of knowing that there is an actual
physical location where they can go if they need expert advice. For investors
that want to experiment with online investing but are already clients of
traditional brokers, the idea of setting up “play money” for them to invest with
is a suitable idea. Also, brokers could set up a mixture that allows both online
trading and traditional trading. Traditional brokers should consider offering
other services such as estate planning and tax planning, which will not be as
easy to offer online.

• However, there are indications that online trading has somewhat dampened
since 2000. What began as an economic slowdown only got worst with the
September 11th terrorists attacks. Investors have generally have become less
tolerant and more risk averse. When dramatic events such as September 11th
happen, it directly affected the overall performance of the economy and
investors have the tendency to stay with approaches that they are most
comfortable with and not try anything new (like online trading) while at the
same time investing less (sine investments involve risk). If the market picks up
speed, investors will change their minds. But, given the uncertainty in global
oil prices and other issues, including ballooning U.S. trade deficits and the war
on terrorism, investors are very unlikely to return to online trading in the near
future. However, they will do so as soon as the market picks up and they once
again become comfortable with this new approach to trading.
 11. Analysis

Q1.Do you feel secure in providing your personal information in…………company?

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 28 50 56

2 Agree 14 50 28

3 Neutral 08 50 16

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree

30

25

20 StronglyAgree
Agree
15 Neutral
Disagree
10
StronglyDisagree
5

0
Q2. Do you think risk associated with transactions is low in…………company?

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 17 50 34

2 Agree 29 50 58

3 Neutral 04 50 08

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree

30

25

20 Strongly Agree
Agree
15 Neutral
Disagree
10
Strongly Disagree
5

Q3. When the………………company promise to do somethin g by a certain time, it

does so.

S.No Likert Scale Response of Total Percentage

 respondent Respondents

1 Strongly Agree 22 50 44

2 Agree 17 50 34

3 Neutral 11 50 22

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree

25

20

Strongly Agree
15 Agree
Neutral
10 Disagree
Strongly Disagree
5

Q4. When you have a problem,

the……….company shows a sincere
interest in solving it.

S.No Likert Scale Response of Tot

 respondent Respondents

1 Strongly Agree 12 50 24

2 Agree 37 50 74

3 Neutral 01 50 2

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree

40

35

30
Strongly Agree
25
Agree
20 Neutral
Disagree
15
Strongly Disagree
10

0
Q5. The…………company perform the service right the first time.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 14 50 28

2 Agree 29 50 58

3 Neutral 07 50 14

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree
 30

25

20 Strongly Agree
Agree
15 Neutral
Disagree
10 Strongly Disagree

Q6. The………………..company provides its services at the time it promises to do

so.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 13 50 26

2 Agree 31 50 62

3 Neutral 06 50 12

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree
 35

30

25
Strongly Agree
20 Agree
Neutral
15 Disagree
10 Strongly Disagree

Q7 The…………….company insists on error-free records.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 28 50 56

2 Agree 14 50 28

3 Neutral 08 50 16

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree
 30

25

20 Strongly Agree
Agree
15 Neutral
Disagree
10
Strongly Disagree
5

Q8. Employees in…………………….company tell you exactly when services will be

performed.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 18 50 36

2 Agree 23 50 46

3 Neutral 09 50 18

4 Disagree 00 50 ----

5 Strongly 00 50 ----
 Disagree

25

20
Strongly Agree
15 Agree
Neutral
10 Disagree
Strongly Disagree
5

Q9. Employees in the……………………..company gives you prompt service.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 09 50 18

2 Agree 39 50 78

3 Neutral 02 50 04

4 Disagree 00 50 ----

5 Strongly 00 50 ----
 Disagree

40

35

30
Strongly Agree
25
Agree
20 Neutral
Disagree
15
Strongly Disagree
10

Q10 Employees in the……………..company are always willing to help you.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 00 50 56

2 Agree 43 50 28

3 Neutral 07 50 16

4 Disagree 00 50 ----

5 Strongly 00 50 ----
 Disagree

45
40
35
Strongly Agree
30
Agree
25
Neutral
20
Disagree
15
Strongly Disagree
10
5
0

Q11. Employees in the………..company are never too busy to respond to your

requests.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 00 50 56

2 Agree 04 50 28

3 Neutral 03 50 16

4 Disagree 34 50 ----

5 Strongly 09 50 ----
Disagree
 35

30

25
Strongly Agree
20 Agree
Neutral
15 Disagree
10 Strongly Disagree

Q12 The behaviour of employees in………………….company instils confidence in

you.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 02 50 04

2 Agree 12 50 24

3 Neutral 36 50 72

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree
 40

35

30
Strongly Agree
25
Agree
20 Neutral
15 Disagree
Strongly Disagree
10

Q13 You feel safe in your transactions with the……………………..company.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 10 50 20

