A PROJECT REPORT

On

ONILNE TRADING IN
INDIA

IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF
MASTERS OF FINANCE & CONTROL (MFC)

SUBMITTED TO: SUBMITTED BY:

Indiabulls Sanjeev Kumar

1
 DEPARTMENT OF COMMERCE
PUNJABI UNIVERSITY, PATIALA

Acknowledgements
It was a great opportunity for me to work with
INDIABULLS, pioneers in the field of online trading and retail
broking. I am extremely grateful to who have shared their expertise and
knowledge with me and without whom the completion of this project
would have been virtually impossible.
Firstly, I would like to thank to my parents, who
has been a constant source of inspiration for me. Without their
blessings I can’t complete my summer training in a successful manner.
Next I would like to thanks to my faculty guide, who has been a
constant source of inspiration for us during the completion of this
project.
I am also extremely grateful to Mr. AMIT MANGLA (BRANCH
MANAGER) & Mr. RAJIV GOYAL (RELATIONSHIP MANAGER)
INDIABULLS, to have given me this opportunity to work with them
and gain valuable insights into the enticing world of online trading.

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 I am indebted to all staff of Indiabulls for their valuable
support and cooperation during the entire tenure of this
project. Not to forget, all those who have kept my spirits
surging and helped delivering my best.

DECLARATION

I hereby declare that the project report entitled “ONLINE TRADING

IN INDIA” submitted in fulfillment of the requirement for the degree of

Bachelor of Business Administration of Punjabi University, Patiala is my

original work and has not been submitted for the award of any other degree

at this university.

Place:

Date: Name: GOPAL KRISHAN

Class: MBA 4th Semester
Roll No. 3412

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 TABLE OF CONTENTS

S.NO CONTENTS PAGE NO

CHAPTER-I 1.1) Introduction of e-broking 6-11
1.2) Emergence of e-broking 12-14
1.3) Process of online trading 15-18
1.4) Surf...select click 19-23
1.5) Problems confronted by e-broking 24-27
1.6) Net trading in India 28-29
1.7) Operations of e-broking 30-34
1.8)Prospectus of e-broking 35-36
CHAPTER-II 2.1) Objectives of study 38
2.2) Research Methodology 39-40
2.3) Limitations of study 41
CHAPTER-III 3.1) Analysis of data 43-57
3.2) Findings 58-61
CHAPTER-IV 4.1) Conclusions 63
4.2) Recommendations 64
APPENDIX-I
Questionnaire 65-67
Bibliography 68

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5
 INTRODUCTION

CONCEPT OF SHARE BROKING

The concept of share broking emerged after the establishment of the joint stock
companies. The ownership of the companies was divided into small parts and that every
part was called share. So, the term “Share” denominates some part in the ownership of
the company. The shares are freely transferable subject to the some certain restrictions.
When the need was felt to sell the shares by the owner of the shares, it was difficult to
find out the buyers of the shares who want to buy the shares at the price the seller want to
sell. At that time a need was felt to bring the buyers and sellers on a common platform.
To solve this problem, a group of persons came into picture, which used to bring the
buyers and sellers together for the trade of the shares. These persons are called the Share
Brokers who find the persons who wish to buy or sell their securities. The whole process
of finding the buyers and sellers of the securities by the brokers is called the Share
Broking.
The origination of the Indian securities market may be traced back to 1875, when
22 enterprising brokers under a Banyan tree established the Bombay Stock Exchange
(BSE). Over the last 130 years, the Indian securities market has evolved continuously to
become one of the most dynamic, modern and efficient securities markets in Asia. Today,
Indian markets conform to international standards both in terms of structure and in terms
of operating efficiency.

SHARE BROKING IN INDIA

6
 In 1850 the Companies Act was passed and that heralded the commencement of
the joint stock companies in India. When the joint stock companies were established,
need was felt for the sale and purchase of the shares of these companies and that need
gave the birth to the stock exchange. The Stock Exchange at Bombay was established in
1875 as "The Native Share and Stockbrokers Association" which has evolved over the
decades in to its present status as the premier Stock Exchange in India. In the early days
the business was conducted under the shade of a banyan tree in front of the town hall.
The tree can still be seen in the Horniman Circle Park. The American Civil War of 1860
helped Indians to establish brokerage houses in Bombay. The leading broker at the time,
Premchand Roychand, assisted in framing conventions, ground rules and procedures for
trading which are respected even now. He was the first Indian broker who could speak
and write in fluent English. The exchange was established with 318 members with a fee
of Re. 1/-. This fee has gradually increased over the years and today it is an over a crore.

TRADING IN STOCK EXCHANGES: -

Trading of the shares means the sale and purchase of the shares. A number of methods
have been used for the trading of the shares from the day of inception of stock exchange.
Following are some phases of these methods:

1.) In January 1899, James M. MaClean, M.P, inaugurated the Brokers’ Hall. After
the First World War the Bombay Stock Exchange (BSE) was housed in an old
building near the Town Hall. In 1928, the present plot of land was acquired
surrounded by Dalal Street, Bombay Samachar Marg, and Hammam Street. A
building was constructed in 1930 and occupied in December of that year. In this
phase, trading used to take place through open outcry system without use of
information technology for immediate matching or recording of trades. Brokers
were used to tell the current share prices of the shares and the interested
investors ordered them for the transactions. This was time consuming and
inefficient. This imposed limits on trading volumes and efficiency.
2.) In 1993, National Stock Exchange was established in Mumbai. The aim of NSE
was to provide nation-wide electronic trading with highest transparency in the

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 market place. In 1994, NSE started the screen based trading system (SBTS) where
a member can punch into the computer quantities of securities and the prices at
which he likes to transact and the transaction is executed as soon as it finds a
matching sale or buy order from a counter party. In 1995 Bombay Stock
Exchange also started the screen based trading. This enabled BSE to provide
floorless and fully automated screen-based trading facilities in capital market
(CM) instruments with equal access to investors all over the country. The use of
satellite communication technology for trading using Very Small Aperture
Terminals (VSATs) enabled NSE & BSE to rapidly expand across the length and
breadth of the country. SBTS electronically matches order on a strict price/time
priority and hence cuts down on time, cost and risk of error, as well as on fraud
resulting in improved operational efficiency. It allows faster incorporation of
price sensitive information into prevailing prices, thus increasing the
informational efficiency of markets. It enables market participants to see the full
market on real-time, making the market transparent. It provides full anonymity by
accepting orders, big or small, from members without revealing their identity,
thus providing equal access to everybody.
3.) The market regulator–the Securities and Exchange Board of India (SEBI)
introduced Internet trading in October, ‘00. In Internet trading, the Net is used as
a medium to communicate orders to the stock exchange through the broker's
website. E-broking sites also provide the client with the opportunity to buy or sell
securities from the client's home or office. The investors are also able to track the
fluctuations in a particular stock and the market as a whole, while deciding to
execute the order and also while the order is being executed. The confirmation of
the order is also shown on the real time basis. The order routing system on which
net trading is done is compatible with screen-based trading terminals used before
starting the net trading.

INTODUCTION TO E-BROKING

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 “Change is the law of nature”. There were times when man was a wanderer or
a nomad. He himself had to go place to place in search of food, water and other basic
necessities of life. But now the scenario has changed so much that 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 how 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.
Gone are the days of pressing the redial button of your telephone in a desperate
bid to reach to your broker, sitting in his office. Very soon you will be clicking the mouse
for making those millions you have been trying since times you entered the markets. This
has been made possible by affixing a small “e” to stock trading. Internet trading or e-
trading is going to be the most important events in the history of stock markets.
E trading is considered as logical extension of e-commerce. To put it simply e-
commerce is buying and selling through electronic medium. There could not be a better
place than the stock market, where tremendous volumes are traded to exploit the
opportunities of e-commerce. Internet based trading enables a person to monitor the
action of stock exchanges by sitting before his personal computer in his home he can
offer bids between the markets and enter the stop limits order.
With the rash of recent advertisements promoting the use of online trading via the
Internet, it is easy to understand why so many people are curious about managing their
investment portfolios using this medium. The heavily discounted commissions are the
main attraction. But what exactly is the investor giving up? Before you rid yourself
entirely of your owned by the brokerage house may not be acceptable to the savvy online
investor who has easy access to the real time price of almost any security traded on the
national markets. Of course, the majority of brokerage firms have traditionally relied
upon salesmanship to fuel their growth, as well as the bottom line. The threat posed by
internet trading to a brokers ability to generate sales is obvious and is clearly the leading
reason why the larger brokerage firms have discouraged on line trading.
From the investor’s point of view, however, Internet trading has many extremely
appealing features. The first is obvious: the investor has control over his portfolio. An

