INTRODUCTION TO THE STUDY

1
 INTODUCTION TO ONLINE TRADING:

Gone are the days of trading on the floor. Technology has changed the
landscape of the stock markets. The look of the stock exchanges has undergone
metamorphic changes in the recent years. Prior to online trading, regional stock
exchange was playing a very important role in capital markets, as they were local
investors. Regional SE, which was unable to interact with other SEs started
developing this own screen based trading and connecting to other scrip’s which
were not available with them. This also helped in accessing the quotes and other
market information from other stock exchange which proved vital in the
functioning of the system as a whole.

The trading network is depicted in given below NSE has main

computer which is connected through Very Small Aperture Terminal (VSAT)
installed at its office. The main computer runs on a fault tolerant STRATUS
mainframe computer at the Exchange. Brokers have terminals (identified as the
PCs in the given picture) installed at their premises which are connected through
VSATs/ leased lines/modems. An investor informs a broker to place an order on
his behalf. The broker enters the order through his PC, which runs under
Windows NT and sends signal to the satellite via VSAT/leased line/modem. The
signal is directed to mainframe computer at NSE via VSAT at NSE’s office. A
message relating to the order activity is broadcast to the respective member. The
order confirmation message is immediately displayed on the PC of the broker.
This order matches with the existing passive order(S) otherwise it waits for the
active orders to enter the system. On order matching, a message is broadcast to
the respective member.

2
 TRADING NETWORK

ANTENNA
HUB

SATELITE

NSE MAINFRAME BROKERS PREMISES

CORPORATE HIERARCHY

3
 The Trading member has the facility of defining a hierarchy amongst
its users of the NEAT system. The hierarchy comprises:

Corporate Manager

Branch 1 Branch 2

Dealer 1 Dealer 2 Dealer 11 Dealer 12

The users of the trading system can logon as either of the

user type. The significance of each type is explained below:

 Corporate Manager:
The corporate manager is a term assigned to a user placed
at the highest level in a trading firm. The facility to set
Branch order value limits and user order value limits is
available to the corporate manager.
 Branch Manager:

4
 The branch manager is term assigned to a user who is
placed under the corporate manager. The branch manager
can set user order value limits for each of his branch.

 Dealer:
Dealers are users at the lower most level of the hierarchy.
A dealer can view and perform order and related activities
only for oneself.

OBJECTIVES OF ON-LINE TRADING:

 Reduce and eliminate operational inefficiencies inherent in manual
system.
 Increased trading capacity in stock exchanges.
 Improve market transparency, eliminate unmatched trades and delayed
reporting.
 Provides for online and offline monitoring, control and surveillance of the
markets.
 Ensure smooth market operations using technology while retaining the
flexibility of conventional trading practices.
 Setup various limits rules and controls centrally.
 Provide brokers with their data on electronic media interface with the
brokers back office system.
 Provide public information on scrip prices, indices for all users of the
system.
 Provide analytical data for use of stock exchange in analysis and reporting

5
 STOCK MARKET TRADING ON INTERNET

The major events that will take place in the Indian Capital Market are
introduction of index-based futures trading on internet. Trading on internet means
that the investor’s will actually buy and sell the stocks on-line through the net. A
committee was setup by SEBI to develop regulatory parameters for use internet
trading. SEBI approved the report on the committee. SEBI decided that internet
trading could take place in India within the existing legal framework through use
of order routing system, which will route order from client to brokers,. For trade
execution on registered stock exchanges. The broad also took note of the
recommended minimum technical standards for ensuring safety and security of
transaction between clients and brokers, which will be forced by the respective
stock exchanges.

ADVANTAGES OF INTERNET TRADING

 It will help in reducing transaction costs particularly for overseas and
remote located investors.
 It will provide real time quotes and on-line trading facility at a much
cheaper cost.
 It will bring down the brokerages fees and increases the trading volumes.
 Quick response in transaction i.e. giving the order verification and
acknowledgement.
 It allows transparent companies of services and easy price discovery.
 It is easy enough to set up either as individual account for margins trading
or settle transactions by credit card.
 It is easy for brokers to monitor and maintain online accounts and the
possibility of miss-trading is less.

6
  Surveillance is easy as there is very less scope for speculation
 The investor is provided with best offer
 Trading procedure is easy and fully automated.

Present Trading Mechanism

The National system provides single, nationwide Securities. It enables

investors in one part of the country to trade at the best quotes with an investors
located in any other part of the country through the members of the stock
exchanges and subsequently clears and settles 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 securities irrespective of the size of
the order or the broker through whom the order is routed. This provides the
facility to execute the buy out any extra cost to the investors.
There will be no trading floor in the exchanges. Instead, each trading member will
have a computer at his own office any where in India which will be connected to
the central computer system at the NSE through leased lines or VSAT’s (Very
Small Aperture Terminal), for an interim transition period of six months and
subsequently by satellite link.
VSAT’s are relatively smaller dishes similar to dish antenna for cable T.V and
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 other hands ensure high speed, availability and quality of the connection. This
code of trading is known as “On-line Trading”.

7
CLEARING & SETTLEMENT TRADING MECHANISM
The clearing and settlement mechanism in India securities market has
witnessed several innovations during the last decade. These include use of the
state-of-art information technology, compression of settlement cycle,
dematerialization and electronic transfer of securities, securities lending and
borrowing, professionalization of trading members, fine-tuned risk management
system, emergence of clearing corporation to assume counterparty risk etc.,
though many these are yet to permeate the whole market.

Till recently, the stock exchanges in India were following a system of

account period settlement for cash market transactions, expert for transaction in a
few active securities, which were settled under t+3 rolling settlement. The rolling
settlement has been introduced for all securities. With effect from April 1, 2003
T+2 rolling settlement has been introduced. The stock exchanges were also
offering deferral products to provide leverage to members to postpone their
settlement obligations. The transactions are not settled immediately but after 2
days after the trade day. The members receive the funds/securities in accordance
with the pay-in/pay-out schedules notified by the respective exchanges. Given the
growing volume of trades and market volatility, the time gap between trading and
settlement gives rise to settlement risk. In recognition of this, the exchanges and
their clearing corporation employ risk management practices to ensure timely
settlement of trades. The regulators have also prescribed elaborate margining and
capital adequacy standards to secure
Market integrity and protect the interests of investors. The exchanges not
providing counter-party guarantee have been advised by SEBI to set up trade
guarantee funds, which would honor pay-in liabilities in the event of default by a
member. In pursuance to this, 16 out of 23 exchanges have set up trade/settlement
guarantee funds. The trades are settled irrespective of default by a member and

8
the exchange follows up the defaulting member subsequently for recovery of his
dues to the exchange. The market has full confidence that settlements will take
place in time and will be completed irrespective of possible default by isolated
trading members.
Movement of securities has become almost instantaneous in the
dematerialized environment. Two depositories viz., National Securities
Depositories Ltd. (NSDL) and Central Depositories Services Ltd. (CDSL) provide
electronic transfer securities and more then 99% of turnover is settled in
dematerialized form. All actively traded scrip’s are held, traded and settled in
demat form. The obligations of members are downloaded to members/custodians
by the clearing agency. The members/custodians make available the required
securities in their pool accounts with Depository Participants (DPs) by the
prescribed pay-in time for securities. The depository transfers the securities from
the pool accounts of members/custodians to the settlement account of the clearing
agency. As per the schedule determined by the depository from the settlement
account of the clearing agency to the pool accounts of members/custodians The
pay-in and pay-out of securities is affected on the same day for all settlements.

