Online Trading Essay Example For Students

Online Trading Essay TOPIC- CUSTOMER PREFERENSE TOWORDS ONLINE SHARE TRADING WITH SPECIAL REFERENSE TO ANAND RATHI SECURITIES IN BHILAI DURG REGION INTRODUCTION ONLINE TRADING Today is world of technology. So, the person who adopt it, get the success. So, online trading means trading through electronic means. Online trading is the trading in which the investors who are familiar with the use of computer and Internet they directly trade in stock market. They trade any time at any place when the stock market is open. The cost of transaction is also reduce with time. The investors have a large range of option for the trading. It is a paperless transaction so it reduces the cost of company. There was a facility of live streaming quotes, which give exact price of share which prevailing in the market at that time. Discount online brokers allow you to trade via Internet at reduced rates. Some provide quality research, other don’t. Full service online brokerage is linked to existing brokerage. These brokers allow their client to place online orders with the option of talking/chatting to brokers if advice is needed. Brokerage rates here are higher. Online trading is still in its infancy stage in India. Online trading involves investment activity which takes place over the Internet and it does not require physical inclusion of the broker. An investor has to register with an online trading portal like ICICIdirect. com, motilaloswal. com and sharekhan. com and many companies like that and investor gets into an agreement with the firm to trade in different securities according to the terms and conditions given on the agreement. As the servers of the online trading portal are connected all the time to the stock exchanges and designated banks the order processing is done in real time and investors can also have updates on the trading. They can also check the status of their orders either through e-mail or through the interface that it cannot be accessed by a third party. Some options are usually given to users such as to link their bank account, Demat accounts and brokerage accounts into a single interface. A single window is also there for all exchanges and a single screen is there for the complete order routing mechanism. The hardware used comprises of Web and application servers, switches, routers, firewalls and security devices, and specialized appliances. There are two broad model inplay in the online brokrege space 1. Bank-backed firms 2. Entrepreneur-floated firms Bank-backed brokerages such as ICICIdirect and HDFC Securities have expanded on the basis of their brand name and the trust of investors in them. The integrated 3-in-1 accounts offered by these bank-backed brokerages help their parent bank by giving it accounts along with float income In second case i. e Entrepreneur-backed companies like Sharekhan, Indiabulls, Religare and Indiainfoline have expanded by offering customers a mix of online and offline accounts, higher margin finance amounts and lower brokerage rates. Though the bank based has performed better but the latter have not lagged too far behind. The reason why online trading has developed over conventional offline brokerage firms is that this conventional method struggled with unfavorable economies. Staff cost is just one example of it. As the markets opens for 330 minutes a day one dealer can at best execute 500 trades in a day while online company like ICICI direct executes 150,000-200,000 trades a day on the National Stock Exchange alone accounting for 3-4% of NSE trades of 5 million a day. It would require a large amount of dealers to service this demand. Besides the salary costs it would also demand huge expenses in real estate and support systems. Ex The offline model has got a downfall in the form of lower bandwidth and IT costs and the cost of bandwidth has fallen to one-eighth of what it was in 2000 giving online broking an advantage especially in the case of lower-volume retail investors. Today 30% of volumes on the NSE comes from this and it may go up to 50% in three-four years providing explosive growth for online broking in India To be a successful trading portal it will definitely depend on bouquet of services provided by it for an end-user. Most of the portals charge a small registration fee and brokerage based on various conditions but its important for the organization to keep focussed on customer-centric services and delivery models to actually enjoy the most attention Emmergence of online trading in india The Indian trader is being fancied by the democratized world of online trading or also known as e-broking. The regular and attractive advertisements in the print media and electronic media have added to this fancy world . But as we compare to the Western countries, in India online rading has not still grasped the market, but has done a veried amount of progress in the past years and the future of online trading is bright. That is why many new companies are coming into this form of business structure and the existing companies are changing to this new format besides offline and other traditional forms of business. With only a mere share of 10% online trading a combined gross turnover of around Rs. 9000-10,000 crores handled by the BSE and NSE together there is a much greater scope for online trading. At present some of the dominant players in the online trading market of share market are 1. Sharekhan. com 2. Icicidirect. com 3. Unicon 4. 