9
investor can exercise control at almost every point from the initial application to the wire
transfer of funds into their accounts. To open an account with one of the Internet
brokerage services, the investor completes a new account from online. These forms are
similar to the form an investor is asked to sign during an initial meeting at a broker’s
office. Our key difference, however, is that in cyberspace no one is pressurizing you to
“hurry up” and sign the forms.
Internet trading commissions are clearly posted on the websites of the various
services, and are typically a fixed rate charge, depending upon the type of security being
traded and the size of trade. In theory, therefore, an Internet investor always knows what
commission he is being charged on each trade. Internet investors can take as much time
as they would like to take prior to placing a trade order.. Furthermore, the internet
investor can never become a victim of excessive trading (where a broker buys and sells
securities merely to generate additional commission for the broker) since the investor
maintains total control over the number of transactions which take place in the account.
All of these positive features of internet trading may lead the unwary investor to
believe that Internet trading is a way to take control of their finances and save some
money in the process. Unfortunately, this is not always the case. The advantages of
Internet stock trading have also its weaknesses and these weaknesses present significant
drawbacks for the average investor.
First and foremost, the average investor is not an expert in the financial markets.
There is a real danger for allowing the autonomy of online trading to hull you into the
belief that you are an expert investor. An online investor sitting at home at a personal
computer also foregoes proper investment advice and financial planning, perhaps among
the most valuable services provided by traditional brokers
There are, of course, additional risks relative to performing transactions over the
Internet, especially on a shared computer. Those people whom investors have provided
their account number and password can freely trade that account while the investor will
have little, if any, recourse against the brokerage firm for the breach of security.

MEANING OF E-BROKING

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 In E-Broking, the Net would be used as a medium to communicate orders to the
stock exchange through the broker's website. So, E-Broking can also be termed as
“Internet Trading”. A lot of existing sites like bseindia.com, nseindia.com, rediff.com,
indiainfoline.com, capitalmarket.com and motilaloswal.com serve a variety of functions
like providing real-time quotes with information and analysis of data on companies and
industries.
But e-broking sites also provide the client with the opportunity to buy and sell
securities from the confines of one's home or office. The difference here (from
conventional order placing over the telephone) is that one would be able to track the
fluctuations in a particular stock and the market as a whole while deciding to execute the
order and also while the order is being executed. And the confirmation of the executed
order would also be available in real-time.
This is indeed a boon for those who don't have the time to visit the office of a
broker or a sub-broker to peer at computer terminals that show the existing screen-based
electronic trading quotes. In fact, the SEBI’s committee on Internet-based Securities
Trading and Services has allowed the Net to be used as an Order Routing System (ORS)
through registered stockbrokers on behalf of clients for execution of trades. This is
compatible with the screen-based trading terminals of today.
Of the two software products launched by NSE, NeatXS is an order routing
product for broker members with multiple locations, which enables computer-to-
computer networking. It has an in-built risk management capability and has two variants -
workgroup edition and enterprise edition - that are targeted at small and large brokers,
respectively. NeatIXS, on the other hand, enables broker members of the NSE to offer
Internet trading to their clients.
The other software - net.net - is a server-based product that provides brokers with
complete software infrastructure to support Internet commerce, the ability to own html
web transaction pages and the option to integrate existing websites. It also provides
exchanges with the ability to send and receive data from its members over the Net on
real-time or post-trade. It also allows brokers' clients to perform several functions over
the Net including viewing market information, entering orders, creating one's own
portfolio, viewing order/trade status, and providing on-line alerts on client activity.

11
 Henceforth an investor need not wait for his broker to come on the telephone line.
He needs not to rush to the broker’s office to get his transaction executed. Nor he has to
wait for his confirmation of his transactions. One can buy/sell the shares independently
on the net. In other words, the broker will permit his client to access his terminal via his
website.

EMERGENCE OF E-BROKING

THE democratized world of online trading (also called e-broking) is slowly

attracting investor fancy in India.

Advertisements in the print and electronic media have raised curiosity of the investor, as
slowly, the mechanics of online trading are also sinking in.

A small beginning

Compared to the Western countries, online trading is still in its infancy in India.
With some ten dotcom players, such as icicidirect.com, investsmart, 5paisa.com, India
bulls, and a host of brokers, such as KotakStreet, share khan, Motilal Oswal, Geojit
Securities and duttstock, entering the online ring promises exciting times ahead.

The following issues are crucial in the selection of an e-broker:

Does brokerage matter: The starting point for individual investors examining the various
online trading schemes is obviously the brokerage rate. In a competitive marketplace, can
brokerage be a key differentiator among different schemes offered by e-brokers?

12
Evidence on brokerage rates seems to suggest that this differentiator may be of limited
value to most investors.

Is click-and-mortar the best bet?: As online trading is still at a nascent stage, practically
all the major players which have set up e-broking outfits, aim at achieving two objectives.
One, to broadbase the overall trading of investors, while holding their existing clientele
intact. Two, most established e-broking outfits, such as icicidirect.com, investsmart (an
IL&FS initiative) and kotakstreet.com, are using their brick-and-mortar presence to
encourage investors to go online. Given the poor connectivity and Internet infrastructure,
most e-broking majors are trying to raise the comfort level of the investors by assuring
them that even if the Internet order-routing system breaks down, or investor access is
broken for any reason, online registered investors can always exercise the option of
putting through their orders offline.

As this combination is still a new concept, most investors will be better off clarifying
how the offline environment will operate, if the online environment fails for any reason.
For the investor, the important thing is to ensure that this switch from online to offline is
seamless and that there are no associated hidden costs.

Clearly, from an investor's viewpoint, ``click-and-mortar'' approach to investing may be

the best bet till the online trading market matures in terms of technology, infrastructure
and service to become a self-sustaining business proposition. At this point in time, for
most e-broking majors, the brick-and-mortar brokerage outfit is likely to subsidise the
investment in online trading technologies and further in the ongoing/recurring costs.
Unless the online trading volumes increase dramatically to 10-15 per cent of the total
trading volumes (or at least 20 per cent of the gross turnover of the BSE and the NSE),
the brick-and-mortar outfits will continue to dominate.

Investor checklist for online trading: The investor checklist is mainly a trendspotter's
guide to the selection of an e-broker. With most online trading outfits still forging
agreements with payment gateways for online banking and with depository participants
for online demat, it may be too early to differentiate the grain from the chaff among e-

13
brokers. But the investors' checklist still looks at aspects that are expected to acquire
prominence as online trading catches on.

The pedigree of the e-broker: The pedigree of the e-broker is important as that is likely to
identify the serious players. Going forward, consolidation is inevitable even in this
industry and when that happens, online trading sites such as icicidirect.com, investsmart
and kotakstreet.com with a good pedigree have a much better chance of survival than the
stand-alone sites such as 5paisa.com and RELIGARE.

Technology and back-.office infrastructure: In these early months, online trading is likely
to attract a host of entrants as India has already seen so far. But the key differentiator will
be the investment in technology and back-office infrastructure. Even if small-time e-
broking outfits make the initial investments in technology, the recurring expenses, which
would also be high, may prove to a burden in the long run. For investors looking at online
trading from a medium-to-long-term perspective, sites with deep pockets and a pedigree
will be a good choice.

Quality of service and security: As the industry quickly consolidates and technology gets
standardized, the quality of service will be the key differentiator. From an investor's
perspective, in the initial stages holding at least two online trading accounts with two
different outfits will be prudent in the long run. Basically, this will help the investor
evaluate the quality of service and ``security-related issues'' (say, in terms of 128-bit
encryption or privacy/confidentiality in access), between two outfits. In the long run,
depending on the service levels, the investor can switch to the better player.

Integrated package: Currently, only icicidirect.com offers a seamless 3-in-1 package of

broking, banking and demat accounts. This effectively means that through the click of a
mouse, an investor can buy and sell shares, and forget about the paperwork involved in
settlements and transfer of shares or money. The rest of the players are also putting such
an integrated package in place, but icicidirect.com has a headstart as the others may be
able to offer an seamless online trading experience only after an independent payment

14
gateway (which provides connectivity between different banks for online banking) is
firmly in place.

