A PRESENTATION

ON:

SUBMITTED BY: SUBMITTED TO:

MANVI MADAN MRS. RITIKA SETH GROVER
SIDDHARTH SHARMA (2499)
Introduction
Online Trading is a common terminology that is used in stock market.
Basically there are two types of trading such as Online Trading and Offline
Trading. Offline trading is the traditional form of trading there the order is
placed with the help of a stock broker, here you dont have direct access to
the trading terminal but in online trading you have the complete freedom
to manage your trading Online. But most of the people are not completely
aware of the concept online trading . In this article we are giving you a
brief about the concept online Trading
Online Trading involves investment activity takes place over the internet
and it does not require physical presence of the broker. An investor has to
register with an online trading portal for doing online trading. Investors
get into an agreement with the firm to trade in different securities
according to the terms and conditions given on the agreement. As the
servers of the online trading portal are connected all the time to the stock
exchanges and designated banks the processing is done in real time and
investors can also have updates on the trading. Online trading allows you
to check out the status of your orders either through e-mail or through the
interface that cannot be accessed by a third party. Online trading also
gives the options like to link their bank account, demat accounts
and brokerage accounts into single interface.

Online Trading is a service offered on the internet for purchase and

sale of shares. In the real world, you place orders on your stockbroker
either verbally (personally or telephonically) or in a written form (fax). In
Online

Trading, you will access a 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.

Advantages and
Disadvantages of
Online Trading:
Due to the problems that arose during paper shares, there was a need of a
system that would make share transfer, buying/selling of shares, etc. an
easier affair.
Therefore in 1996, the Indian parliament passed the Derivatives act, which
allowed online transaction of shares, thus making it much easier for the
broker and investor.
In the new online Trading system, an investor must open a demat account
with one of the Stock Brokers to start trading online.
A demat account is a must for an investor to trade online.
Mentioned below are some of the advantages of trading online:
1) Easier and convenient way to own shares
2) Immediate transfer
3) Zero stamp duty on transfer of shares
4) Safer than paper shares, e.g., fake signatures, delay, thefts, etc.
5) Lesser paperwork for transfer of securities
6) Less transaction cost
7) No “odd” problems. Even a single share can be sold.
8) DP registers a change in address with all companies. No need for
the investor to contact the companies immediately.
9) DP transmission of securities, thus eliminating the need of
notifying the companies.
10) Automatic credit in demat accounts
11) Both equity and debt instruments can be held by a demat account
The depository system aids in reducing the expenditure of new issues due to
lesser printing and distribution costs. It increases the efficiency of the
registrars and transfer agents and the secretarial department of a
company. It provides better facilities for communication and timely service
to shareholders and investors.

The disadvantages of online trading are mentioned below:

1) Investors, who are trading for the first time, go with the flow and
get immersed in technology and actually temporarily forget that they are
actually using their real money.
2) There is no relationship that of a mentor between a professional
broker and an online trading account holder, thus leaving the investor on
his own to make choices of the right shares.
3) Users who are not familiar with the ins and outs of the basics of
brokerage software can make mistakes which can prove to be a costly
affair.
4) This is like any other financial strategy, where your commitment
to online trading takes research and dedication to make sure by yourself
that everything is up to par. You have to take time out to do your own
research where you will have to overcome a great learning curve to make
some money from online trading a possibility.
Process Of online
Trading:
1. Selection of a broker:
The buying and selling of securities can only be done through SEBI
registered brokers who are members of the Stock Exchange. The broker can
be an individual, partnership firms or corporate bodies. So the first step is
to select a broker who will buy/sell securities on behalf of the investor or
speculator.

2. Opening Demat Account with Depository:

Demat (Dematerialized) account refer to an account which an Indian
citizen must open with the depository participant (banks or stock brokers)
to trade in listed securities in electronic form. Second step in trading
procedure is to open a Demat account.

The securities are held in the electronic form by a depository. Depository is

an institution or an organization which holds securities (e.g. Shares,
Debentures, Bonds, Mutual (Funds, etc.) At present in India there are two
depositories: NSDL (National Securities Depository Ltd.) and CDSL (Central
Depository Services Ltd.) There is no direct contact between depository and
investor. Depository interacts with investors through depository
participants only. Depository participant will maintain securities account
balances of investor and intimate investor about the status of their
holdings from time to time.
3. Placing the Order:
After opening the Demat Account, the investor can place the order. The
order can be placed to the broker either (DP) personally or through phone,
email, etc.

Investor must place the order very clearly specifying the range of price at
which securities can be bought or sold. e.g. “Buy 100 equity shares of
Reliance for not more than Rs 500 per share.”

4. Executing the Order:

As per the Instructions of the investor, the broker executes the order i.e. he
buys or sells the securities. Broker prepares a contract note for the order
executed. The contract note contains the name and the price of securities,
name of parties and brokerage (commission) charged by him. Contract
note is signed by the broker.

5. Settlement:
This means actual transfer of securities. This is the last stage in the trading
of securities done by the broker on behalf of their clients. There can be two
types of settlement.