TRANSACTION CYCLE
A person holding assets (securities/funds), either to meet his liquidity needs
or to reshuffle his holdings in response to changes in his perception about risk and
return of the assets, decides to buy or sell the securities. He finds out the right
broker and instruct him to place buy/sell order on an exchange. The order is
converted to a trade as soon as it finds a matching sell/buy order. The trades are
cleared to determine the obligations of counterparties to deliver securities/funds as
per settlement schedule. Buyer/seller delivers funds/securities and receives

9
securities/funds and acquires ownership over them. A securities transaction cycle
is presented given below.

Transaction cycle:

Placin
to g
e cision order
D
e
Trad

on
Executi
Trade
Securi
Funds

ties

Transaction cycle
/

Trad
es
Settl Clear
e
of T ment
ing o
f
rade
s
FIG(1.1)

10
Settlements process:

While NSE provides a platform for trading to its trading

members, the National Securities Clearing Corporation Ltd. (NSCCL) determines
the funds/securities obligations of the trading members and ensures that trading.
members meet their obligations. The clearing banks and depositories provide the
necessary interface between the custodians/clearing members (who clear for the
trading members or their own transactions) for settlement of funds/securities
obligations of trading members. The core functions involved in the process are:

a) Trade Recording:

The key details about the trades are recorded to provide basis for
settlement. These details are automatically recorded in the electronic trading
system of the exchanges.

b) Trade Confirmation:

The counterparties to trade agree upon the terms of trade like security,
price, and settlement date, but not the counterparty which is the NSCCL. The
electronic system automatically generates confirmation by direct participants. The
ultimate buyers/sellers of securities also affirm the terms, as the funds-securities
would flow from them, although the direct participants are responsible for
settlement of trade.

11
c) Determination of obligation:

The next step is determination of what counter-parties owe, and what

counter-parties are due to receive on the settlement date. The NSCCL interposes
itself as a central counterparty between the counterparties to trades and nets the
positions so that a member has security wise net obligation to receive or deliver a
security and has to either pay or receive funds.

d) Pay-in or funds and Securities:

The members bring in their funds-securities to the NSCCL. They make

available required prescribed pay-in time. The depositories move the securities
available in the accounts of members to the account of the NSCCL. Likewise
members with funds obligations make available required funds in the designated
accounts with clearing banks by the prescribed pay-in time. The CC sends
electronic instructions to the clearing banks to debit member’s accounts to the
extent of payment obligations. The banks process these instructions, debit
accounts or members and credit accounts of the NSCCL.

e) Pay-out of Funds and Securities:

After processing for shortages of funds/securities and arranging for

movement of funds from surplus banks to deficit banks through RBI clearing, the
NSCCL sends electronic instructions to the depositories/clearing banks to release
pay-out of securities/funds. The depositories and clearing banks debit accounts or
the NSCCL and credit accounts or members. Settlement is complete upon release
of pay-out of funds and securities to custodians/members. The settlement process
for transactions in securities in the CM segment of NSE is presented in the Figure
1.2

12
f) Risk Management:

A sound risk management system is integral to an efficient settlement

system. The NSCCL ensures that trading members’ obligations are commensurate
with their net worth. It has put in place a comprehensive risk management system,
which is constantly monitored and upgraded to pre-empt market failures.

SETTLEMENT PROCESS IN CM SEGMENT OF NSE

NSE

8 9

DEPOSITORIES NSCCL CLEARING BANKS

6 7

2 3
5 4
CUSTODIANs/CMs
10 11

FIG(1.2)

13
Explanations:

(1) Trade details from Exchange to NSCCL (real-time and end of day trade
file).
(2) NSCCL notifies the consummated trade details to CMs/custodians who
affirm back. Based on the affirmation, NSCCL applies multilateral netting and
determines obligations.
(3) Download of obligation and pay-in advice of funds/securities
(4) Instructions to clearing banks to make funds available by pay-in time.
(5) Instructions to depositories to make securities available by pay-in-time.
(6) Pay-in of securities (NSCCL advises depository to debit pool account of
(7) custodians. Ms and credit its account and depository does it).
(8) Pay-in of funds (NSCCL advises Clearing Banks to debit account of
custodians/CMs and credit its account and clearing bank does it).
(9) Pay-out of securities (NSCCL advises depository to credit pool account of
custodians/CMs and debit its account and depository does it).
(10) Pay-out of funds (NSCCL advises clearing Banks to credit account of
custodians/CMs and debit its account and clearing bank does it).
(11) Depository informs custodians/CMs through DPs.
(12) Clearing Banks inform custodians/CMs.

14
Trading System in ISE:
Transactions for the ISE segment are routed from the Trader
Work Stations (TWS) to the central trading computer installed at ISE's office in
Vashi, Navi Mumbai. The TWSs are connected to the central trading computer of
ISE through leased lines, ISDN lines, VPN connectivity and VSAT network. The
technology infrastructure optimizes and shares the system resources for access to
ISE and NSE segments.

As far as access to the NSE segment is concerned, all orders are routed to
NSE through the central order routing system installed at Vashi. This computer is
connected to the NSE trading system through a 2mbps leased line acting as the
primary link between ISE and NSE and it also has a VSAT link as a backup.
Within the Participating Stock Exchange premises, the TWSs required for ISE
and NSE segments are connected on LAN segments to the VSAT infrastructure
already established

15
CLEARING AND SETTLEMENT:

In tune with the SEBI decision, ISE has implemented T+2 settlement
cycle from April 1, 2003. The total delivery-in/delivery-out and pay-in/pay-out of
Traders and Dealers are computed on a netted basis. After netting, the net position
for each centre is computed. If there is a settlement position at a centre, then funds
or securities are moved in and out from one centre to another, as the case may be,
so as to fulfill the total pay-in or pay-out position of funds and securities. The
movement of funds is through HDFC Bank and ICICI Bank. The settlement of
securities takes place only in a dematerialized mode using both the depositories in
India, i.e. National Securities Depository Limited (NSDL) and the Central
Depository Services(India)Limited(CDSL).Pay-in of funds is done by way of
direct debits to the settlement accounts maintained by the Traders and Dealers
with HDFC Bank and ICICI Bank. In the case of margins, debits are affected on
T+1 by electronically debiting the settlement accounts of Traders and Dealers.
Similarly, pay-out of funds is affected by the Exchange through direct credits to
the settlement accounts of the Traders and Dealers.

16
 In the case of operations on ISS, the trading intermediaries (Sub-brokers
of ISS) are required to maintain separate settlement accounts for the Capital
Market segment and Futures & Options segment of NSE with any one of the
designated Clearing Banks (HDFC Bank and ICICI Bank at present). Similarly,
another settlement account will be required for the equities segment of BSE, when
introduced. Margin collection and refund are through direct debits and credits by
ISS to the settlement accounts of the trading intermediaries. Funds pay-in and
pay-out likewise, are handled through the electronic funds transfer system. In the
Futures & Options segment, end clients are required to maintain such accounts
with the Clearing Banks and all debits and credits are affected by ISS to these
accounts.

As far as securities is concerned a client of a trading member having a

net delivery position, can transfer securities from his demat account either directly
to the pool account of ISS or route them through the account of the trading
member. Pay-out of securities is always affected by ISS into the account of the
concerned trading members, who are then obligated to deliver the same to their
clients.