However, the existing online trading system suffers from major lacunae. Icicidirect.com
currently offers online trading services only to investors who have a bank or a demat
account with ICICI. Or, investors can open an online trading account with
kotakstreet.com only if they open a demat account with Kotak Securities and have a bank
account either with Citibank, HDFC Bank or Global Trust Bank. If investors do not have
these accounts, they have to go through the entire rigmarole of opening up the bank and
demat account again for easy operation. Apart from the hassles involved, there may also
be certain extra charges involved in this exercise that may have to be built into the overall
cost of online trading

PROCESS OF ONLINE TRADING

An investor interesting in trading through Internet shall have to; firstly register
himself with an Internet brokerage firm. Some formalities such as filling the account
opening form of the e-broker, copies of identity proof, copy of residence proof are
made to register him with the e-trader. Secondly, the investor would be required to
open a bank account with a scheduled bank and sufficient balance should be kept in
the account. Thirdly he would be required to open account with a depository
participant because only dematerialized shares can be traded on Internet.

The client places an order via the net by logging on to his

broker’s site.

The broker accepts and executes the order and places it

with the exchange.

The exchange accepts the order after checking the share limit for the day.

15
 The broker makes the payment either directly via the client’s bank account or
pays through its own account and recovers it later from the client.

The exchange receives money and completes the settlement

The client is intimated about the settlement either

through demat or via e-mail.

So, generally following steps are followed while doing the trading through the Internet:

Step-1:

Those investors interested in doing the trading over Internet system, that is, NEAT-ISX
(NSE), should approach the brokers and register with the Stock Broker.

Step-2:

After registration, the broker will provide to them a login name, password and a personal
identification number (PIN).

Step-3:

Actual placement of an order. Using the place order window as under can then place an
order:

(a) First by entering the symbol and series of stock and other parameters such as quantity
and price of the scrip on the place order window.

(b) Second, fill in the symbol, series and the default quantity.

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Step-4:

It is the process of review. Thus, the investor has to review the order placed by clicking
the review option. He may also re-set to clear the values.

Step-5:

After the review has been satisfactory; the order has to be sent by clicking on the send
option.

Step-6:

The investor will receive an ``Order Confirmation'' message along with the order number
and the value of the order.

Step-7:

In case the order is rejected by the Broker or the Stock Exchange for certain reasons such
as invalid price limit, an appropriate message will appear at the bottom of the screen. At
present, a time lag of about ten seconds is there in executing the trade.

Step-8:

It is regarding charging payment, for which there are different modes. Some brokers will
take some advance payment from the investors and will fix their trading limits. When the
trade is executed, the broker will ask the investor for transfer of funds by the investor to
his account.

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TRADE & SETTLEMENT PROCESS

INTERNET SITE

BROKER’S
SITE DEPOSITORY

STOCK
18
EXCHANGE
SURF... SELECT... & CLICK
With e-trading sites mushrooming aplenty, it is a buyer's market for investors.
However, rock-bottom brokerage is no substitute for quality and seamlessness of
service.

Remember the time when we left orders with our broker in the morning and received a
confirmation fax late in the evening? We wondered whether we had acquired the shares
at the best possible price for the day. Today, the picture is different. We can log on to our
broker’s site and get live NSE quotes and place buy and sell orders on the spot, and direct
the site to debit the requisite amount from our savings accounts. A few seconds later, you
get the confirmation on your screen. And after the trade settlement, your bank and DP
accounts will reflect the changes accordingly.

The speed of transaction, confidentiality about the prices and ease of settlement in the
paperless mode should be good reasons for retail investors to jump on to the Net. All they
need is a PC, a modem, a subscription to an ISP, an account with a bank (which has a
web presence) and a depository account. And they can choose from a plethora of e-
trading web sites.

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The Net trading facility is a win-win proposition for both investors and brokers. Says
Dhiraj Agarwal, chief executive officer, Sharekhan.com, “It’s transparent and convenient
from the common investor’s perspective. It is also advantageous from the brokers’ point
of view as they can service a large number of customers without actually increasing their
own running cost.” The response so far is mind-boggling.

Today, there are about 1.6 million Net users in the country (as per Nasscom) and the
number will swell to over 5 million in the next three years. Says Kapil Sanghi, managing
director, equitytrade.com, “The registrations on our site saw an exponential growth
initially. We expect a phenomenal rise in upcountry investors”.

Though Internet trading constitutes less than 1% of the daily off-line trades today, there is
a consensus among Net brokers that it will pick up very fast once infrastructural hassles
are taken care of. Internet trades should constitute 10-15% of the overall trades in the
next one year.

Will Net trading eventually eclipse and cause a demise of off-line broking? In the US,
companies like Merrill Lynch, which had only a brick and mortar presence, had to
quickly move to Net trading. However, a majority in the broking community feels that
brick and click brokerage services will co-exist. Says Motilal Oswal, managing director,
Motilal Oswal Securities, “Traditional brokers will have to re-focus on their business
model. I don’t think money will be made only by Net brokers. It has to be a brick-and-
click structure. It’s only a channel but if a traditional broker does not embrace
technology, he will be left behind.” Adds Pallav Sinha, chief executive (retail services), J
M Morgan Stanley, “There is place for both. The trick is in offering a range of on-line
and off-line services, and easy customer access.”

Besides, off-line brokers have, over the years, built the brick and mortar infrastructure
that a pure Net broker can never hope to replicate. No wonder, all the Indian Net brokers
who count today are traditional brokerages.

With over 20 trading sites available today, security, low cost and services will hold the
key to attracting investors. The seamlessness of all the intermediaries is a prerequisite to

20
lure investors. Says Kapil Sanghi, managing director, equitytrade.com, “Quite a few sites
advertised their web trading portal well ahead of the actual launch. They attracted a large
clientele. Later, this proved to be only a marketing gimmick as ads and super low
brokerage lured clients. Soon investors realized that these sites had nothing special to
offer.”

No doubt, the cost of transaction (brokerage) is becoming competitive. However, it is

post-trading services that will have a significant impact in holding on to clients. Says
Shankar Sharma, director, First Global, “We can penetrate roughly 7000 clients in the
next 1-2 months, which will ensure large volumes for us. But, at the same time, we are
very cautious about services as ultimately quality of business matters. In the future, we
won’t be looking only at the number of accounts.”

Thus, an investor should not look only at the brokerage aspect. One has to see whether
the super low brokerage slabs can deliver the desired level of services. The issue is
seamlessness of services at a minimum cost. Says Manoj Vaish, chief executive officer
(derivatives), BSE, “There will be consolidation of many of the brokers. The future name
of the game will be value-added services. Financial services are slowly becoming more
technology-intensive and there is no escape from it.”

Rather than enter into senseless ‘discount’ wars, many portals are offering benefits like
margin trading that will provide value for money.

Margin trading its basically a facility offered to investors to leverage their capital so that
they can trade above the deposited amounts. With Net trading, margin trading could see
an exponential growth. For instance, Kotakstreet.com is one site which offers margin
trading with few exclusive features. Says D Kanan, vice president, Kotakstreet.com. “If
you are our client and have Rs 50,000 deposited as margin, clearly you can trade up to
Rs1,50,000 (margins 33%). But if you sell some stock first, say, worth Rs1, 50,000, then
we will also consider that in your margins, raising your total margin to Rs 2, 00,000.
Thus, your fresh limit for trading will be Rs 6, 00,000.” Clearly, margin trading will be

21
one of the most lucrative and exciting instruments which will balloon as e-trading takes
of.

However, margin trading is a risky exercise as investors tend to see only the upside
potential, without considering the downside. Though margin trading already forms a
significant proportion of overall trading today, traditional brokers who are offering this
facility are familiar with their clients, blunting the fear of default.

On the flip side, there are a few Net brokers who do not even take margins to reduce the
cost to customers. Says Satish Menon, senior vice president, Geojit Securities, “We don’t
retain the upfront margin from our client but use the on-line fund transfer facility. Thus
clients don’t have to block their funds till they initiate trade.”

Banks, too, are not flexible with their customers. To become an ICICI web trade
customer, it is mandatory to hold an ICICI bank account and also its depository account.
There are two reasons for this. First, banks have strict systems before they can put a trade
through and, therefore, are more comfortable when all the related transactions are within
their control. Second, and more important, it makes a better revenue model. In the case of
ICICI, three birds are hit with one stone. It gets money from its customer for its banking
service, depository service and finally its broking service. Says Anup Bagchi, chief
operating officer, ICICIDirect.com, “Net trading is going to flourish, because, in India,
unlike other countries, we have a long 125 years of an equity cult.”

