A live Project On

ANNALYSIS ON DEMAT ACCOUNT AND ONLINE TRADING

SUBMITTED BY

Ankush Shaw

Avinash Choudhary

Anuj Singh

Ankita Dutta

Ishrat Md

Jayapradadevi

Thirunavukarasu

FINANCIAL ACCOUNTS

INSTITUTE FOR TECHONOLOGY AND MANAGEMENT,

D-14, SIPCOT IT PARK, OMR SIRUSERI

CHENNAI – 603103

BATCH 2014-2016

Content

DEMAT ACCOUNT AND ONLINE TRADING

1- Project overview

2-Introduction

3-History

4-Demat Account

A-Analysis on a Public Sector Banks

5-Online Trading

A-Analysis on the Trading Account

6-Concept of Demat Account

A- Depository services in India

B- Advantage and Disadvantage of Demat Account

C- Benefits of demat Account

D- Depository Participant

E- Opening of Dematralitions account (Demat A/C)

F- Closing of Dematralitions account (Demat A/C)

7-Concept of Online Trading

A- Types of Online Trading

B- Stock exchange

C- Share Trading

D- Trading order type

E- Rolling Settlement System

F- Research methodology

G- Why online trading enter late in India

H- Analysis and Interpretation

I- Limitation

8- Analysis of Demat account and online trading9- Relation between Demat account and online trading

10- Conclusion

PROJECT OVERVIEW

The commencement of E-Trading and Demat has transformed the capital market in India. With the help of Demat and Trading account, buying and selling of shares has become a much faster and even process than trading with the assistance of a physical broker. It provides for the assimilation of bank, broker, stock exchange and depository participants. This helps to get rid of the painstaking procedure of investing in stock exchange. Today, if one wants to invest in stock market, he has to contact a broker on phone or meet him personally to place order. A broker generally gives such importance and additional service only to high net worth customers. But the introduction of Internet trading, even a common or a small investor gets an opportunity to avail the services at an affordable price which is much lesser than what is charged by a physical broker over the phone. Online trading has given customer a real time access to account information, stock quotes elaborated market research and interactive trading. The prerequisites of internet trading are a computer, a modem and a telephone connection, registration with broker, a bank a/c and depository account. The introduction of depository service is consider as the beginning of the trading of stock @ click. This means that you can arrange delivery of scrip’s sold anytime, anywhere to anyone by click of a mouse. Dematerialization facilitates to keep the securities in electronic form instead of paper form. It offer more advantages than the physical certificate form. Despite the advantage of dematerialization, the awareness levels among the investors relating to Demat account and the various financial institutions providing such services. This study involves understanding the various concepts of Demat and Analyzing the investment pattern of individuals in India and a study on Analysis of awareness among investors regarding On Line Trading and Dematerialization.

INTRODUCATION

The commencement of E-Trading and Demat has transformed the capital market in India. With the help of Demat and Trading account, buying and selling of shares has become a much faster and even process than trading with the assistance of a physical broker. It provides for the assimilation of bank, broker, stock exchange and depository participants. Today, if one wants to invest in stock market, he has to contact a broker on phone or meet him personally to place order. A broker generally gives such importance and additional service only to high net worth customers. But the introduction of Internet trading, even a common or a small investor gets an opportunity to avail the service at an affordable price which is much lesser than what is charged by a physical broker over the phone. Online trading has given customer a real time access to account information, stock quotes elaborated market research and interactive trading. The prerequisites of Internet trading are a computer, a modem and a telephone connection, registration with broker, a bank a/c and depository account. The introduction of depository service is considered as the beginning of the trading of Stocks @click. Dematerialization facilitates to keep the securities in electronic form instead of paper form. It offers more advantageous than the physical certificate form. Despite the advantages of Dematerialization, the awareness levels among the investors relating to demat account is not adequate because of numerous reasons.

Indian capital market has seen unprecedented boom in its activity in the last 15 years in terms of number of stock exchanges, listed companies, trade volumes, market intermediaries, investor population, etc. However, this surge in activity has brought with it numerous problems that threaten the very survival of the capital markets in the long run, most of which are due to the large volume of paper work involved and paper based trading, clearing and settlement.

Until the late eighties, the common man kept away from capital market and thus the quantum of funds mobilized through the market was meager. A major problem, however, continued to plague the market. The Indian markets were drowned in shares in the form of paper and hence it was problematic to handle them. Fake and stolen shares, fake signatures and signature mismatch, duplication and mutilation of shares, transfer problems, etc. The investors were scared and were under compensated for the risk borne by them. The century old system of trading and settlement requires handling of huge volumes of paper work. This has made the investors, both retail and institutional, wary of entering the capital market.

Government of India decided to set up a fully automated and high technology based model exchange that could offer screen-based trading and depositories as the ultimate answer to all such reforms and eliminate various bottlenecks in the capital market, particularly, the clearing and settlement system in stock exchanges.

HISTORY

Due to the improvement of technology in the 20th century, the need for a physical location became less important and traders transacted with the help of online trading or electronic trading. Electronic trading made transactions easier to complete, monitor, clear and settle and this helped its sustainability. Set up in 1971, NASDAQ was the world's first electronic market although it was originally operated as an electronic trading platform rather than offering Straight through Processing (STP). Globex is one of the earliest examples of widespread electronic trading; the CME Group's electronic trading platform was conceived in 1987 and launched in 1992. This allowed access to a variety of financial markets such as treasuries, foreign exchange and commodities.

The most decisive period in the history of the BSE took place after 1992. In the aftermath of a major scandal with market manipulation involving a BSE member named Harshad Mehta, BSE responded to calls for reform with intransigence. The foot-dragging by the BSE helped radicalize the position of the government, which encouraged the creation of the National Stock Exchange (NSE), which created an electronic marketplace. NSE started trading on 4 November 1994. Within less than a year, NSE turnover exceeded the BSE. Today our country has an advanced trading system which is a fully automated screen based trading system.

NSE operated on NEAT system and BSE on BOLT system .Although the advent of electronic trading changed the working of stock markets, it turned out to be very inefficient as it could not cater to the service of transferring of securities in a quick and seedy manner. The securities were in the form of physical assets and their movement involved risks such as delays, theft, forgery mutilation, bad deliveries and also added to bad costs. To eradicate these problems, the Depository Act of 1996 was passed in India. The first depository account was setup in 1947 in Germany. Their operations in India are carried out in accordance with the regulations made by SEBI, by-laws and rules of Depositories Act and SEBI (Depositories and participants) Regulations Act of 1996. It was formed with the purpose of ensuring free transferability of securities with speed, accuracy and security. Demat account is opened on the same lines as that of bank account. Depository participants will have the prescribed account opening form which needs to be filled and standard agreements are to be signed by the client and the Depository participant, which details the rights and obligations of both parties.

DEMAT ACCOUNT

Depositories in other words called as demat (dematerialized) account. In India’s banking terminology, the term ‘DEMAT Account’ refers to a deposit made at an Indian financial institution that can be used for investing in shares of stocks and other financial assets. Securities are held electronically in a DEMAT Account, thereby eliminating the need for physical paper certificates. A Dematerialized account is opened by the investor while registering with an investment broker or sub-broker. The Dematerialized account number is quoted for all transactions to enable electronic settlements of trades to take place. Every shareholder will have a Dematerialized account for the purpose of transacting shares.

In India, shares and securities are held electronically in a Dematerialized (or "Demat") account, instead of the investor taking physical possession of certificates. A Dematerialized account is opened by the investor while registering with an investment broker (or sub-broker). The Dematerialized account number is quoted for all transactions to enable electronic settlements of trades to take place. Every shareholder will have a Dematerialized account for the purpose of transacting shares.

Access to the Dematerialized account requires and internet password and a transaction password. Transfers or purchases of securities can then be initiated. Purchases and sales of securities on the Dematerialized account are automatically made once transactions are confirmed and completed.

