How to Start Trading

iPlan Education 1
 TRADINGA Trading Account has your money, which is used for
TRADING
Account share/commodity trading purpose.
Account

DMAT A DMAT Account has shares of companies, which you

DMAT purchased through online share trading.
Account
Account

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 TRADING
TRADING Stock Brokers are Market Intermediaries.
Account
Account These are members of stock exchanges. Theyll
guide you in completing all the required formalities
to open a trading and DMAT Account.
DMAT
DMAT
Account Stock Broker
Account

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 Trading
Trading
TRADING A/c
TRADING A/c
Account ShareKhan
Account ShareKhan

DMAT A/C
DMAT A/C
DMAT NSDL or CSDL
DMAT NSDL or CSDL
Account Stock Broker
Account

Trading Software

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DMAT Account: Depositories & DPs
Depository is an organization which holds securities with it, in which trading is
done among shares, debentures, mutual funds, derivatives, F&O and
commodities.
Depositories in India:
NSDL: National Securities Depository Ltd : 1.25 Crores Demat A/c and 288 DPs in India
(Dec, 2012)
CDSL : Central Depository Services Ltd : 80 lakhs Demat A/c and 643 DPs in India (Dec,
2012)

Depository interacts with its clients / investors through its agents, called
Depository Participants normally known as DPs.
For any investor / client, to avail the services provided by the Depository, has to
open Depository account, known as Demat A/c, with any of the DPs.

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Under Umbrella of SEBI (Protects Investors Interest)

Trading
Trading
TRADING A/c
TRADING A/c
Account ShareKhan
Account ShareKhan

DMAT A/C
DMAT A/C
DMAT NSDL or CSDL
DMAT NSDL or CSDL
Account Stock Broker
Account

Trading Software

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 Under Umbrella of SEBI (Protects Investors Interest)

The Securities and Exchange Board of India (SEBI) is the market regulator in India.
Established in the year 1988 and given statutory powers on 12 April 1992 through the
SEBI Act, 1992.

SEBI has to be responsive to the needs of three groups, which constitute the market:
the issuers of securities
the investors
the market intermediaries.

SEBI has three functions rolled into one body:

Quasi-legislative : It drafts regulations in its legislative capacity.
Quasi-judicial : It passes rulings and orders in its judicial capacity. A second appeal lies
directly to the Supreme Court.
Quasi-executive: It conducts investigation and enforcement action in its executive function .

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Online Trading Mechanism

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Trading Network

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How your account is settled

Sell Shares Buy Share

Receives Receives
Profit /Loss Loss/Profit
Clearing Member

Pay for short sell Pay to buy

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List of Trading Participants
SEBI
Exchanges
Depositories
Clearing House/Member
Brokers
Banks
Investors
FII/DII
Promoters
Retail Investors

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Investors

FII : Foreign Institutional Investors

DII: Domestic Institutional Investors
Promoters
Client Retail Investors

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What do I need for online trading?
Bank Account
Money
Trading Account
DMAT Account
Computer
Internet connection
Knowledge
Experience
AND
Emotional Control

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Due Diligence of a Broker
Brokerage: This the fee a broker charges when you buy or sell any commodity contract over exchange. You
can negotiate on brokerage fee, this can be between 2 paise to 3 paise per Rs. 100. It is charged on both buy
and sell. Brokerage is charged over the total value of contract not just on the margin deposit.
Limits: Limits or leverage is the amount provided by your broker to trade. Normally it is 10 times in Intraday
trading and 5 times in future trading of your actual amount invested. i.e. If you are have Rs 1,000 and you
have a limit of 10 times means you can trade upto Rs. 10,000 with only Rs. 1000 in your account. Just check
out what is the limit your broker is providing you.
Other charges: Ask about any other hidden charges are there on the trading account like AMC.
IT Service: Check the IT support provided by the broker. Ask any friend of yours for the feedback.
Trading Software: Find out which software is provided by your broker for trading purpose. Normally
software is better than a web browser based trading terminal. Web based browsers are slower, some time
they take long time to process your trade.
Qualification: Find out the qualification of your relationship manager who is provided to you by your broker
to assist you in trading, also see how many accounts are handled by your Relationship Manager. Because, if
he is over loaded with many accounts he wont be able to provide you proper information about market on
time - Just a few minute delay can lead to disaster in the commodity market.
Documents: Check out what all documents are required before opening an account.
Contract Documents: Read carefully before signing any contract with a broker

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Online Trading

Cash Market
Day Trading
Delivery

Derivatives
OTC Over The counter
Forward
Swaps
Exchange Traded
Future
Options

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Cash Market
Intraday / Day Trading
9:15 AM 11 AM 1 PM 2 PM 3 PM 3:30 PM
100 102 102 100 98

Enjoy
Levera
ge

Sell
Long Buy 100
120

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Cash Market

Delivery or Holdings Long

9:15 AM 11 AM 1 PM 2 PM 3 PM 3:30 PM
Buy Any time of the day and keep it forever until you sell

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A Live Trading Example

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How it worked: Order Matching system

Lowest Price Seller To Highest Price Buyer

If Prices are same of two bidders: The one who placed order first

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Clearing & Settlement

Activity Day
Trading Rolling Settlement Trading T
Clearing Custodial Confirmation T+l working
days
Delivery Generation T+l working
days
Settlement Securities and Funds pay-in T+2 working
days
Securities and Funds pay-out T+2 working
days
Valuation of shortages based on T+2 working
closing prices (at T+1 closing prices) days
Post Settlement Auction T+2 working
days
Auction settlement T+3 working
days
Bad Delivery Reporting T+4 working
days
Rectified bad delivery pay-in and pay- T+6 working 20
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SEBI (Prohibition of Insider Trading) Regulations, 1992

The malpractice of 'insider trading' affects the innocent investors. In simple terms 'insider
trading' means selling or buying in securities on the basis of price sensitive unpublished
information of a listed corporate which if published could lead to a fall or rise in the prices
of shares of the corporate.

To tackle the problem of insider trading, SEBI issued the SEBI (Insider Trading) Regulations
1992. These regulations were further made stringent through amendments in February
2002 and they were notified as the SEBI (Insider Trading) (Amendment) Regulations 2002.

Prohibition on Dealing, Communicating or Counseling

Investigation
Disclosures and Internal Procedure for Prevention of Insider Trading

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SEBI (Prohibition of fraudulent and Unfair Trade Practices relating
to securities market) Regulations, 2003

The SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities
Market) Regulations, 2003 enable SEBI to investigate into cases of market manipulation
and fraudulent and unfair trade practices. The regulations specifically prohibit market
manipulation, misleading statements to induce sale or purchase of securities, unfair
trade practices relating to securities.

Prohibition of certain Dealings in Securities

Prohibition of manipulative, Fraudulent and Unfair Trade Practices

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