A concern voiced about Net trading is that it will encourage speculation and day trading.
But if we see the daily turnover in the Indian markets today, delivery-based trading is
very less compared to squaring up of transactions. Thus, Internet trading per se will not
be responsible for speculative trading. In fact, a certain amount of speculation and day
trading will ultimately benefit the market with more liquidity. Says Amit Rathi, director,
Anand Rathi Securities, “Net trading doesn’t really change the fundamental nature of the
equity markets. Greed and fear have ruled the markets for decades and Net trading will
not change that or exaggerate that to any significant extent. In fact, through real-time

22
information dissemination, it may bring price adjustments more quickly, making the
markets a little more efficient.”

Today, NSE is the only exchange facilitating Internet trading. It offers an order-routing
facility – NSE XS – and a product for Net trading – NEAT iXS – that enables brokers to
provide Net trading facilities to investors. Recently, NSE.IT enhanced its product basket
by adding another product, ProBos, a broker’s back office product, which will also
support e-broking solutions.

The Bombay Stock Exchange (BSE) is expected to offer Net trading connectivity any
time now. Says Manoj Vaish, 38, CEO (derivatives segment), BSE, “The centralised
trading infrastructure aims at providing a world-class cutting edge trading solution which
is highly available, highly scalable, safe and secure and capable of delivering high class
content and adapting to multiple products/multi-mode delivery mechanisms.”

For all the hype, Net brokers think that India will never see the kind of Net trading as
seen in Korea (where over 60% of the trades take place through the Net). The number of
active clients who actually trade on a regular basis and keep their accounts alive is still
meagre. This is because brokers are concentrating on a few, high networth clients. One
possible reason is that line interface with banks has to be developed. Dependence on a
single bank entails a relatively higher risk for the broker. One should consider the cultural
and social issues and, above all, the Indian psyche. Most Indian investors will love to
adopt a simultaneous route for trading, ie, trading on the Net and holding the broker on
the ear (telephone).

Nonetheless, the convergence era is here and doing business through the Internet is
slowly becoming inevitable. The government seems quite committed as the IT Act is now
a reality. E-transactions and digital signatures will have legal status now.

It is the nature of any business to see a lot of players entering the market at the zero hour
to take early entrant advantage. So, how can Net broking be an exception? Today, a lot of
companies are jumping onto the bandwagon, irrespective of whether they have a prior
experience in the brokerage line or not. They take this as a pure Internet business or as a

23
part of the e-commerce venture of B2C nature. But over time, investors will recognise the
strength and weaknesses of such companies and clearly the brick and mortar experience
of traditional brokerage firms will become distinct. Says Rathi, “Broking at the end of the
day is becoming a commodity. Execution is a commodity. How will you differentiate
yourself besides the brands? How many financial products are you going to offer? Value
added services are going to be the differentiating factor.”

PROBLEMS CONFRONTED BY E-BROKING PLAYERS

PRESENTLY

There are infrastructural problems which presently hinder the rapid growth of e-
broking but these will be tackled soon and in the next two years, e-broking will pick up in
a big way. Priority must be given to enhancing infrastructural levels which in turn will
facilitate the rapid growth of e-broking.

One of the main problems now is the low accessibility to the Internet. The point to be
noted here is that the Internet is today accessed mostly from offices and workplaces and
not from homes. Once this change, e-broking will pick up.

Another important requirement for e-broking to grow rapidly is the establishment of

payment gateways. Here we are lagging behind considerably and unless payment
gateways are set up to facilitate prompt payment from investors to brokers, e-broking will
not really take-off.

24
 However, as I mentioned before, these are teething problems and will hopefully be
resolved soon. I am confident that e-broking will take-off in a big way in the next two-
year period.

There is a flip side to everything and online trading is no exception.

1.) "Server not found":

This may appear on your screens when you are desperately trying to get out of an
unprofitable position. Some of the online sites are providing a telephone number for use
in case their sites are overloaded or their server down.

2.) Connectivity of the Broker with NSE:

Recently ICICI Direct had a connectivity problem with the NSE for two and half-hours
during trading hours. This problem is rare but be alive to its possibility.

3.) Cyber attack:

In the event of a malicious attack on the systems of your broker you are protected only if
the company is taking proper precautions against such attacks and if proper backup is
regularly been taken. You may like to choose a brokerage that has a stated security policy
and contingency plan in place.

4.) Non-availability of a seamless interface:

As a client you will access the NSE through a server of the online brokerage and this may
involve queuing delays. If a number of client access the server the server takes its own
time sending the orders to the NSE server. You must check out the seamlessness of this

25
 interface before selecting an online brokerage. The faster the orders are processed the
more seamless is the interface.

5.) Non- availability of personalized advice:

If you like to ask your broker "Aaj kya achcha lag raha hai" you may not be able to do so.
If you want advice on a particular stock in your portfolio you may not even be able to get
that.

6.) Margin:

If Internet trading alone is not fast and furious enough; many people are trading on
margin. That is where the brokerage firm lends you money by leveraging your account,
allowing you to buy a large amount of securities by putting up only a small amount of
money. You may have forgotten what you read in the small print of your Agreement, but
the brokerage firm has the right to change the maintenance margin requirements without
any warning or notice to you. In fact, the firm has the right to liquidate your securities
holdings (and it can pick and choose which ones) without any notice to you if you fail to
meet the margin call. And there you were leveraged to the hilt, hoping to hit a home run
when you discovered that you are required to make a large deposit that you cannot make.
The next thing you know, the firm is selling off your securities at a point in time that is
not the best for you. These are the perils of trading on margin.

7.) Little use of advisory services:

The advisory services being promised by the brokers would be of little use to investors
looking for an insight into the market. Many would not like to rely on research reports,
which are there for all. So, net investors will have to do their own research and take their
own decision, whether wild or wise.

8.) Increased charges:

26
Some of the brokers are of the view that they would have to provide advisory services to
the customers. But with increased volumes, they will have to follow the international
practice of charging a little more than the normal charges from a customer looking for
personal advice. The customer will have to decide whether he is willing to pay for this
little extra attention from the broker.

LARGE NUMBER OF PLAYERS PRESENT IN THE E-BROKING

SEGMENT, A SHAKEOUT IS IMMINENT

E-broking is in its infancy and hence it is but natural that a lot of players will enter this
business. It has been found globally that when a particular business is young, then a lot of
players enter the market. One witnessed it in the dot com sector and one is now
witnessing it in the e-broking segment. However, though there are several players now in
the fray, only a few with domain expertise, which is very vital for success, are present in
the market.

The present period is one of understanding the market for all players. In my opinion, the
shakeout has not yet begun; mid-2001-to-end 2001 is the likely period when the shakeout
will begin. And once the shakeout begins, only a few players will survive. Big players
with a huge capital base are the ones who will have the potential to succeed. Of course,
much will also depend on the market strategies the various players adopt.

Presently it is necessary for investors to sign a power of attorney in

favour of the operators of those sites who operate their DP accounts. Do
this act as a dampener to the rapid growth of online trading

Again, the answer is no. A power of attorney is necessary because of the fact that one
can't have instructions given through the Internet for transfer of shares. Physical
instructions are therefore needed to be given but at the same time collecting numerous
instructions from several clients will be terribly time consuming. This is where a power
of attorney comes in handy for both the broker and the customer.

27
A power of attorney will help in considerably saving time and reducing paperwork for
both the e-broker and customer. People do have reservations in giving a power of
attorney but then once the reasons are communicated to the investors, they are receptive
to the idea. This is a question of education and communication than anything else. Once
customers understand that it is beneficial to both the parties concerned, they are very co-
operative. Another point I would like to highlight here is that investors seldom give all
their shares under a power of attorney. With greater investor-education, the negative
perception about the power of attorney, if it at all exists, will vanish.

NET TRADING IN INDIA

In 2000, when the Securities and Exchange Board of India announced its
regulations for Internet trading, net trading has become a reality. Kerala-based Geojit
Securities has taken the lead, starting off the process in Bombay. The software was
developed by NSE.IT, the infotech firm floated by the NSE. The first net transaction was
a trade for 100 shares of Reliance executed by D R Mehta, chairman, SEBI, for A P
Kurian, chairman, Geojit Securities. This is a step forward in bringing the capital
markets closer to the investor. Compared to the Western countries, online trading is still
in its infancy in India. Today, web trading has a share of over 40 per cent in United
States, as high as 60 per cent in South Korea and 20 per cent in Britain. Now in India
share of the online trading (nse) has increased to near about 13 per cent as compared to
10 per cent (approx.) in December 2004. In February 2005, daily turnover of net trading
is near about 800 crore. According to a NSE official,”There are the days when the daily
turnover has even crossed the Rs. 1,000 crore mark.”