Access to the Dematerialized account requires an internet password and a transaction password. Transfers or purchases of securities can then be initiated.. Each security issued bears a unique ISIN (International Securities Identification Number) issued by the International Standards Organization (ISO). In India, the task of issuing ISIN of various securities has been assigned by SEBI to NSDL. For Government securities, allotment of ISIN is done by Reserve Bank of India. Each member country has a different code according to the ISIN Standard (ISO 6166).

ISIN is a twelve-character long identification mark. It has three components – a pre-fix, a basic number and a check digit.

The pre-fix is a two digit country code as stated under ISO 3166 (IN for India). The basic number is made up of nine alphanumeric characters (digits and/or

alphabets). The check digit at the end of the ISIN is computed to check the validity of the ISIN. It

is calculated according to the modulus 10 “Double Add Double Check”.

Distinct ISINs are allotted to securities issued by the same company, issued at different times or carrying different rights of different terms and conditions. Different ISINs are issued to physical and dematerialized securities of the same issue.

To understand it in a better manner, let’s take an example:

ISIN INE 475C 01 012 have the following break up:

IN – India

E – Company

475C - Company serial number

01 - Equity (it can be mutual fund units, debt or government securities)

01 - Issue number

2 - Check digit

The third character represents the Issuer Type (E in the above example). It is as follows:

A - Central government security

B - State government

C - Municipal corporation

D - Union Territories

E - Company, Statutory Corporation, Banking Company

F - Mutual funds including UTI

Maximum issuer types can be 35 (A to Z and 0 to 8.)

The characters fourth to seventh represents company identity.

The first three characters are numeric and the fourth character is an alpha character.

The eighth and the ninth character represent security type for a given issuer. Both the characters are numeric.

The tenth and the eleventh characters are serially issued for each security of the issuer entering the system.

ONLINE TRADINGChange is the law of nature". There were times when man was a Wanderer or a normal. He himself had to go place to place in search of food, water and now everything is

available at your doorstep just at the click of the mouse. The growth of information

technology has affected almost all sectors of life. Internet has enabled us to get every

information at our doorstep.

When Internet has affected all sectors he could "stock markets" the most important player of

the economy, has remained far behind? Like all other sectors Internet has set its feet in the

stock markets also.

The Stock Market system provides single, nationwide securities. It enables LAN investors in

one part of the country to trade at the best quotes with an investor located in any other part of

the country through the members of the stock exchange and subsequently clears and settle the

trade in an efficient and cost effective manner. The primary objective of the Stock Market is

to provide clear opportunity to the investors throughout the country to trade any security

irrespective of the size of the order or the broker through whom the order is routed. This

provides the facility to execute the buy order at the lowest price in the stock market located

anywhere in the country without any extra cost to the investors.

There will be no trading floor in the exchange. Instead, each trading member will have a Computer at his own office anywhere in India which will be connected to the central computer system at the NSE through leased line or VSATs (very small aperture terminals), for an interim transition period of 6 months & subsequently by satellite link. VSATs are relatively smaller dishes similar to dish antenna for cable TV & have the benefit of not being very expensive. A satellite network makes it possible to connect almost all the parts of the nation quickly as it is easy to install, as against the ground lines such as dial up modems leased lines, which are prone to disruptions, satellite links, on the other hands ensure high speed,

Though trading accounts are traditionally thought to hold only stocks, a trading account can hold cash, foreign cash, securities and a number of other types of investments. 

Investors who use a number of trading strategies or have a number of brokerage accounts may separate their accounts in order to avoid confusion. One account may be a registered

account for their retirement savings; another account may be a buy-and-hold account for their long-term stocks; another may be a margin account; and another may be a trading account used for conducting day-trading activities.

Concept of Demat Account

In India’s banking terminology, the term DEMAT Account refers to a deposit made at an Indian financial institution that can be used for investing in shares of stocks and other financial assets. Securities are held electronically in a DEMAT Account, thereby eliminating the need for physical paper certificates.

For example, a DEMAT Account became available after India adopted the DEMAT system for the electronic storing of stock shares and other securities in 1996. DEMAT is short for “Dematerialized” and such accounts require that an investor open an account with an investment broker linked to a savings or other funded account. Access to a DEMAT Account requires both an Internet and transaction password, and such accounts allow for the transfer of securities without any physical certificates changing hands. This feature helps prevent problems such as: loss, forgery or theft of the certificates and makes the process of buying and selling securities much more efficient.

DEPOSITORY SERVICES IN INDIA

The earlier settlement system on Indian stock exchanges was very inefficient as it was unable to take care of the transfer of securities in a quick/speedy manner. Since, the securities were in the form of physical certificates; their quick movement was again difficult. This led to settlement delays, theft, forgery, mutilation and bad deliveries and also to added costs. To wipeout these problems, the Depositories Act 1996 was passed. It was formed with the purpose of ensuring free transferability of securities with speed, accuracy & security. It has been able to do so by:

a) Making securities of public limited companies freely transferable, subject to certain exceptions;

b) Dematerializing the securities in the depository mode; and

c) Providing for maintenance of ownership records in a book entry form.

For performing the above tasks, two depositories viz, NSDL & CDSL have come up.

National Securities Depository Limited (NSDL) does the above tasks for the trades done on NSE. It is a joint venture of:

IDBI (Industrial Development Bank of India Limited); NSE (National Stock Exchange); and UTI (Unit Trust of India).

NSDL is the first depository to be set up in India. It was registered by SEBI on June 7, 1996.

The second depository Central Depository Services Limited (CDSL) has been promoted by Bombay Stock Exchange and Bank of India. It was formed in February 1999. Both depositories have a network of Depository participants (DPs) which are further electronically connected to their clients. So, DPs act as a link between the depositories and the clients. The Depository system to some extent works like the banking system. There is a central bank and the rules and regulations related to the working of all the commercial, foreign, co-operative and other types of banks are framed by the central bank. In order to do the daily transactions, the investors open an account with the associate banks, and not with the central one. Like an investor can have a bank account with more than one bank, similarly one can have more than one Demat Account.

NSDL – BANK: The Similarities

Bank NSDL Holds funds in accounts Transfers without handling

cash Holds securities in accounts Transfers without handling

physicalsecurities

Transfers funds between accounts

Safekeeping of money Transfers securities between

accounts Safekeeping of securities

NSDL – BANK: The Differences

Bank NSDL Either of holders can sign

instructions Minimum balance to be

maintained Entitled for interest

All joint holders to sign instructions

No minimum balance required Interest can be earned only by

participating in Stock Lending Scheme

Uses balances in accounts Nomination is kept confidential

Does not move balances in account without account holder’s authorization

Signature and photograph of nominee to be provided

ADVANTAGE AND DISADVANTAGE OF DEMAT ACCOUNT

ADVANTAGE OF DEMAT ACCOUNT

a. The biggest benefit is that you do not need to hold securities in physical form rather they are kept in electronic form and therefore the risks of losing shares due to theft, fire, flood and earthquake are eliminated.

b. One can have instant transfer of stocks from one account to another and therefore the whole process of buying and selling becomes fast which in turn increases the efficiency and effectiveness of stock market as a whole.

c. Since they are held in electronic form there is no stamp duty on transfer of securities which reduces the transaction costs associated with buying and selling of shares.

d. Demat account is not only for equity shares but you can keep mutual funds, gold exchange traded fund, preference shares in it which makes it easier for individuals to keep track of their investments as they do not have to check several account, they just have to check their demat account for knowing about their portfolio.

e. An individual having demat account can even trade for one share also which was not the case when he/she hold them in paper form.

f. Change in address recorded with Depository Participant (DP) gets registered with all companies in which investor holds securities eliminating the need to correspond with each of them separately.

g. Transmission of securities is done by Depository Participant (DP) eliminating correspondence with companies.