INVESTOR PROTECTION:

All settlement liabilities amongst Traders and Dealers of ISE are

guaranteed by the Exchange’s Settlement Guarantee fund. In addition, investors
are protected against non-fulfillment of commitments by Traders/Dealers through
the Investor Protection Fund.

17
 Region wise Distribution of Traders and Dealers

(As on January 1, 2010)

Registered Registered
Region States Covered Total
Dealers Traders
West Goa, Gujarat, Maharashtra 271 95 366
Haryana, Jammu & Kashmir,
North Delhi, Punjab, Rajasthan,85 62 147
Uttaranchal, Uttar Pradesh
Assam, Bihar, Jharkhand, Orissa,
East 82 74 156
West Bengal
Andhra Pradesh, Kerala,
South 19 119 138
Karnataka, Tamil Nadu
Central Chhattisgarh, Madhya Pradesh 12 25 37
TOTAL 469 375 844

DEMATERIALIZATION

Dematerialization is a process by which physical shares of investors are

converted to an equivalent number of Securities in electronic form and
credited in the investor’s account with his Depository Participant.

Dematerialized trading is now compulsory for all investors. Beginning of

first week of January 1999, investor can trade in specific scripts in the
Demoralization form. They can provide and receive delivery only in a
Dematerialized form and share certificate will not be changed for these
scripts.

18
 A depository is an organization where Securities of shareholder are
held in the electronic form at the request of the shareholder through Depository
Participant (DPs). The system is comparable to that in a bank. If an investor wants
services offered by a depository, he would have to open an account with it
through a DP- similar to opening an account with any other branches of the bank
in order to avail of its services.
Dematerialization is a process by which physical certificates of an
investor are taken back by the company/registrar and actually destroyed and an
equivalent number of Securities are credited in the depository account of those
investors. A Depository Participant is investor’s agent in the system. He maintains
investor’s Securities account and intimates the status of holdings from time to
time to the investor

Basic Terminologies on Demat Settlement:

Refers to the process whereby all those who have made purchases make a
payment and all those who have made sales deliver shares. The exchanges ensure
that the buyers who have paid for the shares purchased by them receive the shares.
Similarly sellers who have given delivery of shares to the exchange receive
payment for the same.

SETTLEMENT CYCLES:

19
 Settlement Cycle refers to a calendar according to which all purchase and
sale transactions done within the dates of the settlement cycle are settled on
a net basis. NSE and BSE currently follow daily settlement cycles.
In a rolling settlement, each trading day is considered as a
trading period and trades executed during the day are settled based on the
net obligations for the day. At NSE and BSE, trades in rolling settlement
are settled on a T+2 basis i.e. on the 2nd working day. For arriving at the
settlement day all intervening holidays, which include bank holidays,
NSE/BSE holidays, Saturdays and Sundays are executed. Typically trades
taking place on Monday are settled on Wednesday, Tuesday’s trades settled
on Thursday and so on.

PAY IN & PAY OUT:

Pay In refers to your obligations towards the exchanges and Pay Out refers
to exchange obligation towards you. All Pay Ins and Pay Outs take place on a
“T+2” days basis, where “T” is the trading day and plus two more trading days.
So if you buy some shares on Monday, you would have to pay money which is a
Pay In and you would receive shares, which is a Pay Out. Both of these would
take place on Wednesday.

LIMIT ORDER:

Limit Orders allow you to place a buy/sell order at a price defined by you.
The execution can happen at a price more favorable than the price that has been
defined by you. You can place limit orders during holidays & non-market hours
too.

20
Market Orders:

Market Orders can be placed only during market hours (i.e. when the
exchanges are open for trading). Market Orders have different interpretations for
both NSE and BSE.
SQUARE OFF:
Square Off means buying and selling, selling and buying on the same day. For
example, if you have bought 100 shares of INFTEC today morning and later on at
the end of the day, if you sell INFTEC, 100 shares, it just means that you have
squared off your order.

OPENING CLEARING ACCOUNTS FOR SETTLEMENT OF

TRADES:
All the trades executed at the exchanges are settled by the clearing
member (CM), as in the case of Securities in the physical form. To settle trades in
Demat segment each CM should open one clearing account with any of the DP.
The procedure for opening clearing accounts is:
 Approach a DP.
 Fill up an account opening form.
 Sign on an agreement with the DP.
 Application is forwarded to NSDL by DP.
 NSDL allots a number identified as CM-BP-ID.
 DP opens account and an account number is providing along with CM-
BP- ID to the clearing member.

21
The clearing account consists of three parts:
 Pool account
 Delivery account
 Receipt account

CLEARING
ACCOUNT

DELIVERY POOL ACCOUNT RECEIPT

ACCOUNT ACCOUNT

SELLING BUYING
CLIENT CLIENT

Fig (1.3)

POOL ACCOUNT:

22
 It has two roles to play in clearing of securities,

 Before pay in the selling client of the CM transfers Securities from his client
account to the CM pool account.
 The CM transfers the Securities from his pool account to the account of the
buying client.

DELIVERY ACCOUNT:

The CM transfers the Securities in, from the pool account to the delivery
account before pay in, at the time of pay- in NSDL flushes out the securities in the
delivery account and transfers the same to the CC/CH.

RECEIPT ACCOUNT:

On pay –out day, the CC/CH transfers Securities to the pool account through
the account.CM has to ensure that before book closure or record date of any
company the Securities are moved from CM pool account to a beneficiary account
as holding in pool account for longer period is not allowed.

SETTLEMENT:

In the depository system, any trade that is cleared and settled

through the clearing corporation (CC/CH) is called market trade.

23
Procedure for pay-in of securities

 Give Receipt instruction to the DP for transfer of Securities from client

account to the pool account or give a standing instruction for the same.
 Delivery to CC/CH instruction for the transfer of Securities from pool and
account to delivery account for pay-in.

CLEARING DELIVERY POOL

Both pay-in and pay-out happens to be on 5thworking day after the
ACCOUNT ACCOUNT
trading and the instruction to transfer the Securities from the pool account to
delivery account must be given before pay-in such that this transfer is affected
before pay-in. the transfer instruction is taken as an authority to transfer the
security irrespective of when the client gives the delivery instruction, the
Securities will be parked in the delivery account till final pay-in and the facility of
multiple instructions from the pool account is also provided to the investors.
In case of excess transfer of shares to the delivery account or excess
delivery to CC/CH the instruction slip can be cancelled and
issued new one or the CC/CH will return the Securities at the time of pay-out
respectively.

Procedure for pay-out of securities:

 Transfer of Securities from CC/CH to pool account through
receipt in account on pay-out.
 Delivery instruction to transfer from pool account to client on
pay-out.

CLEARING RECEIPT POOL

24
 On the delivery of the instruction from the client’s name, client’s DP,
ID and DP name of the client must be mentioned and ensure that receipt
instruction given by client to receive the Securities bears the same execution date
as given in the delivery instruction. However, the broker can hold the Securities in
the pool account until the client meets his obligations but before the closure of
books, the balances must be transferred as the balances in the pool account, which
are not entitled for any corporate benefits.

FLOW CHART TO EFFECT CLEARING AND SETTLEMENT OF MARKET

TRADES

Send receipt instruction for

transfer from client account
to pool account
Any time before
pay-in

Give delivery instruction to

your DP for transfer from
pool account to CC

On payout you will receive

securities from CC to your
pool a/c automatically

Any time before or

after pay-out

25
 Give delivery instruction
for transfer of securities
from pool a/c to client a/c’s

Fig (1.4)
INTER-DEPOSITORIES LIMTED

A transfer of securities from an account in one depository to an account

in another depository is termed as an inter-depository transfer. This facility is
quite similar to the account transfers within NSDL.