28
 In India, some major E-trader like icicidirect, 5paisa, RELIGARE, hdfcsec,
sharekhan, kotakstreet, geojitonline and karvy have been giving tough competition to
traditional stock brokers by offering an easier, transparent and cost effective trading
platform. Of late, some of the e-traders have been diversified into commodity trading in a
bid to offer one-stop shop facilities to retail investors. Stock market analysts pointed out
that the e-trading platform has a bright future going ahead.
In India, e-traders have been charging a minimum one time nonrefundable deposit
of Rs. 250 to Rs. 750, while the brokerage cost ranges from 0.20% to 0.85% for delivery
based transactions and 0.035% to 0.10% for intra-day transactions. The buy or sell order
are instantly routed to the Bombay Stock Exchange or the National Stock Exchange
depending upon the investors’ preference for the exchange. The money gets instantly
transferred from customers’ bank accounts for any buy order and shares are deposited
into the demat account managed by the NSDL (National Securities Depositories Limited)
or the CDSL (Central Depositories Services Limited) as all the three accounts- bank,
demat and web trade- are interlinked electronically with each other.

NON-NET BROKING INTERNET BROKING

Check with the broker about the price of Phase I
shares that you wish to buy. Log on to the broker's website to check share
prices and related information.
Place the purchase order with the broker.
Place a purchase order through authorised
secure user id and password.
The broker executes the purchase order
Order is routed through the broker to the
through a stock exchange.
stock-exchange server and you get
Pay the broker through a cheque. confirmation of the deal in a few minutes.
The payment and delivery of shares is still
The broker transfers the shares to your
done in the traditional way.
demat account (with a bank).
Phase II
In case you do not have a demat account, the (once payment on the Internet is allowed)
shares are credited to the broker's account, in Payment amount will get deducted from
favour of the purchaser. your online bank account (with which the
broker has tied up).

29
 The purchased shares are credited to the
online demat account in no time.

OPERATIONS OF E-BROKING

 To start Trading

After an initial deposit has been paid in by us, we will update our database and activate
our ID and we can log onto the site and commence trading. The margin money may be
deposited in our account through the Internet (if we have opted for the Net Banking
Facility) or we may deposit money in our account in the regular manner, under intimation
to us.

 We can buy shares of any value

We will be given an exposure limit, which will depend on the margin deposited by us. It
will be a dynamic online process visible to us on our terminal once the order has been
placed. If there is any shortfall in the margin amount, the exact amount of shortfall will
be displayed. We may utilize the Net Banking Facility and immediately transfer the
shortfall and execute the trade.

30
 Shares of any company can be traded

There is an offering of trading facilities in scrips which are in compulsory demat for all
investors. As of July 1, 2000 there are 583 companies that are compulsory dematting for
all investors.

 We can modify/cancel our orders

Orders which have not been executed can be modified/cancelled. Also orders which have
been partly executed can also be modified/cancelled.

 We get online confirmation on orders and trades

As soon as an order is executed on the exchange, we will get an online confirmation that
the order has been executed. Simultaneously, an e-mail is also sent to us giving details of
your order. The contract note will also be dispatched to our mailing address within 24
hours of the trade being executed.

 We can know the status of our orders

We can view the status of all orders whether executed or not from the order book.
Executed orders can also be viewed in the Trade Book.

 Brokerage charges

There are different brokerage rates charged by different broking houses.

 Handling and Finance Charges

The brokerage charges are the transaction charges and include all applicable levies. The
handling charges are towards the fees payable for settlement of securities & funds. Spot
Sale entails early payment and hence finance charges of 0.75%. In effect, for a spot sale,
you pay 1% as total fees.

31
 We can enter orders after trading hours

Currently we cannot place orders outside trading hours. However we are working on this
and very shortly it will be possible to enter orders outside trading hours

 In case no money in our bank account

In case we do not have money in your bank account, we can arrange to transfer money
from a different bank account to India Infoline.com Securities Pvt. Ltd.'s bank account.
This will automatically populate our systems and our trading limit will be modified
accordingly.

 We need to give shares/funds for pay-in

Shares sold by us have to be credited into our pool account two days prior to making the
sale. In case we open an account with one of our designated DPs and give us Power of
Attorney to operate the same, we shall do needful to fulfil our delivery obligations. For
shares purchased by us for delivery, please ensure that we receive clear funds in our
accounts two days before the exchange funds pay-in.
In case we do not have a Net Banking Account with HDFC Bank and are utilizing our
existing banking facilities, then we will be required to deposit the money in our HDFC
Bank Account or post the cheque payable in Mumbai so as to ensure that clear funds are
available in our account 2 days prior to Pay In. Incase of Pay Out, the money due to us on
account of your sales, will be posted to us from Mumbai by courier and will not be
credited to our account. Incase you have an HDFC Net Banking Account, them money
will be credited to your account within 2 days of the Pay Out.

 We receive shares/funds after the payout

32
 We will receive shares/funds within 48 hours of our receiving the payout from the
exchange. For customers who have not opened accounts within our designated banks,
please note that we will receive cheques payable at Mumbai. Therefore, it is advisable to
open accounts with our designated banks who offer net banking facilities, to ensure
timely payments and receipts of funds to and from us

 The products that are offered

We have 3 different types of products

. Delivery

To start E-Broking one will be required to give us money as margin. We shall be able to
buy any share, which is in the Compulsory Demat for all Investors. For the Delivery
Product the Margin is 100 %. Therefore if investors have given a margin of Rs 5000, he
will be allowed to purchase shares upto the value of Rs 5000 only. In case he have given
us a margin of Rs 1000, and then he will be allowed to purchase shares upto the value of
Rs 1000 only.
He can give the margin money in terms of securities that he can hold and do not wish to
sell. These shares shall have to be transferred into his account and will be valued by India
Infoline.com Securities Pvt. Ltd. on a daily basis and he will be allowed an exposure upto
100 % of that limit. The valuation typically may the last closing price less a certain
percentage. The decision of India Infoline.com Securities Pvt. Ltd. will be final in this
regard. The list of securities, that can be deposited as collateral will be decided by India
Infoline.com Securities Pvt. Ltd. periodically. In case he have given securities as deposit,
and have executed purchase orders, the money due for the purchase will have to be
transferred to our account with HDFC Bank Account, 2 days before the Pay In date. The
shares after payout will be deposited in his account within 48 hours.
In case we have to sell shares, we need to transfer the shares in our Pool Account and
only then we will be allowed to enter the sell order. In case we have opted to open an
account with IIT Corporate Services and have given us an POA, then we shall not need to
transfer the shares, as we shall do the needful on our behalf, subject to adequate holdings.

33
The money shall be deposited in our account directly within 48 hours of the payout or
posted to us in case we do not have a net banking account. The brokerage charges in this
transaction would include a Handling Charge of 20 basis points and therefore would
amount to a total brokerage of 25 basis points or 25 paisa per hundred rupees.

Trading

In this type of product, the client will be allowed to deposit as margin cash or securities
which will be credited to our account as we will be allowed an exposure of upto 4 times
the amount. Therefore if we give Rs 10000 as margin, we will be allowed an exposure of
upto Rs 40,000. In case shares have been submitted by us as collateral and they have been
valued for Rs 25000, then we will get an exposure of 4 times that i.e. Rs 1 lacs. In this
amount you can buy or sell shares upto Rs 1 lacs.
Care must taken to ensure that any open positions are squared off by the end of the
settlement, otherwise they shall be converted into delivery and the charges must be paid
for purchase or securities delivered for sale. The brokerage charged for Trading will be 5
basis points, but if open positions are not squared off, then Securities Handling Charges
of 20 basis points shall also be applicable.
The facility to trade will be available in a limited number of securities only and not for all
the securities, which are in Compulsory Demat for all investors. This list will be put up
on our website and would typically include the most liquid and active securities. All
securities which are available for Trading are also available for Delivery, but all
securities, which are available for Delivery, may not be available for Trading.
The money if any, payable by us in case open positions are not squared off, will have to
paid to us so as to enable us to have clear funds 2 days before the pay in. Any shares also
will have to credit into our account 2 days before the pay in.
In case we have an account with IIT Corporate Services, then the shares sold by us and
not squared off will be debited from our account by us and used to satisfy our obligations.
In case we do not have an account with IIT Corporate Services, then the shares will have
to be transferred to our Pool Account 2 days before the pay in date.

34
Spot Sale

This is a special product, where the money for the sale of securities will be credited to the
account of the investor on the same day of sale. This product will again be available only
for all securities in Compulsory Demat for all investors. The money will be credited to
the account of the client in case he has an HDFC Bank Account, or the cheque shall be
posted to the client on the same day evening by Courier.