DISADVANTAGES OF DEMAT ACCOUNT:

a. The biggest limitation is that in order to have a demat account one needs to be internet savvy and therefore people who are not that literate with internet will find it hard to operate

their demat account and therefore they tell their brokers or sub brokers to transact on behalf of them which sometimes lead to fraud and mismanagement of funds by the sub brokers.

b. Another limitation is that since stocks are dematerialized individuals tend to keep looking the stock price more often than they would have if stocks were in paper form and therefore they end up doing trading instead of investment, however this limitation is not of demat account but of individuals as they are not patient enough still many people blame it on demat account when they are asked why they are in a hurry to sale shares.

c. Trading in securities may become uncontrolled in case of dematerialized securities.

d. It is incumbent upon the capital market regulator to keep a close watch on the trading in dematerialized securities and see to it that trading does not act as a detriment to investors.

e. The role of key market players in case of dematerialized securities, such as stock-brokers, needs to be supervised as they have the capability of manipulating the market.

f. Multiple regulatory frameworks have to be confirmed to, including the Depositories Act, Regulations and the various By-Laws of various depositories. Additionally, agreements are entered at various levels in the process of dematerialization. These may cause anxiety to the investor desirous of simplicity.

g. 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.

h. 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.

i. 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.

j. 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.

Benefits of DEMAT account:

a. Benefit to the company

The depository system helps in reducing the cost of new issues due to lower 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.

b. Benefit to the investor

The depository system reduces risks involved in holding physical certificates, e.g., loss, theft, mutilation, forgery, etc. It ensures transfer settlements and reduces delay in registration of shares. It ensures faster communication to investors. It helps avoid bad delivery problems due to signature differences, etc. It ensures faster payment on sale of shares. No stamp duty is paid on transfer of shares. It provides more acceptability and liquidity of securities.

c. Benefits to brokers:

It reduces risks of delayed settlement. It ensures greater profit due to increase in volume of trading. It eliminates chances of forgery or bad delivery. It increases overall trading and profitability. It increases confidence in their investors.

d. Other benefits:

I. Trading in the shares of the Company is now under the compulsory demat segment. With SEBI making demat mandatory on most of the traded scrip, electronic transaction will be the only way everyone will trade.

II. No stamp duty for transfer of securities in the electronic form. In case of transfer of physical shares, stamp duty is payable on the market value of shares being transferred.

III. All risks associated with physical certificates such as delays, loss, in transit, theft, mutilation, bad deliveries, etc. eliminated. The shares can be kept in the “Frozen Mode” by your Depository Participant under the specific instructions of the client.

IV. The concept of an “odd lot” in respect of dematerialized shares stands abolished, i.e. in the demat mode, market lot becomes one share.

V. Dematerialized securities are most preferred by banks and other financiers for providing credit facility against securities. Generally, demat securities attract lower margin and lower rates of interest compared to physical securities.

VI. Even in the electronic mode of trading, the payment mechanism (usually through a broker) between the buyer and seller continues to be as before. Also the usual brokerage charges would have to be incurred. However, after the settlement, pay in and pay out are on the same day for scrip less trading which means you get your securities as well as cash immediately.

VII. Shares bought or sold are transferred in your name on the very next day of pay out. In case of physical shares, transfer of ownership takes 30 days or sometimes even more.

VIII. No courier/postal charges for sending share certificates/transfer deeds.

IX. Facility for freezing/locking of investor accounts, which enables you to make your account non-operational, for instance if you are abroad.

X. Facility to pledge and hypothecate your securities available.

XI. As the Depository System becomes popular, brokers will be increasingly reluctant to deal with physical shares.

XII. Investors prefer to buy shares which are already in dematerialized form.

DEPOSITORY PARTICIPANT

As a broker represents their investors, and can trade on their behalf either on the stock exchange or off-market. Similarly, a Depository Participant (DP) is the representative (agent) of the investor in the depository system providing the link between the Company and the client through the Depository. In India, a Depository Participant (DP) is described as an agent of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act. In a strictly legal sense, a DP is an entity who is registered as such with SEBI under the sub section 1A of Section 12 of the SEBI Act. As per the provisions of this Act, a DP can offer depository-related services only after obtaining a certificate of registration from SEBI. As of 2012, there were 288 DPs of NSDL and 563 DPs of CSDL registered with SEBI.

SEBI (D&P) Regulations, 1996 prescribe a minimum net worth of RS. 50 lakh for stockbrokers R&T agents and non-banking finance companies (NBFC), for granting them a certificate of registration to act as DPs. If a stockbroker seeks to act as a DP in more than one depository, he should comply with the specified net worth criterion separately for each such depository. No minimum net worth criterion has been prescribed for other categories of DPs; however, depositories can fix a higher net worth criterion for their DPs.

• A depository participant can be a bank or even stock brokers having the license to open demat account depending on convenience of the investor.

• Broker is different from a DP. A broker is a member of the stock exchange who buys and sells shares on his behalf and on behalf of his clients, though he could also hold a license to provide depository services.

• A DP just gives an account to hold those shares. It is not necessary for an investor to open a DP account with broker.

• The account of an investor can be different from that of the broker. Many brokers also offer three-in-one trading accounts which link your broking, demat and bank accounts online, thus making it easier for investors to trade.

• A Broker is a member of the stock exchange, who buys and sells shares on his behalf and behalf on his clients.

• A DP will just give you an account to hold those shares.

Steps to open a demat account:

1. Getting in touch with a registered depository: In order to open a demat account, customer have to first get in touch with a registered depository participant (DP

2. Download the Forms: Download or collect the account opening forms from the respective DP’s office or website. Fill up the requested details in the account opening form and provide the necessary signatures. Affix photographs and submit a copy of PAN Card, proof of address, bank statement or other documents as required by the company.

3. Wait the turn-around Time: It usually takes about a week or two for the welcome kit to reach the customer depending on different company policies. A Demat account can be opened with zero balance in customer’s account. There is no compulsion to maintain a minimum balance either.

4. Nominate Nominee: It is important to add a nominee while applying for a demat account. Check and double check the nominee details for accuracy. This will enable the nominee to receive the benefits of securities in the event of exigencies. After opening an account, the DP will allot customer a beneficial owner identification number that will be needed for all future transactions. When customer wishes to sell shares, he/she need to coordinate with their broker and give a ‘Delivery Instruction’ to their DP. The account will then be debited with the number of shares sold by DP. Customer will receive the payment from broker.

5. Trade: Similarly, when customer want to buy shares, informs broker. The shares that were bought will be credited into his/her account by the DP. Customer can also use the trading account linked to their demat account to buy and sell shares online. The DP will provide periodic statements of all transactions.

OPENING A DEMATRALITIONS ACCOUNT(DEMAT A/C)

Demat refers to a dematerialized account. Just as we have to open an account with a bank if we want to save your money, make cheque payments etc, we need to open a demat account if we want to buy or sell stocks. So it is just like a bank account where actual money is replaced by shares. We have to approach the DPs (remember, they are like bank branches), to open our demat account.

Demat account allows you to buy, sell and transact shares without the endless paperwork and

delays. It is also safe, secure and convenient.

Let's say our portfolio has 100 of Satyam, 50of Suzlon, 20 of ICICI BANK, 50 of Tech

Mahindra and 100 of TCS shares. All these will show in our demat account. So we don't have

to possess any physical certificates showing that us own these shares. They are all held

electronically in our account. As we buy and sell the shares, they are adjusted in our account.

Just like a bank passbook or statement, the DP will provide you with periodic statements of

holdings and transactions.

Individuals, companies, Trusts, Partnership firms, NRIs, HUF, Banks and Institutions are allowed to open a depository account with any depository through a depository participant.

The investor would need to execute a standard form giving all his details, bank details,

instruction details, nomination details and off-course photograph and signature. Along with

this form, the investor would also have sign an agreement with the depository participant

which usually forms a standard part of the account opening process. The details on the form

have to be matched with a photocopy of the investor's passport, driving license etc. to certify

the mentioned details. If the investor is an NRI, then the client will have to provide overseas

address, provide copy of RBI Approval, if any. The RBI Approval is not mandatory for

opening of a DP. Account but is required to receive shares into the account when purchased

through the secondary market.

CLOSING A DEMATRALITIONS ACCOUNT(DEMAT A/C)

A demat account is used by an investor to electronically hold securities in which investments are made. Depository participants (DP), who maintain this account for the investor, charge an annual maintenance fee from the investor. This implies a cost for the investor and, hence, such an account should be closed if it does not have any securities or if the investor does not intend to hold them in this account any more.