It can be done only for Securities that are available for

Dematerialization on both the depositories. The account in NSDL can be either a
clearing account or a beneficiary account. For debiting the clearing account or the
beneficial account with NSDL, the form for “inter-depository delivery
instruction” is required to be submitted by the clearing member/beneficial owner
to its DP.

For crediting the clearing account or the beneficial account, the

standard instruction given for automatically crediting the account is applicable. In
case the standard instructions are not given, then the form for “inter-depository
receipt instruction” is required to be submitted by the clearing member/beneficial
owner to its DP.

As both the depositories are connected to each other, the batches

to affect inter-depository transfers are presently exchanged twice on the working

26
day. The issuer/registrar and transfer agent is informed about the transfer by both
the depositories and it amends its records accordingly.
Government Securities cannot be transferred from one depository to another using
this facility.

NATIONAL SECURITIES DEPOSITORY LIMITED

NSDL was inaugurated in 1996, as the depository in the country to avoid the
myriad problems in settlement.

In depository system, Securities are held in securities (depository) accounts,

which is more or less similar to holding funds in the bank accounts. Transfer of
ownership is done through simple account transfer. This method does away with
all the risks and hassles normally associated with paper work. Consequently, the
cost of transaction in depository environment is considerably lower as compared
to transaction in physical certificates.

Trading in dematerialized Securities is quite similar to trading in physical

Securities. The major difference is that at the time of settlement, instead of
delivery/receipt of Securities in the physical form, the same is affected through
account transfer. Currently dematerializes trading is available at NSE, BSE and
CSE.

Exclusive Demat segment follows rolling settlement (T+2) cycle and the
unified (erstwhile-physical) segment follows account period settlement cycle. All

27
investors, other than the institutional investors, can deliver Securities either in the
physical or dematerialized form in the market.

From January 4, 1999, all categories of investors can deliver

only in Dematerialized form with respect to a select list of securities. However
initially this was applicable only at those exchanges, which have joined the
depository, but SEBI has also specified that this list is to be expanded in a phased
manner. The settlement of trades in the stock exchanges is undertaken by the
clearing corporation (CC)/clearing house (CH) of the corresponding stock
exchanges.

While settlement of Dematerialized Securities is effected through NSDL, the

funds settlement is effected through the clearing banks. The physical Securities
are settled by the clearing members directly with the CC/CH.

BENEFITS OF DEPOSITORY SYSTEM

In the depository system, the ownership and transfer of Securities takes

place by means of electronic book entries. At the outset, this system rids the
capital market of the danger related to handling of paper. NSDL provides
numerous direct and indirect benefits, like:

 Elimination of bad deliveries-in the depository environment,

once holding of an investor are Dematerialized, the question of bad delivery
does not arise i.e. they cannot be hold “under objection”.
 Elimination of all risks associated with physical certificates-
dealing in physical Securities have associates security risks of stocks,

28
mutilation of certificates, loss of certificates during movements through and
from the registrars, thus exposing the investor to the cost of obtaining
duplicate certificates and advertisement, etc.., This problem does not arise in
the depository environment.
 No stamps duty for transfer of any kind of Securities in the
depository
 Immediate transfer and registration of securities in the
depository environment, once the securities are credited to the investors
accounts on pay-out; he becomes the legal owner of the securities. There is no
further need to send it to the company’s registrar for registration.
 Faster settlement cycle-the exclusive Demat segment follow
rolling settlement cycle of T+2 i.e. the settlement of trades will be on the 2nd
working day from the trade day. This will enable faster turnover of stock and
more liquidity with the investor.
 Reduction in brokerage by many brokers for trading in
Dematerialized Securities-brokers provide this benefit to investors as dealing
in Dematerialized Securities reduced their back office cost of handling paper
and eliminates the risk of being the introducing broker.
 Faster disbursement of non-cash corporate benefits like rights,
bonus, etc..,
 Reduction of problems related to change of address of investor,
transmission, etc., in case of change of address or transmission of Demat
shares, investors are saved from undergoing the entire change procedure with
each company or registrar. Investors have to only inform their DP with all
relevant documents and the required changes are effected in the database of all
the companies, where the investor is a registered holder of Securities.

29
 A STUDY OF STOCK EXCHANGE:

Stock exchange is an organized market place where securities

are traded. These securities are issued by the government, semi-government
bodies, public sector undertakings and companies for borrowing funds and raising
resources. Securities are defined as any monetary claims (promissory notes or
I.O.U) and also include shares, debentures, bonds and etc., if these securities are
marketable as in the case of the government stock, they are transferable by
endorsement and alike movable property. They are tradable on the stock
exchange. So are the case shares of companies.

Under the Securities Contract Regulation Act of 1956,

securities’ trading is regulated by the Central Government and such trading can
take place only in stock exchanges recognized by the government under this Act.
As referred to earlier there are at present 23 such recognized stock exchanges in
India. Of these, major stock exchanges, like Bombay Stock Exchange National
Stock Exchange, Inter-Connected Stock Exchange, Calcutta, Delhi, Chennai,
Hyderabad and Bangalore etc. are permanently recognized while a few are
temporarily recognized. The above act has also laid down that trading in approved
contract should be done through registered members of the exchange. As per the
rules made under the above act, trading in securities permitted to be traded would
be in the normal trading hours (9.00 A.M to 3.30 P.M) on working days in the
trading ring, as specified for trading purpose. Contracts approved to be traded are
the following:

 Spot delivery deals are for deliveries of shares on the same day or the next
day as the payment is made.

30
  Hand deliveries deals for delivering shares within a period of 7 to 14 days
from the date of contract.
 Delivery through clearing for delivering shares with in a period of two
months from the date of the contract, which is now reduce to 15 days.
(Reduced to 2 days in demat trading)
 Special Delivery deals for delivering of shares for specified longer periods
as may be approved by the governing board of the stock exchange.
Except in those deals meant for delivery on spot basis, all the rest are to be
put through by the registered brokers of a stock exchange. The securities contracts
(Regulation) rules of 1957 laid down the condition for such trading, the trading
hours, rules of trading, settlement of disputes, etc. as between the members and of
the members with reference to their clients

HISTORY OF STOCK EXCHANGES IN INDIA:

The origin of the Stock Exchanges in India can be traced back to the latter half
of 19th century. After the American Civil War (1860-61) due to the share mania
of the public, the number of brokers dealing in shares increased. The brokers
organized an informal association in Mumbai named “The Native Stock and
Share Brokers Association in 1875”.later evolved as Bombay stock exchange
Increased activity in trade and commerce during the

First World War and Second World War resulted in an increase in the stock
trading. The Growth of Stock Exchanges suffered a set after the end of World
War. Worldwide depression affected those most of the Stock Exchanges in the
early stages had a speculative nature of working without technical strength. After
independence, government took keen interest to regulate the speculative nature of
stock exchange working. In that direction, securities and Contract Regulation Act

31
1956 was passed, this gave powers to Central Government to regulate the stock
exchanges. Further to develop secondary markets in the country, stock exchanges
established at Mumbai, Chennai, Delhi, Hyderabad, Ahmadabad and Indore. The
Bangalore Stock Exchange was recognized in 1963. At present there are 23 Stock
Exchanges.