The brokerage charge in these cases, shall include Brokerage ( 5 bp ), handling charges
( 20 bp ) and Finance Charges ( 75 bp ) making it a total of 1%. The shares that we wish
to sell, has to be deposited in our account prior to the sale. In case we have a DP Account
with IIT Corporate Services; our account shall be immediately debited with the shares. In
case we do not have a DP Account with IIT Corporate Services, the shares will have to be
transferred to our account and only then will the sale order by executed.

PROSPECTS FOR E-BROKING

It is heartening to note that efforts are being made by the leading international stock
exchanges across the globe to realize their cherished dream of “consolidation” in the
Global Equity Markets. The Tokyo Stock Exchange reported in June 2000 (visit
www.TSE.or.jp) “stock exchanges across the globe are exploring an alliance that will
create a 24-hour Global Equity Market. The New York Stock Exchange and Exchanges
from three main time zones-Australia, Tokyo and Hong Kong in the Asia-Pacific; Sao
Paulo, Mexico and Toronto in the Americas; and Euronext, the combined Amsterdam,
Brussels and Paris exchanges in the world’s global companies.
E-Broking is still an evolving industry in India and the survivors are likely to be
those brokers who offer integrated/consolidated services and are financially resilient. The
future of the E-Broking industry, thus, largely depends upon the extent of the penetration
of the Internet in the near future. Moreover, the Bombay Stock Exchange (BSE) and the
National Stock Exchange (NSE) have recently developed ‘proprietary’ trading engines

35
called ‘Webex’ and ‘Dotex’, respectively. These engines will obviate the need for a
broker to develop his own engine, and thus, result in capital investment savings.
However, a user can log on to these engines using the website of the broker and trade
electronically. These developments are, therefore, expected to give a strong fillip to the e-
Broking industry in India. Application of superior technology and establishing integrated
systems to provide a one-stop solution to clients will be a key determinant of success.
The business intelligence major, International Data Corporation, has predicted
that: “The IT-enabled services market globally will account for revenues of US $1.2
trillion by 2006. Despite the adverse global economic conditions, Indian players logged
in high growth rates. Overall, this sector grew at over 65%, upping from Rs. 71 billion in
2001-02 to touch Rs. 117 billion in 2002-03,” concludes NASSCOM. In yet another
study, titled “e-commerce and Development Report 2002” conducted by UNCTAD, it
was revealed that the global e-commerce market was worth around US $615.3 billion and
expected to grow to US $ 4,600 billion by 2005. Another estimate by Forrester Research
indicates that global online sales accounted for approximately US $ 2,291.5 billion of
world trade during 2002 (as reported by www.Nasscom.org). Despite the development of
Internet e-commerce and the hype that surrounds it, the amount of business has done
online, as a proportion of all retail sales remains stubbornly small.
The e-brokerage industry continues to be battered by several complex challenges,
such as, collapse in pricing structures, reduced return on IT investments, shaken value
propositions, and crisis in consumer confidence. A research report from the Tower
Group, 2004 (visit www.Towergroup.com), for example, very strongly asserts that these
challenges may change not just the way brokerage firms conduct their day-to-day
business, but may begin to re-define the e-Broking industry as a whole. They must make
tough decisions as to where to deploy their IT dollars, as well as what strategies and what
customers to pursue. They must re-invest themselves in a real-life world where ‘service’
is the key differentiator. Despite all the challenges, e-Broking industry seems like a sector
set to grow day-by-day.

36
37
 OBJECTIVES OF THE STUDY

The various objectives of conducting this research are as follows:

● To study changing scenario of e-broking

● To study the various hurdles involved while trading through the Internet &

suggest the measures to overcome these hurdles.

● To know the views of investors regarding the improvements brought by the

electronic broking in the stock market.

● To make a comparison between traditional broking & E-broking.

● To study investor perception regarding traditional trading as well electronic

trading

38
 RESEARCH METHODOLOGY

The Research Methodology used by me for the purpose of this project is as follows:-
DEFINING THE RESEARCH PROBLEM:
It is rightly said, “a problem well defined is half solved” The definition of the problem
includes the study of the topic “Study of Electronic Broking”. In this study, problems
related with E-broking will be investigated; size of the investment made by the investors
while using traditional broking and E-broking will be studied
Research Design:-
The research design used here for this project is a combination of Explanatory designs.
First a general know about of the process of online trading and then various E-Broking
services. Then a personal interaction with the Managers and investors to figure out the
results.
Data Collection Method:-
According to the needed research of the project; I pursued both primary & secondary data
collection methods. I have used web sites related to E-Broking information broacher for
secondary data collection. To ensure the accuracy of the results the primary data
collection method used is the structured interview method.
Sampling:-
The sampling units in my project are Managers/Consumers. The sample size was small
by following the convenience sampling method. There were queries for the persons
interacted & the questionnaire has been attached at last.
SAMPLING SIZE

The sample size of my research is Managers/Consumers. Large samples give

more reliable results that are why I tried my best to cover more users (consumers) in
Patiala.
Sample Size - 100

Sample Unit – Managers and investors

. Sample Extent - Patiala City

39
Data Availability: Data has been collected from the Users or Investors and
Managers of different E-Broking Houses.

The Research stands for:-

1. To know how of the actual phenomenon occurring & exploring the new ideas
with a clear & precise insight.
2. To test the hypothesis with being variables to be compared within their
relationship.
Data Analysis & Interpretation:-
The statistical tools used by me are mainly average, Percentage, & comparisons etc. I
would like to give brief points about

1. Questionnaire: - The questionnaires are given to respondent with no

pressurization at all, i.e. he/she is free to provide the information whatever the
concern is.
2. Direct Interviews: - The direct interviews are one up against all the data
collection tools just because one can judge that what a person is telling to the
surveyor. Although it is time consuming but the information gathered is of much
more weightage than others.
3. Sampling design, Procedure & Sample size:-A sample is always a part of the
desired universe & it should represent each & every aspect of the study being
conducted. The only thing is that the sample being chosen is of relevance &
accurate source of information. My sampling design is based on random sampling
because each element gets probability to be included & all choices made are
independent of each other.

40
 LIMITATIONS OF THE STUDY
In spite of the best efforts there are always some problems or limitations associated with
market research that cannot be removed but can be minimized only. In this survey also there
could be certain error due to these factors.
1. Small Sample Size
Our sample size is very small as compared to total consumer base that means our sample size
is comparatively small in accordance with the universe, which is large enough. So deduction
drawn from the project can’t be generalized. That can’t be generalized to the whole of E-
Broking service.
2. Time Constraint
Research is continuous process and is never ending activity could be inappropriate to certain
factor.
3. Non-Response Error
As this research is based upon responses provided by consumers, so non-responses and some
wrong responses may play as the part of error.
4. Sampling
It is not possible to cover each and every consumer so it has been tried to cover all section of
section of consumers by taking representative sample, which limit. The research is limited to
small extent.
These limitations may have effect on findings of the work but not up to large
extent and thus do not affect the findings of the work very significantly. Some of the
Respondents didn’t like to share their views and some were ignorant about the facts of
electronic trading

41
42
 ANALYSIS OF DATA

GENDER STATUS

MALE 72

FEMALE 28

GENDER STATUS

28

72
MALE
FEMALE

43
AGE OF INVESTORS

AGEOF INVESTORS

35
35
30
30
25
20
20
15
15 No. of persons
10
5
0
18-25 25-35 35-45 45-
above

OCCUPATION OF INVESTORS

occupationof investors

50 45
45
40
35 Professional
30 25 Businessman
25 20
Salaried
20
15 Student
10
10
5
0
No of persons

44
Q1 Since how long you have been trading?

1-5 5-10 10-15 15-above

No of years No of persons
1-5 30
5-10 35
10-15 25
15-above 10

35

30

25

20
35
15 30
25 no of persons
10

5 10

0
1-5 years 5-10 years 10-15 years 15-above
no of years

Out of 100 respondents 30 says they are trading from 1-5 years only, 35 says they are
trading from 5-10 years, 25 says that they are trading from 10-15 years it means they are
somehow aware of traditional trading system and only 10 investors are those which have
been trading since 15-above years it means that they are investing since the system of
outcry trading.

45
Q2 Are you familiar with traditional or outcry system?
Yes No

Yes 60

No 40

Awareness of traditonal trading

40%

yes no
60%

Out of 100 respondents, 60% of investors are aware of traditional trading system means
that they have deal with traditional trading and 40% of investors are not aware with
traditional trading means that they just do all there trading with only electronic trading.