The account holder must ensure that all the securities that have been held are sold off, transferred to another account or rematerialized (the process of converting the securities in an electronic form back into the physical form).

ApplicationThe account holder must submit the application in the prescribed format as specified by the depository. The application form can be downloaded from the website of the depository or DP. It can also be closed on the basis of a request letter submitted by the client to the DP on a plain paper giving details of the account.

FormalitiesA duly filled rematerialisation Request Form (RRF) should be submitted for securities that are to be rematerialized. If you want to shift the securities to another account, a delivery instruction slip (DIS) has to be given in an off-market transaction.

Negative cash balanceA negative cash balance is on account of charges related to the account, such as the annual maintenance fee. This must be settled before submitting the request for its closure.

Unused DISThe unused DIS must be submitted along with the closure form or a declaration must be given that all unused slips have been destroyed.

Points to note> An account cannot be closed if there is a lien marked on any of the securities held in it or if the securities are frozen.

> A demat account closure form from a PoA holder will not be entertained by the DP.

CONCEPT OF ONLINE TRADINGInvestors can have complete control of their stock investing actions, now that they have the convenience of buying and selling shares on the NSE online and in real time. Each individual has access to the latest information and tools to analysis any stock investment decision. Plus the power to execute the sale or purchase right before them on their personal computer screen. Online trading involves investment activity which takes place over the Internet and it does not require physical inclusion of the broker.

An investor has to register with an online trading portal like ICICIdirect.com, motilaloswal.com, sharekhan.com and many companies like that and investor gets 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 order processing is done in real time and investors can also have updates on the trading. They can also check the status of their orders either through e-mail or through the interface that it cannot be accessed by a third party.

TYPES OF ONLINE TRADINGThere are three basic types of online trading accounts involved with stock trading.

1. Cash Trading2. Margin Trading 3. Simulated Trading Account or Virtual Trading Account

1. Margin Trading

Margin Trading is nothing but borrowing money to invest in stocks, here the investor borrows money from his/her broker to invest in stocks through the same broker. The “margin” here is the money actually borrowed from the broker. The margin loan can be up to 50% of the total amount invested. This effectively means that you can invest in shares worth Rs 100 by borrowing Rs 50 from your broker. This is called buying shares on a 50% margin. If the value of the shares goes down, the investor has to pay a “maintenance margin” to bring the margin up to 40% of the market value of the shares. This margin is paid when the broker makes a “margin call” to the investor, and investor has to pay the difference between current margin and maintenance margin to take it to 40%. If the margin falls below 30%, the broker has the discretion of liquidating the client’s holdings and thus recovering the loan advanced.

Risks in Margin Trading:

1. You can lose more money that you have invested.

2. You may have to deposit additional cash or securities in your account on short notice to cover market losses.

3. You may be forced to sell some or all your securities when falling stock prices reduce the value of your securities.

4. Your brokerage firm may sell some or all of your securities without consulting you to pay off the loan it made to you.

Benefits of Margin Trading:

1. The main benefit of Margin Trading for the investors is that it serves as an avenue for the investor who wants to buy more shares than the cash available.

2. The investor leverages the transaction and aim to make more money on the investment than the interest payable on the margin loan.

3. It can be very effective tool in the hands of the experienced and heavy trades, who can invest up to double his investible sum in the hope to earn high profits.

4. Trading on Margin improves liquidity in the market. With lesser amounts of cash with investors, they can assume higher risk and can invest in higher value of stocks.

5. The Official and structured market for Margin Trading will most likely lead to an expansion of day trading activity in the market.

Day Trading provides the market needed liquidity to the equity market.

2. Cash Trading

Cash trading is an investment strategy that calls for the investor to make purchases of securities on a cash basis only. This is different from the process of trading on margin, where the investor makes use of a line of credit extended through a broker. With the cash trading method, the investor relies solely on the balance of his or her cash account to purchase stocks, bonds, commodities or other investment vehicles. Cash trading is unlike margin trading because the account holder cannot borrow money from the broker to fund the transaction. Cash trading involves less risk than margin trading, because risk is limited to only the cash invested.

Risks in Cash Account:

1. Generating cash for other opportunities may trigger capital gains obligations.

2. Successful cash investments will usually result in lower overall profits than leveraged investments.

3. You may have to pass on investment opportunities that are just slightly more expensive than your investable cash.

Benefits of trading in a cash account:

1. Securities are paid for in full.

2. Your potential loss is limited only to the amount invested.

3. You own your securities until you decide to sell them.

4. You won’t be forced to sell your shares during unfavorable market conditions.

3. Virtual Trading Account

Virtual Stocks as the name suggests is a stock investing / trading platform using virtual money in a simulated environment. This platform is offered by direct Centre for Financial Learning. Virtual Stocks allows you to invest / trade in stocks in almost live environment with no exposure to the risks of live markets.You can try out the trading & investing strategies, review the outcome of your strategies which ultimately helps you to become more informed market participants. Currently through Virtual Stocks you can place orders based on quotes of Bombay Stock Exchange (BSE) and / or National Stock Exchange (NSE). Virtual Stocks completely eliminates the risks of live market and lets you experience, experiment, gain confidence. This can help you to increase your chances of being successful in live markets.

STOCK EXCHANGE

Indian Stock Market Overview

The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE) are the two primary exchanges in India. In India, in addition, there are 22 Regional Stock Exchange. However, the BSE and NSE have established themselves as the two leading exchanges and account for about 80 percent of the equity volume traded in India. The average daily turnover at the exchanges has increased from RS. 851 crore in 1997-98 to RS. 1,284 crore in 1998-99 and further to RS 2,273 crore in 1999-2000 (April-August 1999). NSE has around 1500 shares listed with a total market capitalization of around Rs9, 21,500 crore. The BSE has over 6000 stocks listed and has a market capitalization of around RS 9,68,000 crore (Rs 9680-bln). Both exchanges have a different settlement cycle, which allows investors to shift their positions on the bourses. The primary index of BSE is BSE Sensex comprising 30 stocks. NSE has the S&P NSE50 Index (Nifty), which consist of fifty stocks. Both the exchanges have switched over from the open outcry trading system to a fully automated computerized mode of trading known as BOLT (BSE on Line Trading) and NEAT (National Exchange Automated Trading) System. It facilitates more efficient processing, automatic order matching, faster execution of trades and transparency. The scrip’s traded on the BSE have been classified into ‘A’, ‘B1’, ‘B2’, ‘C’, ‘F’, and ‘Z’ groups. The ‘A’ group shares represent those, which are in the carry forward system. The ‘F’ group represents the debt market (fixed income securities) segments. The ‘Z’ group scrips are the blacklisted companies. The ‘C’ group covers the odd lot securities in ‘A’, ‘B1’ & ‘B2’ groups and right renunciations. The key regulator governing Stock Exchanges, Brokers, Depositories, Depository participants, Mutual Funds, FII and other participants in Indian secondary and primary market is the Securities and Exchange Board of India (SEBI) Ltd.

Different Stock Exchanges in India 

(a)National Stock Exchange (NSE) of India

Vision: To continue to be a leader, establish global presence, facilitate the financial wellbeing of people.

Integrated in November 1992, the National Stock Exchange of India (NSE) was initially a tariff forfeiting association. In 1993, the exchange was certified under Securities Contracts (Regulation) Act, 1956. The Equities division of NSE began its operations in 1994 while in 2000 the corporation incorporated its Derivatives division. The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures. NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market practices and trading volumes. The market today uses state-of-art information technology to provide an efficient and transparent trading, clearing and settlement mechanism, screen based trading, compression of settlement cycles, dematerialisation and electronic transfer of securities, securities lending and borrowing, professionalization of trading members, fine-tuned risk management systems, emergence of clearing corporations to assume counterparty risks, market of debt and derivative instruments and intensive use of information technology.