(a) On the spot settlement:

It means settlement is done immediately and on spot settlement follows. T
+ 2 rolling settlement. This means any trade taking place on Monday gets
settled by Wednesday.
(b) Forward settlement:
It means settlement will take place on some future date. It can be T + 5 or T
+ 7, etc. All trading in stock exchanges takes place between 9.55 am and
3.30 pm. Monday to Friday.
Types Of Orders
The following are the types of orders generally available:

 Market Order - An order to buy or sell stock immediately at the best

available price for the number of shares specified. Typically, brokerage
houses will guarantee the execution of the order; however, a guarantee
in price is not given. Market buy orders are usually filled at the
prevailing ask (selling) price, as long as there are enough shares
available to complete the order. Conversely, market sell orders are
typically executed at the bid (buying) price, as long as there are enough
buyers to fill the order. Because there are no guarantees to execute the
order at a specified price, it is possible that the order is executed at a
price that is very different from the level at which the stock is trading at
the moment the order is sent. This “slippage,” or difference in price from
the moment the order is sent, to its actual execution, typically occurs
during periods of volatile or fast moving markets. Slippage is also
common in market orders that are sent on stocks that are less liquid in
trading.
 Limit Order - An order to buy or sell stock at a price specified by the
customer. The broker will make an attempt to immediately buy or sell
at the price specified, however, does not guarantee that the order will
be executed. Limit orders are especially useful in volatile or fast moving
markets, where market orders have the possibility of getting filled at
extreme price levels, beyond the expectations of the customer. Limit
orders are also used by traders to anticipate buying or selling a stock, if
the market reaches a level that is attractive.
 Stop Orders - Dormant orders that are triggered and become active only
if and when the stock reaches a price specified by the customer. Stop
orders are typically used by investors to control risks in the event that
the price of a stock moves to a level at which he wishes to close a trade.
This is usually done in an effort to limit losses or protect gains.
o Regular Stop Order - A market order to buy or sell a stock only if it
trades at or beyond a price specified by the customer.
o Stop Limit Order - A limit order that is executed to buy or sell a stock
only if it trades at a price specified or better by the customer.
 Time and Size Conditions - An order to buy or sell a stock with a time
limit set by the customer. Time Conditions are typically referred to in the
industry as:
o Day Order - A day order that is good only for the regular market
trading hours, and is cancelled at the end of the trading session if not
executed. This is the most common time limited order.
o Good Till Cancelled (GTC) Order - An order that remains open until
filled or cancelled by the customer (Some brokerage houses set limits
to this type of order after 30 or 60 days. Check with your broker to be
certain).
o Immediate or Cancel (IOC) Order - This is an order that must be filled
immediately in its entirety or as a partial fill or be cancelled.
o Fill or Kill (FOK) Order - This order must be filled immediately in its
entirety or be cancelled. (Partial fills are not acceptable).
o All or None (AON) - An order that must be filled in its entirety or be
cancelled (does not have to be filled immediately).
o Market on Close (MOC) Order - An order to buy or sell stock at or
near regular session closing.
o Minimum Quantity - An order to buy or sell a specified number of
shares at a price contingent upon a minimum number of shares to be
filled in the event of a partial fill.
o Do Not Reduce - To instruct your broker not to reduce the price of
your limit order in the event that a stock goes ex-dividend, and the
prevailing price of the st ock is reduced by market makers by the
amount of dividend
Bombay Stock
Exchange (BOLT):
Bombay Stock Exchange (BSE) 29. The Bombay Online Trading
System (BOLT) enabled the oldest stock exchange in India to expand
trading activities to 118 cities across the country. BOLT has at present
capacity to handle 5,00,000 trades in a seven hour trading session
per day. During 1997-98, trading volume in on BSE ranged between
Rs. 11413 crore and Rs. 23,310 crore as against Rs. 6248 crore to Rs.
14863 crore in 1996-97. The ratio of total delivery to toal turnover in
April 1997 was 8.1 per cent, which rose to 9.1 per cent in July 1997. The
delivery ratio declined in the following two months but registered a
steep increase thereafter to reach 16.1 per cent at the end of March
1998.
Players In Online
Trading :
At present some of the dominant players in the online trading market of
share market are-

1. Sharekhan.com

2. Icicidirect.com

3. Unicon

4. 5paisa.com

5. Indiabulls

6. Kotak Securities

7. Motilal Oswal

8. Geojit Securiti
Why Online Trading
entered late in India?
The Indian exchanges and brokering houses have been very slow in
moving their transactions online and the major reason has been
the lot government regulations. The initial delay was due to
laying down the specifications for creating Closed User Groups
(CUGs). This issue was resolved between the Department of
Telecommunications (DoT) and the Finance Ministry around 1998
anda f t e r t h a t s o o n c a m e t h e o n l i n e t r a d i n g p o r t a l s l i k e
I C I C I D i r e c t . c o m , m o t i l a l o s w a l . c o m , sharekhan.com and
smartjones.com. Connectivity related issue was perhaps the most
important technological factor. Traditionally the cost of leased lines and
VSAT links has been very high and the reliability of the links was very low.
To commission the links it took a long time as one had to make an
application and wait for a few weeks for the link to be up and running.
Many other issues like security, backup and recovery procedural costs
also acted as deterrents in the process.

Now,w i th t he r e s o lu t io n o f r e g ul a t o r y is s ue s I nd ia n o lo ng e r
h a v e a ny pr e s s in g c o n ne c tiv it y a nd bandwidth issues. The entry
of private players into the broadband scenario and the
government opening up the telecom sector these issues have become
almost non-existent. Security solutions and services available in the
market.
 Summary
1.These days traders/investors can transact in stock markets either by
routing orders through their brokers or by directly using online trading
softwares like NEAT by NSE.

2. Brokers can either avail the exchange developed trading platforms

or develop their own in-house trading softwares e.g. Tradetiger by
Sharekhan securities, Trade racer by ICICI securities, etc

3. A person should be aware of different types of price quotations and

orders which are available for trading on the bourses.

4. Most popular price quotations are- bid price, ask price and LTP.

5. The difference between ask price and bid price is called as spread.
Bid-ask spread is an indicator of liquidity of a stock. Narrower the spread,
higher the liquidity.

6. A trader can place a market order, limit order or a stop- loss order in
the stock market.

7. Online trading platforms have commands to view, modify or cancel an

order.