46
Q3 What are the limitations you attach to traditional form of broking?
Safety
Time consuming process
Less Convenient
Problems faced by investor in traditional trading No. of persons faced problem
Safety 38
Time consuming process 48
Less convenient 18

50 46
45
38
40
35
30
25
20 16 no. of persons
15
10
5
0
Safety Tim e Less
consuming Convenient
process

As shown in the graph, we can interpret that the investors feel that there are many
limitations attach to the traditional trading such as safety, time consuming process
and receipt of financial instrument Out of 100 investors 38 investors feel that there is less
.safety in traditional trading, 48 investors feel that it takes more time in trading
system and 18 persons feel that outcry system is less convenient as compare to
electronic trading. So time consuming is the biggest limitation according to the
investors.
Q4 Are you familiar with e-broking?
Yes No

47
..
Yes 98
No 2

Awareness of e-broking in investors

2%

yes no

98%

Out of 100 respondents 98 says yes they have awareness about e-broking system and rest
2 says no they are not having much awareness of e-broking. So we can conclude that that
there is high awareness of e-trading in India.

Q5 Since how long you have been in electronic trading?

1-3 3-5 5-above

48
No of years using electronic trading No of persons
1-3 30
3-5 50
5-above 20

Usage of electronic trading by investors

60
50
50
no of persons

40
30
30
20
20

10

0
1-3 years 3-5years 5-above years
no of years

Out of 100 investors, 30 investors are using electronic trading from 1-3 years, 50
investors are using electronic trading from 3-5 years and 20 investors are using electronic
trading from 5 years or from more than 5 years. So we can conclude that much of
investors are using it from more than 3years that is 70% of investors and 30%are just the
beginners in electronic trading.

Q6 In which brokerage house you have your trading account?

ICICIDirect IndiaInfoline
India Bulls Others

49
Brokerage houses No of investors having trading account
ICICIDirect 42
India Bulls 28
IndiaInfoline 20
Others 10

Trading accounts in different brokerage houses

10%

20% 42% ICICIDirect

IndiaBulls
India Infoline
others
28%

Out of 100 investors, 42 investors are having there trading account in ICICIDirect,28
investors are having there trading account in India Bulls,20 investors are having there
trading account in India Infoline,and10 investors are having there trading account in
other brokerage houses like Kotak securities,karvy and many others. So we can see that
investors have much preference regarding ICICIDirect because it is providing all the e-
broking services in its integrated package .i.e. trading account, demat account and
electronic fund transfer also.

Q7 In which bank you have your demat account?

ICICI bank
Hdfc bank
Citibank

Banks which provide the demat facility No of investors having demat account in banks

50
ICICI Bank 42
Hdfc Bank 38
Citibank 20

Demat account in different banks

20

42
ICICI bank
Hdfc bank
Citibank

38

Out of 100 investors, 42 investors are having there Demat account in ICICI bank, because
According to investors ICICI bank is giving all the broking facilities under one roof
which reduce much work of the investor so they prefer ICICI services more as compare
to the other banks providing the demat facilities, 38 investors prefer Hdfc bank for demat
account because hdfc bank is having tie up with many brokerage houses like Kotak
securities, and 20 investors are having there demat account in Citibank because as Hdfc
bank is having some tie up similarly Citibank is having tie-ups.

51
Q8 To know the views of the investors regarding the overall reliability of electronic
trading.

Factors Highly Satisfactory Neutral Unsatisfactory Highly

satisfactory Unsatisfied
More 23 35 14 18 10
transparency
Increase in the 18 40 8 19 15
volume
Easy 45 22 12 13 8
accessibility
Reduced 11 23 7 21 38
cost
Timely trade 56 17 10 13 4
confirmation
Easy 28 14 19 25 14
payment

100%
no of persons

80% Easy payment

Timelytrade confirmation
60% Reduced cost

40% Easy accessibilty

Increasein the volume
20% More transparency
0%
d
ry

ry
y

e
l
o

ra
or

ifi
ct

ct
ut

t is
ct
fa

fa
fa

ne

sa
t is

tis
tis

un
sa

sa
sa

ly
ly

un

gh
gh

hi
hi

From the table and graph, it is interpreted that more than 50% of the respondents agree
that there is more transparency while trading through the E-broking. There are just 28%
respondents who have said that transparency in the trades has not been increased at all
while trading through the E-broking. 58% of the respondents have the view that the
volume of trade in the stock exchanges has been increased as more and more people have
started trading. Near about 70% people have said that it is accessible to trade through the
e-broking as the people can trade any time and anywhere through internet. 60% of the

52
respondents have the view that it is more costly to trade through the internet. 73% of the
respondents have the view that they can get timely trade confirmation while trading
through the internet. 42% of the respondents have said that it is more convenient to make
the payment through the E-banking but 39% of the respondents said that it is easier to
make the payment to the traditional broker.

Q9 Do you face any technical or operational problems with the electronic trading?
Yes No
Yes 48
No 52

Faced any technical problem in e-broking

48%

52%

yes no

Out of 100 investors, 48 investors are having some technical problems in e-broking and
52 investors do not face any technical problems. The investors faced technical problems
such as capturing the trade information, system down time, disputed trades.

53
Q10 To study the hurdles involved while trading in trading through internet.

Name of Problem No. of Responses

More Costly 9
Lack of Knowledge 18
Loyalty to Traditional Broker 22
Lack of Trust 6
Slow Speed 11
Others 2

Problems in Internet Trading

More Costly
3% 13%
16% Lack of Knowledge

Loyalty to Traditional Broker

9%
26% Lack of Trust

Slow Speed
33%
Others

From the table & graph, showing the responses of people regarding the problems of E-
broking, it is interpreted that the major hurdles are the loyalty of the people towards their
traditional brokers and lack of knowledge in the E-broking. These two are the major
problems faced by the electronic brokers. There are some people who think that it is more
costly to trade through the electronic broking than the traditional broking. Some of the
respondents have the view that slow speed of Internet is the problem while trading
through the electronic broking.

Q11 To study the satisfaction level of investors regarding e-broking services.

Highly Satisfactory 38

Satisfactory 25

54
 Marginally satisfactory 33

Unsatisfactory 4

Highly Unsatisfactory 0

Satisfaction level of investors

4 0

33 38

25

Highly Satisfactory Satisfactory Marginally satisfactory

Unsatisfactory Highly Unsatisfactory

Out of 100 respondents 38 says overall reliability of your electronic broking systems is
highly satisfactory to them, 25 says that overall reliability of your electronic broking
systems is satisfactory, 33 says that overall reliability of your electronic broking systems
is marginally satisfied, 4 says that overall reliability of your electronic broking systems is
unsatisfactory to them and none of the investors say that they are highly unsatisfied it
means that 96% of investors are satisfied from the e-broking services and only 4%of
investors are unsatisfied from the e-broking services.

Q12 To make a comparison between traditional broking & E-broking on certain

factors.

FACTORS TRADITIONAL E-BROKING

BROKING
Less Expensive 64 36

55
 More Convenient 27 73
Reliable Stock Tips 55 45
Transparency 31 69
Good Speed 46 54
Timely Statements 29 71
Confidentiality 12 88

Comparison between traditional trading and e-

broking
no of responses

100
90
80
70
60
50
40
30
20
10
0
ps

ts
t
e

y
en

ed
iv

en

lit
nc
Ti
s

ni

pe

tia
m
en

re
ck
ve

en
S

te
pa
xp

to
on

od

ta

fid
S

ns
E

S
C

on
le
ss

ra

y
e

el

C
T
or
Le

ia

im
M

el

T
R

TRADITIONAL BROKING E-BROKING

As shown in the table and graph, is interpreted that 64% of the respondents have the view
that it is less expensive to trade through the traditional broking than the E-broking. 73%
of the respondents have the view that it more easy to trade through the E-broking as the
people can invest any time and any where through the internet. 55 % people think that
they get reliable stock tips from their traditional brokers but 45% of the respondents think
that E-brokers provide us the reliable stock tips. Near about 70% of the respondents have
the view that there is complete transparency in the trade while trading through the
internet. 46% people have the view that the orders can be routed to the stock exchange
with less time than the E-broking. 71% respondents say that get timely statements and
even through their e-mails while trading through the E-broking. Near about 90% of the
respondents have the view that it is more confidential to trade through the E-broking.