Some NSE Figures and FactsThe equities division of NSE covers around 300 Indian cities, while its derivate section covers 305cities. The number of securities accessible for buying and selling in NSE exchange in its equities and derivate section are 1,383 and 3,143 respectively. The total amount of Settlement warranty fund in NSE equities division and derivate section are RS 2,085.25 crores and RS 6,018.30 crores respectively. The daily turnover of NSE equities division is RS 10,336.52 crores, for derivate segment is RS 32,809.96 crores and for Whole sale debt division is RS 13,911.57 crores. NSE uses satellite communication expertise to strengthen contribution from around 400 Indian cities. The exchange administers around 1 million of buying and selling on daily basis. It is one of the biggest VSAT Incorporated stock exchange across the world. Currently more than 8,500 customers are doing online exchange business on NSE application.

(b) Bombay Stock Exchange (BSE) of India

Vision: "Emerge as the premier Indian stock exchange with best-in- class global practice in technology, products innovation and customer service."

BSE Ltd, the first ever stock exchange in Asia established in 1875 and the first in the country to be granted permanent recognition under the Securities Contract Regulation Act, 1956, has had an interesting rise to prominence over the past 137 years. While BSE Ltd is now synonymous with Dalal Street, it was not always so. The first venue of the earliest stock broker meetings in the 1850s was in rather natural environs - under banyan trees - in front of the Town Hall, where Horniman Circle is now situated. A decade later, the brokers moved their venue to another set of foliage, this time under banyan trees at the junction of Meadows Street and what is now called Mahatma Gandhi Road. As the number of brokers increased, they had to shift from place to place, but they always overflowed to the streets. At last, in 1874, the brokers found a permanent place, and one that they could, quite literally, call their own. The new place was, aptly, called Dalal Street (Brokers' Street). The journey of BSE Ltd. is as eventful and interesting as the history of India's securities market. In fact, as India's biggest bourse in terms of listed companies and market capitalisation, almost every leading corporate in India has sourced BSE Ltd. services in raising capital and is listed with BSE Ltd. 

Even in terms of an orderly growth, much before the actual legislations were enacted, BSE Ltd. had formulated a comprehensive set of Rules and Regulations for the securities market. It had also laid down best practices which were adopted subsequently by 23 stock exchanges which were set up after India gained its independence. BSE Ltd., as a institutional brand, has been and is synonymous with the capital market in India. Its S&P BSE SENSEX is the benchmark equity index that reflects the health of the Indian economy. It also has a platform for trading in equities of small-and-medium enterprises (SME). More than 5000 companies are listed on BSE making it world's No. 1 exchange in terms of listed members. The companies listed on BSE Ltd command a total market capitalization of USD 1.32 Trillion as of January 2013. It is also one of the world’s leading exchanges (3rd largest in December 2012) for Index options trading (Source: World Federation of Exchanges). 

BSE also provides a host of other services to capital market participants including risk management, clearing, settlement, market data services and education. It has a global reach with customers around the world and a nation-wide presence. BSE systems and processes are designed to safeguard market integrity, drive the growth of the Indian capital market and stimulate innovation and competition across all market segments. BSE is the first exchange in India and second in the world to obtain an ISO 9001:2000 certification. It is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its On-Line trading System (BOLT). It operates one of the most respected capital market educational institutes in the country (the BSE Institute Ltd.). BSE also provides depository services through its Central Depository Services Ltd. (CDSL) arm. 

(c) Over the Counter Exchange of India OTCEI

The OTCEI was incorporated in October, 1990 as a Company under the Companies Act 1956. It became fully operational in 1992 with opening of a counter at Mumbai. It is

recognised by the Government of India as a recognised stock exchange under the Securities Control and Regulation Act 1956. It was promoted jointly by the financial institutions like UTI, ICICI, IDBI, LIC, GIC, SBI IFCI, etc.The Exchange was set up to aid enterprising promoters in raising finance for new projects in a cost effective manner and to provide investors with a transparent & efficient mode of trading. The OTCEI is ‘floor-less exchange’ where all the activities are computerised be it trading, billing, payments, etc. OTC designated dealers operate through their computer terminals which are hooked to a central computer. All quotes and transactions are recorded and processed here. The dealers are spread over the country and have access to the central computer. Besides, PTI OTC scan is available to each dealer which displays the best bids and offers of the market makers in respect of each scrip. A transaction can be effected by entering the bid or offer in a dealer’s computer counter. The exact transaction price along with other details is also displayed in the counter computer.

Share Trading

Buying or Selling of shares in share market is called share trading.

Once people own shares by means of subscribing to IPO (Initial Public Offering), they may need to have a liquidity is selling these certificates of ownership in order to redeem their money. For this purpose secondary market has been created. These secondary markets are known as stock market or share markets. This is the place where shares are bought and sold freely which of course is governed by the universal law of supply and demand. The shares that are more in demand goes up in price and those that are low in demand goes down. The investors in the share/stock market make money by the principle of buying low and selling high. This is in brief about share trading.

You can trade in shares and commodities. However, in India, retail investors mainly trade in stock futures and options due to sheer volumes. Trading means buying and selling a stock the same day or holding it for just 2-3 days. The former is called intra-day trade. The latter is called swing trade. Positional trade generally involves taking a longer position and holding a stock for 2-3 weeks.

Tips for share trading- The importance of discipline in share trading cannot be over stressed. That is because in most cases, when people are making money, greed makes them wait for more, and so they don't book profits. When prices fall, fear makes them sell fast. These situations can be avoided if they know when to book profit/loss.

If losses are not a deterrent and the market's roller-coaster movements give you a high, here are a few habits and skills that can help you stay on the right track. These are useful for day traders as well as positional traders.

Discipline: The key to success is a stop-loss order. Stop loss helps a trader sell a stock when it slides to a certain price. Suppose you buy shares of company A at RS 100 and set a stop loss at RS 95. When the price falls to RS 95 , the shares will be sold automatically. This means you have limited your loss to RS 5. While entering a trade, you should be clear about how much loss you are willing to accept.

Skill: Trading is a skill, a lot of amateurs in the market buy at a wrong point. A skilled trader identifies such people and takes an opposite position to trap them.

Planning: One should identify a few stocks and focus on them.

Minimum capital: Only those with a capital of at least RS 2 lakh can trade for a meaningful gain. However, this capital should not be borrowed and should not be part of your core savings. People can also trade with less, but volumes are importants So, a certain Minimum capital is must.

Stock volumes: A stock should have enough volumes for it to be tradable. Accor. For those just starting, trading Nifty-50 stocks is a good idea, he says.

Price range: What should you do with a share which has high volumes but not much price movement? You should prefer shares with a minimum price range of RS 10. This means the average difference between a stock's intra-day high and intra-day low should be at least RS 10.

Timings: Look for the most volatile market timings. 9.30-11.30 am is a good time to trade in Indian stock markets.

Volatility: Any stock with a positive beta of 1 or above is good. A beta of 1 means the stock will move in line with the market. If the market falls 2%, the stock will also fall 2%. One can find a stock's beta in the trading software.

Supply-Demand: One has to know the supply and demand of individual stocks. If the number of shares up for sale is more, one should not buy the stock, and vice versa. To know if the sell quantity is more or the buy quantity is more, one cannot rely on the bid and ask numbers available on the screen.

News Flow: Never trade on news which is out in the market. It takes a few minutes for a stock price to adjust to any news.

Average out: When the price of a stock starts falling, people buy more to average out. In trading, it's a strict 'No'. "As a professional trader, I would never average out. It's a losing trade. The trade is going bad. I would rather wait for the right time to enter again.

Trading Order Types

All trades are made up of separate orders, that are used together to make a complete trade. All trades consist of at least two orders (one buy and one sell order), usually with one order to enter the trade, and one or more orders to exit the trade. For example, if a trader expected the market's price to go up, the simplest trade would consist of one buy order to enter the trade, and one sell order to exit the trade.

Traders have access to many different types of orders that they can use in various combinations to make their trades. The following explanations will explain each of the order types, and how these orders are used in trading.