Till recent past, floor trading took place in all Stock Exchanges. In the floor
trading system, the trade takes place through open outcry system during the
official trading hours. Trading posts are assigned for different securities whereby
and sell activities of securities took place. This system needs a face – to – face
contact among the traders and restricts the trading volume. The speed of the new
information reflected on the prices was rather than the investors.

The Setting up of NSE and OTCEI (Over the counter exchange of

India with the screen based trading facility resulted in more and more Sock
exchanges turning towards the computer based trading. BSE introduced the
screen based trading system in 1995, which known as BOLT (Bombay on – line
Trading System).

Madras Stock Exchange introduced Automated Network Trading

System (MANTRA) on October 7, 1996 Apart from Bombay Stock Exchanges
have introduced screen based trading.

32
THE SECURITIES AND EXCHANGE BOARD OF INDIA

The Securities and Exchange Board of India even though established

in the year 1988. Received statutory powers only on 30th January 1992. Under the
SEBI Act, a wide variety of powers are vested in the hands of SEBI. SEBI has the
powers to regulate the business of Stock Exchanges, other security and mutual
funds. Registration and regulation of market intermediaries are also carried out by
SEBI. It has responsibility to prohibit the fraudulent unfair trade practices and
insider dealings. Takeovers are also monitored by the SEBI has the multi pronged
duty to promote the healthy growth of the capital market and protect the investors.

The Governing Board of stock exchanges:

The Governing Board of the Stock Exchange consists of elected
members of directors, government nominees and public representatives. Rules, by
laws and regulations of the Stock Exchange substantial powers to the executive
director for maintaining efficient and smooth day-to-day functioning of Stock
Exchange. The Governing Board has the responsibility to maintain and orderly
and well-regulated market.

The Governing body of the Stock Exchange consists of 13 members of which

 Six members of the Stock Exchange are elected by the members of the
Stock Exchange.
 Central Government nominates not more than three members.
 The board nominates three public representatives.
 SEBI nominates persona not exceeding three and
 The Stock Exchange appoints one Executive Director.

33
 One third of the elected members retire at annual general meeting
(AGM). The retired member can offer himself for election if he is not elected for
two consecutive years. If a member serves in the governing body for two years
consecutively, he should refrain offering himself for another two years.

The members of the governing body elect the president and vice-
president. It needs to approval from the Central Government or the Board. The
office tenure for the president and vice-president is on year. They can offer
themselves for re-election, if they have not held for two consecutive years. In that
case they can offer themselves for re-election after a gap of one-year period.

NATIONAL STOCK EXCHANGE

The National Stock Exchange (NSE) of India became

operational in the capital market segment on third November 1994 in Mumbai.
The genesis of the NSE lies in the recommendations of the pherwani committee
(1991). Apart from the NSE. It had recommended for the establishment of
National Stock market System also. The committee pointed out some major
defects in the Indian stock market. The defects specified are.
 Lack of liquidity in most of the markets in terms of depth and breadth.
 Lack of ability to develop markets for debt.
 Lack of infrastructure facilities and outdated trading system.
 Lack of transparency in the operations that affect investors’
confidence.
 Outdated settlement system that are inadequate to cater to the growing
volume, leading to delays.

34
 Lack of single market due to the inability of various stock exchanges
to function cohesively with legal structure and regulatory framework.
 These factors led to the establishment of the NSE.

The main objectives of NSE are as follows

 To establish a nationwide trading facility for equities, debt

and hybrid instruments
 To ensure equal access investors all over the country through
appropriate communication network.
 To provide a fair, efficient and transparent securities market to
investors using an electronic communication network.
 To enable shorter settlement cycle and book entry settlement system.
 To meet current international standards of securities market.

 Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of

Baroda. Canara Bank, Corporation Bank, Indian Bank, Oriental Bank of
Commerce. Union Bank of India, Punjab National Bank, Infrastructure
Leasing and Financial Services, Stock Holding Corporation of India and SBE
capital market are the promoters of NSE.

MEMBERSHIP:

35
 Membership is based on factors such as capital adequacy, corporate
structure, track record, education, experience etc. Admission is a two-stage
process with applicants requiring going through a written examination
followed by an interview. A committee consisting of experienced people from
the industry to assess the applicant’s capability to operate as an exchange
member, interviews candidates. The exchange admits members separately to
Wholesale Debt Market (WDM) segment and the capital market segment.
Only corporate members are admitted on the debt market segment whereas
individuals and firms are also eligible on the capital market segment.
Eligibility criteria for trading membership on the segment of WDM are as
follows.
 The persons eligible to become trading members are bodies corporate,
companies institutions including subsidiaries of banks engaged in financial
services and such other persons or entities as may be permitted form time to
time by RBI/SEBI.
 The whole-time directors should possess at least two years
experience in any activity related to banking or financial services or treasury.
 The applicant must possess a minimum net worth of Rs.2 crores.
 The applicant must be engaged solely in the business of securities and
must not be engaged in any fund-based activities.

The eligibility criteria for the capital market segment are:

 Individuals, registered firms, bodies corporate, companies and such

other persons may be permitted under SCRA, 1957.
 The applicant must be engaged in the business of securities and must
not be engaged in any fund-based activities.

36
 The minimum net worth requirements prescribed are as follows;
 Individual and registered firms – Rs.100 Lacs.
 Corporate bodies – Rs. 100 Lacs.
.
 The minimum prescribed qualification of graduation and two years
xperience of handling securities as broker, sub-broker, authorized assistant,
etc must be fulfilled by following:
 Minimum two directors in case the applicant is a corporate
 Minimum two partners in case of partnership firms and
 The individual in case of individual or sole proprietary concerns.

 The two experienced director in a corporate applicant or trading

member should hold minimum of 5% of the capital of the company.

37
 RESEARCH METHODOLOGY

NEED OF THE STUDY:

SEBI in September 1996 has issued guidelines to the stock exchanges
to go for online trading to go for online trading procedure by the end of the year
1996.Following its direction stock exchanges has installed the online trading
system.
The major need for this study is to know the effectiveness of the online trading
system in comparison with the outcry and mock trading to study its advantages
and recommend for beneficial and effective use of this system of physical transfer
of the shares

OBJECTIVES OF THE STUDY:

The objectives of the study are as follows:
 To know the on-line screen based trading system adopted by ISE and
about its communication facilities for the appropriate configuration to set
network. This would link the ISE to individual brokers/members.
 To study about the backup measures with respect to primary
communication facilities, in order to achieve network availability and
connectivity back-up options.
 Study about Clearing & Settlements in the stock exchanges for easy
transfer and error prone system. Also study about computerization demand
process.
 To know about the settlement procedure involved in ISE and also NSDL
operations.

38
  Clearing defining each and every term of the stock exchange trading
procedures.

SCOPE OF STUDY:
The scope of the project is to study and know about Online Trading
and Clearing & Settlements dealt in Inter-Connected Stock Exchange.
By studying the Online Trading and Clearing & Settlements, a clear
option of dealing in stock exchange for the Networth stock breoking ltd. Unlike
olden days the concept of trading manually is been replaced for fast interaction of
shares of shareholder. By this we can access anywhere and know the present
dealings in shares.