56
 FINDING
 Out of 100 respondents 30 says they are trading from 1-5 years only, 35 says they
are trading from 5-10 years, 25 says that they are trading from 10-15 years it
means they are somehow aware of traditional trading system and only 10
investors are those which have been trading since 15-above years it means that
they are investing since the system of outcry trading.

 Out of 100 respondents, 60% of investors are aware of traditional trading system
means that they have deal with traditional trading and 40% of investors are not

57
 aware with traditional trading means that they just do all there trading with only
electronic trading

 Investors feel that there are many limitations attach to the traditional
trading such as safety, time consuming process and receipt of financial
instrument Out of 100 investors 38 investors feel that there is less .safety in
traditional trading, 48 investors feel that it takes more time in trading
system and 18 persons feel that outcry system is less convenient as compare
to electronic trading. So time consuming is the biggest limitation according
to the investors.

 Out of 100 respondents 98 says yes they have awareness about e-broking system
and rest 2 says no they are not having much awareness of e-broking. So we can
conclude that that there is high awareness of e-trading in India.

 Out of 100 investors, 30 investors are using electronic trading from 1-3 years,
50 investors are using electronic trading from 3-5 years and 20 investors are using
electronic trading from 5 years or from more than 5 years. So we can conclude
that much of investors are using it from more than 3years that is 70% of investors
and 30%are just the beginners in electronic trading.
 Out of 100 investors, 42 investors are having there trading account in
ICICIDirect,28 investors are having there trading account in India Bulls,20
investors are having there trading account in India Infoline,and10 investors are
having there trading account in other brokerage houses like Kotak securities,karvy
and many others. So we can see that investors have much preference regarding
ICICIDirect because it is providing all the e-broking services in its integrated
package .i.e. trading account, demat account and electronic fund transfer also.

 Out of 100 investors, 42 investors are having there Demat account in ICICI bank,
because according to investors ICICI bank is giving all the broking facilities

58
 under one roof which reduce much work of the investor so they prefer ICICI
services more as compare to the other banks providing the demat facilities, 38
investors prefer Hdfc bank for demat account because hdfc bank is having tie up
with many brokerage houses like Kotak securities, and 20 investors are having
there demat account in Citibank because as Hdfc bank is having some tie up
similarly Citibank is having tie-ups

 In 100 investors more than 50% of the respondents agree that there is more
transparency while trading through the E-broking. There are just 28% respondents
who have said that transparency in the trades has not been increased at all while
trading through the E-broking. 58% of the respondents have the view that the
volume of trade in the stock exchanges has been increased as more and more
people have started trading. Near about 70% people have said that it is accessible
to trade through the e-broking as the people can trade any time and anywhere
through internet. 60% of the respondents have the view that it is more costly to
trade through the internet. 73% of the respondents have the view that they can get
timely trade confirmation while trading through the internet. 42% of the
respondents have said that it is more convenient to make the payment through the
E-banking but 39% of the respondents said that it is easier to make the payment to
the traditional broker.

 Out of 100 investors, 48 investors are having some technical problems in e-

broking and 52 investors do not face any technical problems. The investors faced
technical problems such as capturing the trade information, system down time,
disputed trades

 The responses of people regarding the problems of E-broking, it is interpreted that

the major hurdles are the loyalty of the people towards their traditional brokers
and lack of knowledge in the E-broking. These two are the major problems faced
by the electronic brokers. There are some people who think that it is more costly

59
 to trade through the electronic broking than the traditional broking. Some of the
respondents have the view that slow speed of Internet is the problem while trading
through the electronic broking.

 Out of 100 respondents 38 says overall reliability of your electronic broking

systems is highly satisfactory to them, 25 says that overall reliability of your
electronic broking systems is satisfactory, 33 says that overall reliability of your
electronic broking systems is marginally satisfied, 4 says that overall reliability of
your electronic broking systems is unsatisfactory to them and none of the
investors say that they are highly unsatisfied it means that 96% of investors are
satisfied from the e-broking services and only 4%of investors are unsatisfied from
the e-broking services.

 Out of 100 investors, 64% of the respondents have the view that it is less
expensive to trade through the traditional broking than the E-broking. 73% of the
respondents have the view that it more easy to trade through the E-broking as the
people can invest any time and any where through the internet. 55 % people think
that they get reliable stock tips from their traditional brokers but 45% of the
respondents think that E-brokers provide us the reliable stock tips. Near about
70% of the respondents have the view that there is complete transparency in the
trade while trading through the internet.46% people have the view that the orders
can be routed to the stock exchange with less time than the E-broking. 71%
respondents say that get timely statements and even through their e-mails while
trading through the E-broking. Near about 90% of the respondents have the view
that it is more confidential to trade through the E-broking.

60
61
 CONCLUSION AND RECOMMENDATIONS

Conclusion

E-broking is the new concept in the stock market. In India, E-broking is still at its infancy
stage. E-broking has made it easy to trade in the stock market as now people can trade
while sitting at their home. Now stock market is easily accessible by the people. There
are some problems while doing the trade through the internet. Major problem faced by

62
the E-broker is that the investors are loyal to their traditional brokers, they rely upon the
suggestions given by their brokers. Another major problem is that the people don’t have
full knowledge regarding the electronic broking. They find it difficult to trade
themselves, as a wrong entry made by them, can bring them huge losses.

Nevertheless to say that the Electronic Broking has the bright future as the
percentage of the trade done through the E-broking is increasing day by day. Across the
globe, bulk of the trading is being done through the net, proving online trading to be an
instant success among the investors and intermediaries. It also renders a harmonic
integration of investors, e-broking firms, banks, stock exchanges and the depositories
with the possibility of a `single window system', in the near future. Such a system will
enable the execution of trade at `T+0', rather than the existing `T+2' time cycle. The
emergence of high-tech mechanisms like Straight through Processing (STP), Continuous
Linking System (CLS) and Direct Access Trading (DAT) Platforms is sure to make the
dream of an investor, getting his orders executed with the click of a mouse in 20-30
seconds, a reality these days.

Recommendations

Following are some recommendations to make those factors ineffective, which come as
hindrance in the smooth functioning of E-broking:

1.) Efforts should be made to make people educate about the electronic broking.
2.) Internet services should be made more efficient as all the functioning of the e-
broking depends upon the Internet.

63
 3.) There should be complete security and there should not be any chance of fraud by
any unauthorized person.
4.) Companies providing E-broking services should provide some concessions while
charging software-licensing fees from the investors to attract more people.

APPENDIX-I

QUESTIONNAIRE

Name-
Address-
Gender
Age-

64
18-25 25-35 35-45 45-above
Occupation-
Professional Businessman Salaried Student
Q1 Since how long you have been trading?
1-5 5-10 10-15 15-above
Q2 Are you familiar with traditional or outcry system?
Yes No
Q3 What are the limitations you attach to traditional form of broking?
Safety
Time consuming process
Less Convenient
Q4 Are you familiar with e-broking?
Yes No
Q5 Since how long you have been in electronic trading?
1-3 3-5 5-above
Q6 In which brokerage house you have your trading account?
ICICIDirect IndiaInfoline
India Bulls Others
Q7 In which bank you have your demat account?
ICICI bank
Hdfc bank
Citibank

Q8 How do you rate the overall reliability of electronic trading?

Highly Satisfactory Neutral Unsatisfactory Highly

satisfactor Unsatisfied

More
transparency
Increase in the volume
Easy accessibility
Reduced the cost

65
 Timely trade confirmation
Ease in the payment

Q9 Do you face any technical or operational problems with the electronic trading?
Yes No
Q10 What are the hurdles involved while trading in trading through internet?
More Costly
Lack of Knowledge
Loyalty to Traditional Broker
Lack of Trust
Slow Speed
Q11 How will you rate your satisfaction level regarding with the services provided in e-
broking?
Highly satisfactory
Satisfactory
Marginally satisfactory
Unsatisfactory
Highly unsatisfactory

Q12 To make a comparison between traditional broking & E-broking on certain factors?
FACTORS TRADITIONAL E-BROKING
BROKING
Less Expensive

More Convenient
Reliable Stock Tips
Transparency
Good Speed
Timely Statements

66
 Confidentiality

BIBLIOGRAPHY

● http://www.financialexpress.com/fe/daily/20000411/ffe06089.html

● http://www.india-today.com/itoday/20000320/business.html

● http://www.iamawiz.com/interviews/interview45.html

● http://www.capitalmarket.com/magazine/cm1517/covsto.htm

● http://www.expresscomputeronline.com/20011210/indtrend1.shtml

● http://www.rncos.com/Report/IM044.htmm

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• http://www.equitymaster.com
• http://www.nse-india.com

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