Market Orders (MKT): Market orders are orders to buy or sell a contract at the current best price, whatever that price may be. In an active market, market orders will always get filled, but not necessarily at the exact price that the trader intended. For example, a trader might place a market order when the best price is 1.2954, but other orders might get filled first, and the trader's order might get filled at 1.2956 instead. Market orders are used when you definitely want your order to be processed, and are willing to risk getting a slightly different price.

Limit Orders (LMT): Limit orders are orders to buy or sell a contract at a specific or better price. Limit orders may or may not get filled depending upon how the market is moving, but if they do get filled it will always be at the chosen price, or at a better price if there is one available. For example, if a trader placed a limit order with a price of 1.2954, the order would only get filled at 1.2954 or better, if it got filled at all. Limit orders are used when you want to make sure that you get a suitable price, and are willing to risk not being filled at all.

Stop Orders (STP): Stop orders are similar to market orders, in that they are orders to buy or sell a contract at the best available price, but they are only processed if the market reaches a specific price. For example, if the market price is 1.2567, a trader might place a buy stop order with a price of 1.2572. If the market then trades at 1.2572 or above, the trader's stop order will be processed as a market order, and will then get filled at the current best price. Stop orders are processed as market orders, so if the stop (or trigger) price is reached, the order will always get filled, but not necessarily at the price that the trader intended. Stop orders will trigger if the market trades at or past the stop price, so for a buy

order, the stop price must be above the current price, and for a sell order, the stop price must be below the current price.

Stop Limit Orders (STPLMT): Stop limit orders are a combination of stop orders and limit orders. Like stop orders, they are only processed if the market reaches a specific price, but they are then processed as limit orders, so they will only get filled at the chosen price, or a better price if there is one available. For example, if the current price is 1.2567, a trader might place a buy stop limit order with a price of 1.2572. If the market trades at 1.2572 or above, the stop limit order will be processed as a limit order. If the market continues to trade at 1.2572, the limit order will get filled at 1.2572 or at a better price if there is one available. Stop limit orders may or may not get filled depending upon whether or not the market reaches the chosen price, and then depending upon how the market moves. Stop limit orders will trigger if the market trades at or past the stop price, so for a buy order, the stop price must be above the current price, and for a sell order, the stop price must be below the current price.

Market if Touched Orders (MIT): Market if touched orders are identical to stop orders, except that they are used when the market price has already traded past the stop price, and the trader only wants the order to be processed if the market price comes back to the stop price. For example, if the market price is 1.3010, and the trader places a buy market if touched order with a price of 1.3001, the order will only be processed if the market trades at or below 1.3001. If the order is processed, it will be processed as a market order, and will get filled at the current best price. Market if touched orders will trigger the opposite way than a stop order, so for a buy order, the trigger price must be below the current price, and for a sell order, the trigger price must be above the current price.

Limit if Touched Orders (LIT): Limit if touched orders are identical to stop limit orders, except that they are used when the market price has already traded past the stop price, and the trader only wants the order to be processed if the market price comes back to the stop price. For example, if the market price is 1.3010, and the trader places a buy market if touched order with a price of 1.3001, the order will only be processed if the market trades at or below 1.3001. If the order is processed, it will be processed as a limit order. If the market continues to trade at 1.3001, the limit order will get filled at 1.3001 or at a better price is there is one available. Limit if touched orders will trigger the opposite way than a stop limit order, so for a buy order, the trigger price must be below the current price, and for a sell order, the trigger price must be above the current price.

Rolling Settlement System

Rolling settlement was first introduced in India by OTCEI (Over the Counter Exchange of India). As dematerialization took off, NSE provided an option to settle the trades in demat securities on rolling basis. In January 2000, SEBI made rolling settlement compulsory for trades in 10 scrip’s selected on the basis of the criteria that they were in the compulsory demat list and had daily turnover of about Rs.1 crore or more. SEBI reviewed the progress of rolling settlement in February 2000. Consequent on the review, SEBI added a total of 156 scrip’s under rolling settlement. Scrip’s that trade on any of the exchanges and had signed agreements with both the depositories were included for compulsory rolling settlement from March 21, 2000.

Following Finance Minister’s announcement on March 13, 2001 that the rolling settlement would be extended to BSE-200 list would be traded only in the compulsory rolling settlement on all the exchanges from July 2, 2001. Further, SEBI mandated rolling settlement for the remaining securities from December 31, 2001. SEBI introduced T+5 rolling settlement in equity market from July 2001. Subsequently shortened the settlement cycle to T+3 from April 1, 2002. After having gained experience of T+3 rolling settlement, it was felt appropriate to further reduce the settlement cycle to T+2 thereby reducing the risk in the market and to protect the interest of investors. As a result, SEBI, as a step towards easy flow of funds and securities, introduced T+2 rolling settlement in Indian equity market from 1st April

1. Trading Activities (T Day)

T stands for trading. Trading can be done the entire day i.e. from 09:55 am to 3.30 pm in the four major segments of the capital market, namely, Equity segment. Futures and Options segment, Retail debt market (RDM) and Wholesale debt market (WDM). Trading day can be any working day. (Saturday and Sunday are trading holidays and other holidays are intimated by the exchange from time to time).

2. Clearing Activities (T+1 Day)

Clearing is a process of determination of obligations, after which the obligations are discharged by settlement. Trades done during the entire day are accounted together for netting of obligations. The NSCCL gets the information from the NSE about the trades executed during the day which helps the CC (Clearing Corporation) to determine the obligations of each member in terms of funds and securities. This is the next working day after the trading day. On this day, by 11:00 am the NSCCL gives the confirmation of all trades. Once the netting of obligations is done, then by 1:30 pm on the same day, all the files are being processed and downloaded so that each member knows as to what he has to pay-in and receive.

3. Settlement Activities (T+2 Day)

On the second working day after the trading day, settlement of trades is done. This requires all the members to pay in the required funds and securities by 11:00 am to the NSCCL by giving the required instructions to the respective clearing banks and depositories for the same. By 1:30 pm, on the same day, members get the required funds and securities through the NSCCL. If the seller defaults in paying in the securities, the CC debits the clearing member with an amount (T+1 closing price of the security). This is known as valuation debit.

4. Post Settlement Activities (T+3 to T+9 Day)

On the T+3 working day, the CC buys the shares from the Auction market on behalf of the seller/defaulter. If there is a difference between valuation debit and the purchase price, it has to be borne by the defaulter. Any shortage not bought in is deemed to be closed out at a pre-defined terms.

Research Methodology

TITLE: To DETERMINE THE

“GROWTH AND DEVELOPMENT OF ONLINE TRADING IN INDIA”TITLE JUSTIFICATION:

The above title is self-explanatory. This study mainly deals with growth of online trading in India since its inception in the year 2000.The trading volumes of stock exchange has increased since then and the services offered by the online stock traders has facilitated the Indian Customer. The level of Indian stock trading through online has been increasing and provides a vast scope for the future.

SCOPE OF THE STUDYSince 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 i n i t i a l l y d u e t o l a c k o f o u t l i n e t r a d i n g s o m e c o m p a n i e s v a n i s h e d a n d s o m e s u r v i v e d . T h e 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.

SIGNIFICANCE OF THE STUDYThe 100 people have been interviewed through various sources and their responses have been analyzed. This data can be explorated to take in the trends all Indian Online Stock Trading Industry. The significance for the Industry lies in studying the growth trends that emerge from the study. It is one of the fastest growing and evolving sectors.

RESEARCH DESIGN

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

EXPLORATORY AND DESCRIPTIVE RESEARCHThe 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 and journals online through the help of the 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.WHY ONLINE TRADING ENTERED LATE IN INDIA?