COLLECTION OF DATA:
The data collection methods include both the primary and secondary
collection methods.
 Primary collection methods: This method includes the data collection from
the personal discussion with the authorized clerks and members of the
exchange.
 Secondary collection methods: The secondary collection methods includes
the lectures of the superintend of the department of market operations and so
on., also the data collected from the news, magazines of the ISE and different
books issues of this study.

TIME PERIOD:
The data is collected in the project duration of 45 days.
The period is 01Jan10 to 18Feb10.

39
LIMITATIONS OF THE STUDY:
The study confines to the past 2-3 years and present system of the
trading procedure in the ISE and the study is confined to the coverage of all
the related issues in brief. The data is collected from the primary and
secondary sources and thus is subject to slight variation than what the study
includes in reality. Hence accuracy and correctness can be measured only to
the extent of what the sample group has furnished.

40
 PROFILE OF NETWORTH STOCK BROKING LTD

NETWORTH STOCK BROKING LTD (NSBL):

A world of intelligent investing
A world of intelligent investing

Ever since its inception in 1993, Networth Stock Broking Limited (NSBL) has
sought to provide premium financial services and information, so that the power
of investment is vested with the client. We equip those who invest with us to
make intelligent investment decisions, providing them with the flexibility to
either tap into our extensive knowledge and expertise, or make their own
decisions. NSBL made its debut in to the financial world by servicing
Institutional clients, and proved its high scalability of operations by growing
exponentially over a short period of time. Now, powered by a top-notch
research team and a network of experts, we provide an array of retail broking
services across the globe - spanning India, Middle East, Europe and
America. Currently, we are a Depository participant at Central Depository
Services India (CDSL) and aim to become one at National Securities
Depository (NSDL) by the end of this quarter. Our strong support, technology-
driven operations and business units of research, distribution and advisory
coalesce to provide you with a one-stop solution to cater to all your broking and
investment needs. Our customers have been participating in the booming
commodities markets with our membership at Multi Commodity Exchange of
India (MCX) and National Commodity & Derivatives Exchange (NCDEX)
through Networth Stock.Com Ltd.

41
NSBL is a member of the National Stock Exchange of India Ltd (NSE) and the
Bombay Stock Exchange Ltd (BSE) on the Capital Market and Derivatives
(Futures & Options) segment. It is also a listed company at the BSE.

Corporate overview:

 Networth is a listed entity on the BSE since 1994

 The company is professionally managed with experience of over a
decade in broking and advisory services
 Networth is a member of BSE, NSE, MCX, NCDEX, AMFI, CDSL

 Current network in Southern and Western India with 107 branches and
franchise. Presence in major metros and cities

 Empanelled with prominent domestic Mutual Funds, Insurance

Companies, Banks, Financial Institutions and Foreign Financial Institutions.

Strong experienced professional team

 20000+ strong and growing client base

 Average daily broking turnover of around INR 1 billion
 AUM with Investment Advisory Services of around INR 3 billion

Products and services portfolio

 Retail and institutional broking

 Research for institutional and retail clients
 Distribution of financial products

 Corporate finance

42
  Net trading
 Depository services
 Commodities Broking

Infrastructure:

 A corporate office and 3 divisional offices in CBD of Mumbai which

houses state-of-the-art dealing room, research wing & management and back
offices.
 All of 107 branches and franchisees are fully wired and connected to
hub at corporate office at Mumbai. Add on branches also will be wired and
connected to central hub
 Web enabled connectivity and software in place for net trading.
 60 operative ID’s for dealing room
 State of the Art accounting and billing system, on line risk
management system in place with 100% redundancy back up.
 In house technology back up team to ensure un-interrupted
connectivity.

43
Figure showing Products and services portfolio of the
company

44
 e broking in com
offlin mod
in e& itie
l g as value chain - in
On ra d in offi s
t t ng
Ne o s itory as va lue c hain
Dep
i o M anagement Sc
l hem
rtfo
Po o rp orate Finance e
C
dvisory Se
tor A rvi
n ves ces
I n C om p any,
ts o Se
or cto
ep broking in Eq
e ui
R

r,
n

Ec
rch

ty
li

ono
Onl i & Off
Resea

&
Derivaties
my
ne

Services

Fig (3.1)

Networth Stock

Broking Limited (Company Snapshot Business Description):

45
 Networth Stock Broking Limited. The Group's principal activity is to
provide capital market and portfolio management services. The Group operates
through three segments: Capital Market, Financial Product

Distribution and Depository Participant. The Group is depository participants with

Central Depository Services India (CDSL) and National Securities Depository
(India) Limited (NSDL).

Networth Stock Broking Ltd. Appoints Mr. R Sankaran As

Independent Non Executive Chairman

Networth Stock Broking Ltd. announced that it has appointed Mr. R

Sankaran as Independent Non Executive Chairman of the Company with
effect from June 23, 2009. Further Mr. S P Jain, the former Chairman will
continue as the Non Executive Director of the Company.

Networth Stock Broking Ltd. Announces Holding Interest Of

Peninsular South Asia Investment Company Ltd

Networth Stock Broking Ltd. announced that M/s. Peninsular South

Asia Investment Company Ltd - South Asia Access Fund (FII) has
increased their shareholding in the Company from 527000 equity shares
(4.69%) to 602000 equity shares (5.36%) by purchase of 75000 equity
shares from the open market.

46
Networth Stock Broking Ltd. Announces Retirement of Mr.
Sathyan Rajan As Managing Director

Networth Stock Broking Ltd announced that Mr. Sathyan Rajan's term as
the Managing Director expires on January 17, 2009 and thereafter he will
continue as an Ordinary Director of the Company.

Networth Stock Broking Ltd. Sings MOU with Punjab National

Bank

Networth Stock Broking Ltd. announced that it has signed a MoU with
Punjab National Bank (PNB), for an Internet trading alliance. The alliance
entails the Company providing its online trading platform and expertise for
e-broking services in equities and derivatives and online IPO services to
the customers of PNB.

Description

Networth Stock Broking Ltd. (Networth) is engaged in providing financial

services and information to the customers. The Company operates in
three business segments: capital market (CM) segment, financial product
distribution (FDP) segment and depository participant (DP) segment. The
Company is depository participants with Central Depository Services India
(CDSL) and National Securities Depository (India) Limited (NSDL). The
Company’s subsidiaries include Networth Stock.Com Limited, Networth
SoftTech Limited, Networth Wealth Solutions Limited, Ravisha Financial
Services Private Limited and Networth Insurance Broking Private Limited.

47
 Officers and directors

Girish Dev Chief Executive Officer, Executive Director

Trupti Lalpuria Compliance Officer, Company Secretary
R. Sankaran Independent Non-Executive Chairman of the
Board
Suresh Pukhraj Non-Executive Director
Jain
Ajay Kumar Non-Executive Director
Kayan
Utsav Parekh Non-Executive Director
Suhas P. Bade Non-Executive Independent Director

NSBL provides the retail broking services all over the India, Middle East,
Europe and America. NSBL has 156 branches across the India. They are
growing exponentially because of their strong support; technology drives
operations, research team and network of experts. Online trading is one of
the important platforms provided by NSDL.

NSBL has also acquired membership of the currency derivatives segment

with NSE, BSE & MCX-SX. It is Depository participants with Central
Depository Services India (CDSL) and National Securities Depository
(India) Limited (NSDL). With a client base of over 1L loyal customers,

48
NSBL is spread across the country though its over 230+ branches. NSBL
is listed on the BSE since 1994.

Networth offers 2 different online trading platforms to its

customers:

N-Easy (Website based trading)

It is a powerful and user friendly browser based online stock trading

platform. This website based trading platform is for delivery based low
volume trader or investor who keeps moving from one place to another.