5paisa. com 5. Indiabulls 6. KotakSecurities 7. MotilalOswal 8. Geojit Securities 9. Angel Trade 10. RelianceMoney 11. Religare 12. Karvy 13. IL Earlier the share market was not safe enough to invest but some of the changes in the past ten years in the Indian share market have created the interest of trading in the shares by the people. Broadly we can classify three important factors which have contributed to the development of online trading in India- Firstly the major step was taken by the National Stock Exchange (NSE) in the year 1994 which allowed the electronic trading and seeing to this various other stock exchanges in India followed soon. This helped in making the fast . accurate and transparent transactions saving a lot of time then the traditional method of trading. The investors were also saved by the clutches of the fraud brokers at the times when the clients were not aware of the true prices of the shares. Secondly, in the year 1996 the dematerialization of the shares came (also known as DEMAT) which avoided the online presence of shares in an electronic form avoiding them from theft, pilferage or from other losses like counterfeiting and frauds regarding share transfer. The third reason was the rapid growth of computer education and learning of internet by the people. With the evolving of internet the online trading became a hit and the investors became confident in investing just with a click of a mouse. With the happening of such events the ratio of trading has improved a lot. As it takes less time people praise this technology for trading purposes. Some people who traded rarely now even trades 2-3 times every day as it provides edge of researching about companies on the internet. The number of small investors is increasing on the daily basis that trades on the internet. If a person invests or trades in equities, derivatives, commodities etc through the use Internet it is known as online trading enabling the investor to connect electronically to buy or sell stocks,derivatives etc with the other investors. This can be done with the help of online service providers like Sharekhan. com, ICICI Direct. com etc. A person can access a stockbrokers website through an PC connected to Internet and can place his orders. The benefits are- * A person can see the latest market movement through streaming quotes. * Reduces time lag due to self-execution and instant confirmation. * Empowers traders to have a complete control over their trading decisions. * A person can access his accounts and related information on the Website. Provides greater convenience of trade as a person can trade from home or other convenient location. * It is cheap in terms of cost associated and offers reduction in overheads * A trader can view the historical charts on his computer. The Internet revolution has changed the way to communicate and the way to do business in today’s society bringing us closer and closer to vital sources of information. It provides us with means to directly interact with service-oriented com puter systems tailored to our specific needs; therefore we can serve ourselves better by making our own decisions. This new access by the online trading customers to low-cost transactions and cutting-edge, real- time market information that formerly belonged only to brokers has opened up extraordinary new investment opportunities as well as a crucial need for state-of-the-art information Today the investors use the Internet Client-Server technology to buy and sell the securities at an instant at any point of time. People investing online have reached the proportions. Online trading follows an investor to buy and sell shares on the exchange through Internet and helps in the direct control of his investments ONLINE TRADING IN INDIA Online trading started in India in February 2000 when a couple of brokers started offering an online trading platform for their customers. In the past, investors had no option but to contact their broker to get real time access to market data. The Net brings data to the investor on line and net broking enables him to trade on a click. Now information has become easily accessible to both retail as well as big investors. The development of broking in India can be categorized in 3 phases: * Stock brokers offering on their sites features such as live portfolio manager, live quotes, market research and news to attract more investors. * Brokers (now e-brokers) will offer value management or services such as initial public offerings on line, asset allocation, portfolio management, financial planning, and tax planning, insurance services and enable the investors to take better and well-considered decisions. * Brokers offering on line broking and relationship management by providing and offer ing analysis and information to investors during broking and non-broking hours based on their profile and needs, that is, customized services. DEMATERIALISATION OF SHARES The term Demat, in India, refers to a dematerialised account. For individual Indian citizens to trade in listed stocks or debentures. The Securities Exchange Board of India (SEBI) requires the investor to maintain a Demat account. Dematerialization is the process wherein shares certificates or other securities held in physical form are converted into electronic form and credited to demat account of an investor opened with a depository participant A Demat Account is opened by the investor while registering with an investment broker (or sub broker). The Demat account number which is quoted for all transactions to enable electronic settlements of trades to take place.. SEBI has made compulsory trading of shares of all the companies listed in stock exchanges in demat form with effect from 2nd January 2002. The procedure of opening a demat account with DP is similar to opening an account with a bank. Advantages of Demat 1. The demat account reduces brokerage charges. 2. Demat makes pledging/hypothecation of shares easier. 3. Demat enables quick ownership of securities on settlement resulting in increased liquidity. 4. It provides easy receipt of public issue allotments. 5. It helps avoids confusion in the ownership title of securities. 6. It also helps you avoid bad deliveries caused by signature mismatch. . It also help in avoiding postal delays and loss of certificates in transit. 8. It eliminates risks associated with forgery, counterfeiting and loss due to fire, theft or mutilation. 9. Demat account holders can also avoid stamp duty (as against 0. 5 per cent payable on physical shares. Disadvantages of Demat 1. Trading in securities may become un controlled in case of dematerialized securities. 