The Indian exchanges and brokering houses have been very slow in moving their transactions online and the major reason has been the lot government regulations. The initial delay was due to laying down the specifications for creating Closed User Groups (CUGs). This issue was resolved between the Department of Telecommunications (DoT) and the Finance Ministry around 1998 and after that soon came the online trading portals like ICICIDirect.com, motilaloswal.com, 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 deterrent in the process. Now with the resolution of regulatory issues India no longer have any pressing connectivity and 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 have matured and it doesn't cost a pretty packet anymore to put a simple backup solution in place. Through online trading everyday large volumes of data is being transacted. At BSE the average daily turnover in 2001-2002 (April-March) was Rs 1244.10 crore and the number of average daily trades was Rs 5.17 lakh. To control Online Trading RBI made regulations making it mandatory for companies to store at least 7 years of transactional and financial data.

1. Design needs to be always-on, secure, redundant, and have adequate backup and recovery processes.

2. For such high amounts of critical data it's natural to deploy network-based storage like NAS or SAN.

3. Security is a vital and integral part of the design architecture. The hardware and software elements should be built around layered security architecture and should be held in place with a well-documented security policy.

4. Ideally online exchanges should have 'five-nine' availability.

5.It's difficult to deploy out-of-the-box applications  at exchanges as each has a unique architecture based on factors like operations flow, trading volumes, number of members, number of users, and number of locations.

6. NSE has deployed NIBIS (NSE's Internet Based Information System) for real-time dissemination of trading information over the Internet and NEAT a client-server-based application to help its operations.

7. BSE has deployed an Online Trading system (BOLT) on a Tandem platform which has a two-tier architecture. It claims to be able to support up to 2 million trades a day. 

ADVANTAGES OF ONLINE TRADING-

1 . Provides with the Freedom of Information- The Internet provides a new sense of controlling our financial future as the amount of investment information available online is truly outstanding. An investor can-a- Know the price of any stock he desires at any point time on internet.b- An investor can review the price history of any stock in chart format online.c- An investor can follow in depth the event happening in the market.d- Helps an investor in receiving a wealth of free commentary and analysis about

stock market in the global economy.e- Helps an investor to conduct an extensive financial research of any company he

desires.f- He may also consult with other investors online present around the world.

Online stock broking companies provide real-time stock quotes, daily roundups of the stock market, expert commentary, and a deep community of fellow investors. 

2. Provides Control to Investors Money- When an investor wants to buy or sell stock he no longer need to call his broker on the phone thus helping in the execution of the order instantly on the internet.

3. Provides access to the market- Through the sophisticated information streams, dedicated trading platforms and sophisticated tools the investor can access the markets which provides more agility in buying and selling stocks.

4. Ensures the best price for investors- Some companies like Invest smart (IL&FS) specialize in the techniques which offers the best price deals for the buy and sell orders of the investors and traders providing the high level of transparency by displaying of information relating to the specific stocks and company profiles which helps in getting the best quote for the orders.

5. Online trading offers greater transparency- Online trading offers the investors with greater transparency by providing with an audit trail. The process involves a complete integrated electronic chain starting from order placement, to clearing and settlement and

finally ending with a credit into the depository account of the investor. All these stages are inspected which brings the transparency into the system.

6. Provides hassle free trading- Online trading provides an integration of the bank account, trading account and demat accounts, which leads to easy and paperless trading for the client.

7. Online trading allows instant trade execution- Online transactions helps in the quick execution of the entire trading transaction right from logging to the traders’ site and to the settlement of the bank account in a very short period of time.

8. It provides a level playing fieldTrading online gives even the smallest retail investor access to information which was earlier available only to the big traders. It has provided with a level playing field for all investors in the securities market.9. Online trading reduces the settlement risk This method of trading reduces the settlement risk for the investor as when a short sell order is played the orders are squared off at the specified cut-off time and are not allowed to be carried forward.10. Provides live financial news & analysisThe online sites also provide live terminals which provide streaming news to give investor the latest financial information as it occurs.11. Online help desk Some companies provide online help desk an investor cancan contact the Tele Trading Executives from the Tele Trading team during and after market hours and can clarify questions.12. Instant order trade confirmationsThrough online trading every trade is confirmed immediately and investor receives an on-screen confirmation following every trade with full details for the investors records which avoids costly errors that would have been discovered when it is too late.13. Keeps Information SecureAs per the guideline provided by SEBI every effort has to be made to keep the investors account and personal information secure by use of encryption technology and updated security technology to advanced fraud prevention measures.

DISADVANTAGES OF ONLINE TRADING1. In online terminal, investor can’t get customized expert advice, whereas in offline the

broker gives suggestions according to investors strategy (i.e. short term or long-term)2. Brokerage is high compared to offline.3. Privacy is less due to hacking scandals4 .Transactional errors due to technical problems.

INTERVIEW OF MR PRAVEEN REDDY L.V

MR PRAVEEN REDDY is MBA, Indian Institute of Management, Calcutta. He is

B.TEech , Indian Institute of Technology , kharagpur and certified derivatives trader – Bombay stock exchange . Presently he is working with RBS as programme Manager , Chennai , India According to the conversation with Mr.Praveen reddy, the demat account in in April 2014 average account addition per month is around 60,000-70,000 compared to over one lakh per month during 2008 bull- run. The number of demat accounts in India is 2.30 crore up from 1.80 crore in 2008.

There are two types of wealth –physical and financial. Physical wealth includes the assets Such as land etc. and financial wealth includes the equities. Although the investors have increased accessibility and liquidity , their exposure to financial wealth is low .

The distribution of equities is as follows –

Promoter s own 54% of all equities

30% is owned by institutions

Only 15% is owned by individuals

Average India has very little or no exposure to equities.

The investors need to educate themselves before investing in the equities. Whenever there is a foul play in the market, SEBI has regulations to protect the interest of the investors.

The closure of a demat account takes a considerable amount of time i.e. 3-5 days because the securities owned should be converted into cash.

The account holder must ensure that all the securities that have been held are sold off, transferred to another account or rematerialised (the process of converting the securities in an electronic form back into the physical form).

The account holder must submit the application in the prescribed format as specified by the depository. The application form can be downloaded from the website of the depository or DP. It can also be closed on the basis of a request letter submitted by the client to the DP on a plain paper giving details of the account.

Analysis and Interpretation-

Q1- Do you trade online or not?

A) Yes B) No

Interpretation- From the above given chart we analyze that 77 people out of 100 use to trade online while 23 people don’t.

Q2- In which of the following do you trade online?

MUTUAL FUND 1.7 %EQUITY 3.2%INITIAL PUBLIC OFFER (IPO) 2.3%COMMODITIES 0.9%FUTURES AND OPTIONS (DERIVATIVES)

0.7%

INTERPRETATIONThe maximum amount of person’s trade online to trade in equity. The second preference is to trade in IPO in which about 2 .3% people do.1 .7% people t rade onl ine to dea l in mutual funds 0 .9% deal in commodities and 0.7% in future and options.

Q3- What is your opinion about the problem of market uncertainty in trading?a) It’s a big challengeb) It’s manageablec) It’s an opportunity

Interpretation – 25% people consider market uncertainty as a big problem. Around

60% consider it as an opportunity. Rest says it’s unmanageable.

Q4- Does unsatisfactory services provided by the broking firm create problem in trading?

a) Yesb) A littlec) No

Interpretation- 60% people consider the unsatisfactory services provided by the

broking firm create problem in trading, 15% consider it a little and 25% were not agree to that.

Q4- Which charge do you consider charged by the broking firms is a problem in trading?

a) Broking chargeb) Undisclosed hidden chargec) Annual maintenance charge

Interpretation- Most people considered broking charges and Annual Maintenance

charge as their problem in trading.

Q5- Name of the broking firm with which you are making your investment?

a) India bullsb) Angel brokingc) India info lined) Religare) ICICIf) Others

Interpretation- Market share of INDIA BULLS is around 31%.

LIMITATIONS

The various limitations of the study are here:

1-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.

2-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.

3-Most of the people they are not aware of technology. Though Internet penetration is growing still it is not at the required level.

4-Some of the respondents who did not do online trading were able to respond to only some questions.