As this is a website based trading environment, there is no need to install

any software and trading can be done absolutely anywhere there is
internet.

N-Swift (Installable software based trading)

It is an advanced and interactive online stock trading platform. This

platform requires installation based application which is made available by
Networth. User has to install this software application on his computer. It’s
mostly suited for high volume traders.

Trader can watch market prices while they trade. The application is highly
integrated which enables the user to place orders in live environment. The
user screen is fully customizable by the user to display information based
upon his preferences.

Services offered by the company:

49
 Equity
 Derivatives
 Currency Derivatives
 IPO
 Commodities
 Depository Services
 Portfolio Management Services
 Wealth Management Services
 Online Platform
 Call & Trade

Historical data and others (table 4-1)

Date Open High Low Close Volume
Feb 18, 2010 37.00 39.50 36.50 36.50 2,391
Feb 17, 2010 37.50 40.30 36.75 37.70 4,116
Feb 16, 2010 40.05 41.00 38.65 38.65 6,461
Feb 15, 2010 41.00 42.00 40.05 40.65 3,605
Feb 12, 2010 41.90 41.90 41.90 41.90 0
Feb 11, 2010 41.30 42.00 40.85 41.90 1,259
Feb 10, 2010 44.00 44.00 42.70 42.70 1,526
Feb 9, 2010 45.40 45.50 42.75 44.05 5,486

50
 Feb 8, 2010 43.25 44.60 42.50 43.25 7,216
Feb 5, 2010 36.75 40.50 36.70 40.50 5,960
Feb 4, 2010 40.05 40.05 38.05 38.45 15,076
Feb 3, 2010 42.10 42.10 39.20 40.05 1,918
Feb 2, 2010 40.55 40.55 38.00 40.15 5,237
Feb 1, 2010 38.25 41.95 38.25 38.50 4,282
Jan 29, 2010 40.35 42.90 40.20 40.20 2,411
Jan 28, 2010 43.60 45.25 42.30 42.30 4,392
Jan 27, 2010 45.00 46.50 44.25 44.50 8,754
Jan 26, 2010 46.45 46.45 46.45 46.45 0
Jan 25, 2010 46.45 46.45 46.45 46.45 138
Jan 22, 2010 44.50 47.00 44.50 46.50 9,658
Jan 20, 2010 51.80 51.80 48.05 48.10 19,880
Jan 19, 2010 53.80 54.00 50.40 50.40 23,786
Jan 18, 2010 51.40 53.00 50.70 53.00 9,821
Jan 15, 2010 51.60 52.80 51.50 51.50 14,878
Jan 14, 2010 54.00 54.40 51.85 51.85 17,088
Jan 13, 2010 51.15 55.10 51.00 52.00 111,104
Jan 12, 2010 53.00 55.75 52.00 52.50 164,031
Jan 11, 2010 56.00 56.00 52.90 53.10 576,081
Jan 8, 2010 57.10 57.15 53.50 55.65 254,130
Jan 7, 2010 47.50 54.45 47.50 54.45 826,728
Jan 6, 2010 46.90 50.00 46.00 50.00 19,690
Jan 5, 2010 43.00 47.95 43.00 46.05 6,798
Jan 4, 2010 42.00 46.95 42.00 45.50 4,098
Jan 1, 2010 43.55 43.55 43.55 43.55 0
Dec 31, 2009 44.00 45.50 43.15 43.55 11,520

ANALYSIS OF OVERALL PERFORMANCE COMPARING

TO OTHER FIRMS(table 4-2)

Financ
Divide Operating
Valuation ial Margins
nd metrics
ratios
Excha Price Chan Chg Earnin P/E Mkt Total d Return Return Net pr
Operat
Company nge Curre ge % gs ratio Cap Divide ebt on on ofit
ing
name ncy per sh nd to ass avg as avg eq margi
margin
are ets sets uity n
51 Networth BOM INR 40.00 -1.00 - 449.2 0.00 19.74 -12.82 -30.62 -33.07 -33.20

51
 Financ
Divide Operating
Valuation ial Margins
nd metrics
ratios
15 Stock 2.44
6M
51 Broking... %
53
Aditya Birla 0.00
29 BOM INR 52.30 0.00 2.90B 0.00 4.75 0.69 2.72 2.35 1.39
Money Lim... %
74
53 JRG -
891.3
27 Securities BOM INR 38.25 -0.50 1.29 -0.55 0.00 0.00 -2.23 -6.25 -7.39 -6.59
1M
45 Limited %
53 Parsoli - -
915.4 -
00 Corporation BOM INR 34.00 -0.60 1.73 0.00 2.75 -49.99 -75.12 746.1
5M 722.23
71 Ltd. % 2
53
Emkay Share 5.34 21.0
27 BOM INR 94.65 +4.80 4.49 2.30B 0.00 9.78 -1.23 -2.45 -4.27 -3.25
and Stock ... % 7
37
51 Action
0.00 177.5
17 Financial BOM INR 20.15 0.00 -2.20 0.00 15.44 -10.42 -18.04 -88.36 -93.78
% 2M
06 Servi...
53
India Infoline 118.4 0.13 19.9 33.55
26 BOM INR +0.15 5.93 2.80 1.82 5.17 9.55 22.79 16.34
Limited 0 % 7 B
36
53 Religare -
374.9 47.91
29 Enterprises BOM INR -0.20 0.05 -5.20 0.00 29.61 -1.45 -4.15 -1.17 -5.46
5 B
15 Ltd. %

Comparison study of Networth and other firms taking different

parameters into consideration

Those parameters are as follows:

Account opening fees.

Brokerages.

Features.

52
Flexibility.

Table (4-3)

Particulars Networth ICIC KOTAK INDIA Share

(Kotak
I BULLS khan
securities)
A/C
NIL 750 1000 1200
Opening 500

FEES

INTERPPRETATION:

The a/c opening fees of Networth is nil comparing to its competitors.

Hence, it attracts more customers due to its nil a/c opening fees

Table (4-4)

53
Particulars Networth ICICI KOTAK INDIA Share khan
(Kotak
BULLS
securities)
1) The 1)From 0.1 1) For 1) 250/- 1)For intra-
least in to 0.15 for intra-day equity day
trade margin trading, trading trading,share
brokerage trades kotak account khan brokege
BROKERAGE 1psy & 2)0.2% to brokerage opening is around
maximum 0.425for is around charges 0.1%
5psy. squared off 0.5% 2)200/- 2)For
2) Delivery trades 2) For demat delivery
brokerage 3)0.4 to account trading,
minimum delivery opening sharekhan
10psy & 0.85% on charges brokege is
and trading, 3) 750/- around 0.5%
maximum delivery 3)sharekhan
is 40psy. kotak software
basedtrades charge 50
brokerage changes
paise per Rs
is around
100
0.45%

INTERPPRETATION:

From the above table comparing brokerage charges with the

competitors it’s found that on an average Networth is charging very less
brokerage charges

Table(4-5)