2 Agree 33 50 66

3 Neutral 07 50 14

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree
 35

30

25 Strongly Agree
20 Agree
Neutral
15
Disagree
10 Strongly Disagree

Q14 Employees in the……………………company are consistently courteous with

you.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 28 50 56

2 Agree 22 50 44

3 Neutral 00 50 ----

4 Disagree 00 50 ----

5 Strongly 00 50 ----
 Disagree

30

25

20 Strongly Agree
Agree
15 Neutral
Disagree
10 Strongly Disagree

Q15 Employees in the………………..company have a knowledge to answer your

questions.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 43 50 86

2 Agree 07 50 14

3 Neutral 00 50 ----

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree
 45
40
35
30 Strongly Agree
25 Agree
Neutral
20
Disagree
15 Strongly Disagree
10
5
0

Q16 The……………………company gives you individual attention.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 11 50 22

2 Agree 39 50 78

3 Neutral 00 50 ----

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree
 40

35

30
Strongly Agree
25
Agree
20 Neutral
15 Disagree
Strongly Disagree
10

Q17 The…………………….company has operating hours convenient to customers.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 23 50 46

2 Agree 27 50 54

3 Neutral 00 50 ----

4 Disagree 00 50 ----

5 Strongly 00 50 ----
 Disagree

30

25

20 Strongly Agree
Agree
15 Neutral
Disagree
10 Strongly Disagree

0
Q18 The…………………….company has employees who give you personal
attention.

S.No Likert Scale Response of Total Percentage

respondent Respondents

1 Strongly Agree 15 50 30

2 Agree 17 50 34

3 Neutral 18 50 36

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree

18
16
14
12 Strongly Agree
10 Agree
Neutral
8
Disagree
6 Strongly Disagree
4
2
0

Q19 The…………………..company has your best interests at heart.

S.No Likert Scale Response of Total Percentage
respondent Respondents

1 Strongly Agree 18 50 36

2 Agree 21 50 42

3 Neutral 11 50 22

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree

25

20

Strongly Agree
15 Agree
Neutral
10 Disagree
Strongly Disagree

Q20 Employees of the………………………………..company understand your

specific needs.
S.No Likert Scale Response of Total Percentage
respondent Respondents

1 Strongly Agree 33 50 66

2 Agree 17 50 34

3 Neutral 08 50 ----

4 Disagree 00 50 ----

5 Strongly 00 50 ----
Disagree

35

30

25
Strongly Agree
20 Agree
Neutral
15 Disagree
Strongly Disagree
10

12. Conclusion:

As we can see from the analysis, the percentage response of respondents towards
Agree and Strongly agree is far more than neutral, disagree and Strongly Disagree.

Hence, we can conclude that customers are very satisfied with online trading as the
response is positive w.r.t questionnaire.
 QUESTIONNAIRE

I would like to introduce myself as Pavnish, a

management student undergoing MBA(ITM) programme
at DEEN BANDHU CHHOTU RAM UNIVERSITY OF SCIENCE
AND TECHNOLOGY, Murthal(Haryana). With this regard,
I need to do a project for the fulfillment of my course.

So I request you to co-operate with me by fulfilling this

questionnaire. The information will be used purely for
academic purpose.

Name of the Project: Measuring Customer Satisfaction

with online trading at NSE using SERVQUAL

Name of the Participant:

Age:

Occupation:
 Questionnaire on

S. Questions Strongly
No Strongly Agree
Disagree
1 2 3 4
5
1 Do you feel secure in providing your 1 2 3
personal information 4 5
in……………………………….company?
2 Do you think risk associated with 1 2 3 4
transactions is low in 5
…………………………………..company?
3 When the……………………………………… 1 2 3 4
company promise to do something by a 5
certain time, it does so.
4 When you have a problem, 1 2 3 4
the……………….....company shows a sincere 5
interest in solving it.
5 The…………………………..company perform 1 2 3 4
the service right the first time. 5
6 The…………………………..company provides 1 2 3 4
its services at the time it promises to do so. 5
7 The………………………….company insists on 1 2 3 4
error-free records. 5
8 Employees in 1 2 3 4
the………………………………..company tell 5
you exactly when services will be
performed.
9 Employees in the…………………………… 1 2 3 4
company give you prompt service. 5
10 Employees in the……………………………… 1 2 3 4
company are always willing to help you. 5
11 Employees in 1 2 3 4
the……………………………..company are 5
never too busy to respond to your requests.
12 The behavior of employees 1 2 3 4
in………………………company instills 5
confidence in you.
13 You feel safe in your transactions with 1 2 3 4
the……………………………company. 5
14 Employees in 1 2 3 4
the……………………………….company are 5
consistently courteous with you.
15 Employees in 1 2 3 4
the……………………………….company have a 5
knowledge to answer your questions.
16 The………………………………company gives 1 2 3 4
you individual attention. 5
17 The………………………………..company has 1 2 3 4
operating hours convenient to customers. 5
18 The……………………………….company has 1 2 3 4
employees who give you personal attention. 5
19 The………………………………company has 1 2 3 4
your best interests at heart. 5
20 Employees of 1 2 3 4
the…………………………….company 5
understand your specific needs.
Measuring Customer Satisfaction with online trading at
NSE using SERVQUAL
Direction: The following set of statements relate to your feeling
about……………………….company. For each statement, please show the extent to
which you believe……………………………..company has the feature described by
the statement. Once again, circling 1 means you strongly agree
that…………………company has that feature, and circling 5 means that you
strongly disagree.