ANALYSIS OF DEMAT ACCOUNT AND ONLINE TRADING

Analysis of Demat account and online trading can be done through comparison. Here we are going to compare ICICI DIRECT SECURITIES LTD and SBI CAP SECURITIES LTD in India. ICICI is a private organization where as SBI CAP comes under SBI bank which is public sector bank. The comparison below highlights similarities and differences between brokerage, customer service, maintenance fees, tools and investment options provided to India Stock Market investors by the two organizations.

Explanation for terms used in above comparison is listed below.

Type of Broker: Brokers in India can be categories by the type of services they provide. There are two popular types of broker. They are full-service broker and discount broker.

Support exchanged: Stocks are traded in stock exchanges. India has two big stock exchanges. They are BSE (Bombay Stock Exchange), NSE (National Stock Exchange).

Account Type: Most brokers offer different types of accounts or plans to suit different individual investors need.

Trading Account Opening Fees: The broker charges an account opening fee to open a new share trading account. The Account Opening fees is generally different for different types of account. This fees is nonrefundable.

Trading Account AMC: The broker charges an Account Maintenance Fee; also called Annual Maintenance Fee (AMC) for trading account.

Demat Account Opening Fees: The broker charges Demat Account Opening Fee when the new Demat account is opened.

Demat Account AMC: The broker charges Demat Account Maintenance Fee, also called Demat Annual Maintenance Fee (AMC) for Demat account. The Demat AMC is charged quarterly and in most cases automatically deducted from your account.

Equity Delivery Brokerage: Brokerages charged for buy and sell orders in the Cash Segment when the transaction is settled by delivery.

Equity Intraday Brokerage: Brokerages charged for buy and sell orders in the Cash Segment when transaction is Squared-off on the same day.

Equity Futures Brokerage: Brokerages charged for buy and sell orders in the Future Trading.

Equity Options Brokerage: It is a contract, which gives the buyer the right, but not the obligation to buy or sell shares of the underlying security at a specific price on or before a specific date.

Minimum Brokerage Charges: The minimum brokerage charged by the broker for a transaction.

From the above comparison of ICICI DIRECT PVT LTD and SBI SMART, we can infer the following points.

Both ICICI and SBI SMART provide 3-in-1 accounts which links savings, demat and trading accounts.

Both organizations provide online demo, online portfolio and after trading hour orders for customers.

Both organizations provide email, toll free numbers for assistance. ICICI DIRECT provides mobile trading and charting of stock and commodities. In ICICI DIRECT Wide range of investment options are available under one portal.

It provides a low bandwidth website which works well where internet connection is slow.

GTC (good till cancellation) and off-market hours order placement facility is very useful.

ICICI Security charges high brokerage in comparison to most of the brokers, very high 'minimum brokerage' of Rs 35 per trade or 2.5% of the trade value

Poor performance of website is reported in peak hours of trading.

SBI SMART provides the facility of buying and selling of shares to NRIs also.

SBI SMART is online website based trading. Installable trading terminal is not available. Good Till Cancelled (GTC) orders are not available.

ICICI DIRECT SECURITIES LTD: ICICI direct is an online trading and investment platform for shareholders. It the largest stock broker firm in India providing a wide range of investment options to the retail and institutional customers. ICICI Securities is part of ICICI Group, India. Provisions like 3-in-1 online trading platform links banking, trading and Demat accounts, ensuring unmatched convenience for customers. Share trading in both NSE and BSE, innovative offerings like - Margin, Margin Plus, BTST, and SPOT are some specialties of ICICI direct. Monitoring investments is as important as making the investment itself. ICICI direct provides Portfolio tracker and watch list along with sms alerts that will always keep customer updated on the status of their investments with Organization. Instead of transferring money to a broker's pool or towards deposits, customer can manage their own Demat and bank accounts when they trade through ICICIDIRECT.COM. It provides the flexibility to pay only when customer trades.

SBI CAP SECURITIES LTD: SBICAP Securities Ltd (SSL) is a 100% subsidiary of SBI Capital Markets Ltd which is one of the oldest players and has a dominant position in the Indian primary capital markets. SBI Capital Markets Ltd. commenced broking activities in March 2001 to fulfill the secondary market needs of Financial Institutions, FIIs, Mutual Funds, Banks, Corporate, High Net worth Individual, Non-residential Investors and Retail domestic investors. Services currently offered include Institution Equity, Retail Equity, Derivatives, Broking, and Depository Participant services, E-Broking. SSL is registered with the Securities Exchange Board of India for its various services. They also provide online trading to investors & traders. The portal allows both Resident Indians and Non-Resident Indians (NRIs) to invest. Trading with eZ-trade@sbi links all three accounts i.e. Bank Account, Demat Account and Trading Account of a customer together. SBICAP securities are now changed to SBI SMART.

ICICI DIRECT SBICAP SECURITIES(SBI SMART)

Type of broker Full service Full serviceSupport exchanged

BSE, NSE BSE, NSE

Account type 3-in-1 eZ-trade

Stock Broker Fees / Charges

ICICI DIRECT SBICAP SECURITIES(SBI SMART)

Trading Account Opening Fees

Rs 975 Rs 850

Trading Account AMC

NIL NIL

Demat Account Opening Fees

NIL NIL

Demat Account AMC

Rs 450 Rs 350

Trading Brokerage ChargesICICI DIRECT SBICAP SECURITIES

(SBI SMART)Equity Delivery Brokerage

0.55% 0.50%

Equity Intraday Brokerage

0.275% 0.15%

Equity Futures Brokerage

0.05-0.03% 0.05-0.09%

Equity Options Brokerage

Rs 65-95 Rs 50-100

Currency Futures Trading Brokerage

0.050% - 0.030% 0.03%

Currency Options Trading Brokerage

Rs 95 - Rs 65 per lot Rs 30

Minimum Brokerage Charges

Rs 35 per trade or 2.5% of the trade value whichever is lower

Rs 0.05 for Cash, Rs 0.01 Future

Transaction Charges

ICICI DIRECT SBICAP SECURITIES(SBI SMART)

Equity Delivery NSE: 0.0031% | BSE: 0.0035%

NSE: 0.00386% | BSE: 0.00384%

Equity Intraday NSE: 0.0031% | BSE: 0.0035%

NSE: 0.00386% | BSE: 0.00384%

Equity Futures 0.00185% NSE: 0.002206% (Rs 221/Crore)Equity Options 0.05% on Premium NSE: 0.05515% (Rs 5515/Crore)

RELATION BETWEEN DEMAT ACCOUNT AND ONLINE TRADING

Trading account is an inference between bank account and Demat account. The relationship between Demat and trading account can be illustrated by following figure.

When a person buy share, trading account takes money from consumer’s Bank Account and buys shares and stores it in his Demat account. When shareholder Sell shares, trading account takes back the shares from Demat account and Sells them in Stock Market and get back the money and that goes back to shareholder’s Bank account. Actually share holder manually transfers it to Bank account from trading account most of the time

Conclusion

The onl ine t rading i s growing wi th a rapid pace wi th the r i s ing level of educat ion among the customers. The other factors being that the Indian Investor nowadays wants to deal himself in trading rather than depending upon other middlemen. They also consider the factors like timesaving in doing the online transactions, convenience etc. Although some people feel that online trading is not secure but the people doing the trading online is happy about the increasing security

concerns among the companies. The year 2008 has not been so good for the stock market and the Sensex and Nifty has been dipping and affecting the business negatively for these companies. This is due to the fact that at these times people do not prefer to open the DMAT and Trading accounts. So the companies have to reduce their account opening fees to attract more and more customers. Also people trade very less in the bearish market and the company’s profits against brokerage fees soars downwards. It is also a found fact that during the bearish market the ratio of online trading becomes very less. Also there is an intense competition among the companies and the companies come up with new and new promotion schemes such as discounted and negotiable brokerages, Zero balance accounts, waiving a/c opening fee and AMC etc. As the internet penetration is growing in India this business holds a huge potential for growth.The mantra for success in the current situation will be educating the customers about the benefits of online trading and the amount of ROI that can be generated through it.The total trading volume of brokerage companies has increased from US$1239.1 billion in 2004 to US$1492.1 billion in 2005, and is expected to reachUS$6535.7 billion by 2015.