54
Particulars Networth ICICI KOTAK INDIA Share
(Kotak
BULLS
khan
securities)
1)sms alerts 1) 3-in-1 1) Call & trade 1) Brokerages 1)Single
2)Technical account facility are less screen
level alerts integrates 2) Daily sms compare to interface for
3) Trade on your alerts other online cash and
NSE & BSE. banking, 3) Market trading derivatives
FEATUR 4) G.T order broking pointers companies.
transaction. and demat 4) Stock 2) Live 2)Hot keys
ES 5) Provide accounts. steaming similar to a
NEAT 2) There is recommendatio quotes. traditional
facility. absolutely 3) Fast order broker
6) NEAT no manual ns etc. entry and terminal
interfere executions. 3)Alerts and
based on require 4) Technical reminder
3) Price analysis. 4)Back-up
client facility to
alerts place traders
history. on
Directphone
lines

INTERPPRETATION:

From the above table it has been interpreted that Networth is having
good technical features to attract the customers and as well as to with stand
in the market against its competitors by giving similar competition to the
market players

Table(4-6)

55
Particulars Networth(nsbl) ICICI KOTAK INDIA Share
(Kotak
BULLS
khan
securities)
Nsbl has various Instead of Kotak Power Onli
transferring provides indiabulls ne trading
flexible plans in money to exclusive trading is very
the online tool terminal User
FLEXIBILITY online trading like broker’s to monitor is the friendly
pool or what is most and one
N-platinum to N- towards happening advanced doesn’t
deposits, at in the new need any
silver. Flexibility of ICICI market and generation software
direct we also trading to access.
funds pay-inns & can investor can platform Sharekhan
manage view with great has ability
pay-outs through our own gains/losses speed. funds
demat and in real- This from most
NEFT. These bank time. trading banks
accounts terminal
products are through is built in
ICICI JAVA.
providing complete direct.com.

information of

market updates

INTERPPRETATION: Networth has a superb flexibility of funds pay-

inns & pay-outs through NEFT. While others also having good flexibility

but comparatively less flexible than NSBL.

56
THE STUDY OF THE PROJECT REVEALS THE
FOLLOWING OBSERVATIONS

 The online trading is introduced to reduce and eliminate all the

discrepancies that arise out of manual trading system. It has been developed to
computerize the trading activity of the broker. With the computerization of the
trading activity, the number of transaction and the volume of trading have
increased to a great extent..

 The turnover has gone up during 1998 with the introduction of online
trading system. The trading of the first day was Rs. 37.00 crores.

 Now the companies are also taking orders on phone call. Trading in Z
securities is not available. (Z securities are those securities which are not
traded regularly). Bank account for instant transfer is also available, as other
companies dealing with online trading are giving instant bank a/c.

 All companies are giving offline option while ISE is not giving any
offline options.

 Portfolio valuation is not available. Moreover, only government

securities and bonds are allowed for mutual trading.

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THE STUDY OF THE PROJECT REVEALS THE
FOLLOWING FINDINGS

 Fluctuations are more in the secondary market than any other

market.
 There are more speculators than investors.
 Information plays a vital role in the secondary market.
 Previously rolling settlement is T+5 days, now it changed to
T+2 days and further it will be changing to T+1 day.
 It was also observed that many broking houses offering
internet trading allow clients to use their conventional system as
well just ensure that they do not lose them and this instead of
offering e-broking services they becomes service providers.
 The numbers of players are increasing at a steady rate and
today there are over a dozen of brokerage houses that opted to
offer net trading to their customer’s and prominent among them
are Networth stock broking Limited, Share Khan, India Bulls and
Kotak Street.

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THE STUDY OF THE PROJECT REVEALS THE
FOLLOWING SUGGETIONS

The overall performance of ISE, DP and ONLINE TRADING is good.

Here are the suggestions for further improvements of the performance in the
future.
 Volume of paper work is small but it is very complicated to maintain data
in system so try to reduce that by regular audit and updating data.
 Most of DPs do not have the necessary infrastructure to handle the high
workload of transactions lending to many error by DPs, so by giving full
infrastructure information to every DP can avoid this problem
 The pool a/c does not know the true owner of the shares and hence
dividends are paid to the broker instead of owners, by this broker can do any
manipulations or any fraud with the owner, for this the owner can lose his
dividend. Hence for this try to pay the dividend directly to the owner.
 If the shares are fake/forged which delivered by the broker the shareholder
can lose that system and have to receive another lot of issued shares from the
broker in 21 days, this system stands abused as soon as possible.
 The online trading is easy to work but it is costly to maintain and difficult
to learn.
 It should increase the speed of executing the orders.
 Mutual funds trading for other companies have to be encouraged. If phone
orders are encouraged, trading in z securities are allowed,

 Bank accounts for instant transfer are provided and offline option are
given then ISE would be definitely improving in the turnover.

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  Necessary steps should be taken by the exchanges to deal with the
situation arising due to break down in online trading.
 Instant bank account should be provided as the other companies are
providing, because this helps the ISE in dealing directly with the investors.
 Another important thing, which has to be taken into considerations, is
portfolio management. It should have a separate department for portfolio
management and should guide the investors. If ISE takes initiative steps for
portfolio valuation of the investor’s .Then investors will be attracted towards
the ISE to a greater extent.
 ISE has to give more advertisement through the media stating the
advantages to the investors by using ISE.
 Leverages should be provided to the investors till settlement. Then only it
encourages the investors to take active part in online trading of the stock
exchange
 The software or the system used in online trading should be advanced
and the persons who operate should have minimum knowledge or if they are
very well versed about the functioning of the system then it will be helpful in
smooth functioning of online trading.
In ISE investors cannot do their own trading on the system, every
time they have to consult the DP members and has to tell to hold the shares
by his name, instead of this provide the web trading facility to investors by this
they can do their own trading by sitting in front of internet.

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 THE STUDY OF THE PROJECT REVEALS THE
FOLLOWING CONCLUSION

 The study of on “online trading system and Clearing & settlements at

Inter-connected stock Exchanges has been an enlightening experience
stressing on the position aspects on security trading. Dematerialization of
shares and online trading has done in whole lot of good to the issuer, investor,
companies and country.

 The Depository system has reduced the time lag in delivering and
settlement of securities but also supported the cause of providing more
liquidity to the security holder, the need for setting up of a depository, paper
less trading through online trading system and settlement became in evitable
and unavoidable for the smooth and efficient functioning of the capital
market. This system has proven its worthiness by increasing in the settlement
will be done with in the day in future is in itself an indication of how great a
boon in this system of Online trading.

 E-brokerages provide convenience, encourage increased investor

participation and lead to lower upfront costs. In the long run, they will likely
reflect increased market efficiency as well. In short run, however, there are a
number of issues related to transparency, investor’s misplaced trust, and
poorly aligned incentives between e-brokerages and markets, that may impede
true market efficiency.

 For efficiency to move beyond the user interface and into the trading
process, consumers need a transparent window to observe the actual flow of

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orders, the time of execution and the commission structure are various points
in the trading process. In this regard, institutional rules, regulations and
monitoring functions play a significant role in promoting efficiency and
transparency along the value chain in electronic markets. Our analysis
confirms that in the context of online stock markets, the need for such
intervention and oversight it particularly strong.

BIBILOGRAPHY

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BIBILOGRAPHY

Books:

Investment Management
V.K.Bhalia
Investment Management
Preethi Singh
Security Analysis And Portfolio Management
V.A.Avadhani
Marketing of Financial Services
V.A.Avadhani
- Indian Financial System
- M.Y.Khan

Newspaper:

Economic Times of India

Web-site:
www.nseindia.org
www.iseindia.com
www.nsccl.com

Report:

NSBL Report

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