2. It is incumbent upon the capital market regulator to keep a close watch on the trading in dematerialized securities and see to it that trading does not act as a detriment to investors. . The role of key market players in case of dematerialized securities, such as stock-brokers, needs to be supervised as they have the capability of manipulating the market. 4. Multiple regulatory frameworks have to be confirmed to, including the Depositories Act, Regulations and the various By-Laws of various depositories. 5. Additionally, agreements are entered at various levels in the process of dematerialization. These may cause anxiety to the investor desirous of simplicity in terms of transactions in dematerialized securities. However, the advantages of dematerialization outweigh its disadvantages and the changes ushered in by SEBI and the Central Government in terms of compulsory dematerialization of securities is important for developing the securities market to a degree of advancement. Freely traded securities are an essential component of such an advanced market and dematerialization addresses such issues and is a step towards the advancement of the market. DEPOSITORY SYSTEM Depository is an organization which holds of the securities of the investors in the electronic form same as bank hold money. Further, depository transfer securities with out physical handling. Now a days most of the bank are also DPs so any one can contact to DP with their identity proof and pan card for opening demat account for a prescribe fee by the DP. Depository offers various services to the investors through its depository participants such as maintenance of investors beneficial holding in electronic form ,dematerialization and rematerialisation of securities ,facilitation of settlement of trade in electronic form and electronic trading in case of IPO and corporate action such as rights, bonus. TWO TYPES OF DEPOSITORIES * National securities depositories Ltd. ( NSDL) * Central depository services (INDIA)Ltd. (CDSL) NSDL was the first depository organisation promoted by UTI,IDBI AND NSE. Nsdl was set up to provide electronis depository facilities for securities being traded in capital market . the depository oridence was promulgated by the government of indiain September ,1995 The SEBI issued a guidelines for depositories in May, 1996, The bill was passed by the parliament in July 1996, where as NSDL was registered by SEBI on June 7,1996. NSDL has minimum net worth of Rs. 100crore . NSDL deals with shares in dematerialized form with DPs who are agent of investors bankers stock banks and financial institution DPs can be a public financial institution , bank, custodian, registered stock broker or no banking financial companies subject to the approval from the depository companies and the SEBI. As per RBI guideline, institutional investors/bank having a minimum portfolio of securities of RS 10crore have to settle all transaction through depositories. DPs participants has to pay a admission fees of Rs. 25000 to NSDL and deposit Rs 10lakh as a security with NSDL. CDSL CDSL commenced its operation during February, 1999. It was promoted by Bombay stock exchange in association with leading banks such as SBI Bank Of India, Bank Of Baroda , HDFC Bank, Standard Charted Bank , Union Bank Of India And Centurion Bank CDSL was set up with the objective of providing convenient, dependable and secure depository services at affordable cost to all market participants . ll leading stock exchanges like the NSE, Calcutta stock exchange, Delhi stock exchange, Ahmadabad stock exchange etc. Have established connectivity with CDSL. As at the end of March 2002 over 4,300 issuer have their securities (equity, bond, debenture commercial papers), units of mutual fund, certificate of deposits etc. in to the CDSL system . thus an investors can hold almost all his securities in one account with CDSL . REMATERILISATION OF SHARES Rematerialization is the proces s of conversion of electronic holdings of securities into physical certificate form. For rematerilisation of scrips, the investor has to fill up a remat request form (RRF) and submit it to the DP. The DP forwards the request to depository after verifying the investor’s balances. Depository in turn initiates the registrars and transfer agent or the issuer company. RTA/ Company prints the certificates and dispatches the same to the investor. OBJECTIVES OF PROJECT REPORT https://tin. tin. nsdl. com/pan/index. html * To understand the attitude of the on-line share traders in Durg-Bhilai city . To measure the effectiveness of broking sites in Durg-Bhilai. * To conduct an enquiry among the share trading public in Durg-Bhilai about their experience with broking sites. * To suggest some improvements in these sites if needed. * To understand the depth up to which the on-line share traders are clear and aware of on-line share trading. * To know the procedure of online trading Anand Rathi set up in 1994, is one of India’s fastest growing full-service securities fi rm with a presence in more than 300 locations across India and has offices in Dubai Bangkok. Anand Rathi provides wealth management services, investment banking, and brokerage distribution services in the areas of equities, commodities, mutual funds and insurance. The group caters to the financial needs of diversified group of clients, which include the well-reputed Corporate Groups, Institutions, Foreign Investors, Individuals as well as wealthy families and was recently ranked by an Asia Money 2006 poll amongst South Asia’s top 5 wealth managers for the ultra rich. Anand Rathi today has a pan India presence as well as an international presence through offices in Dubai and Bangkok. Anand Rathi provides a breadth of financial and advisory services including wealth management, investment banking, corporate advisory, brokerage distribution of equities, commodities, mutual funds and insurance all of which are supported by powerful research teams. The firms philosophy is entirely client centric, with a clear focus on providing long term value addition to clients, while maintaining the highest standards of excellence, ethics and professionalism. The entire firm activities are divided across distinct client groups: Individuals, Private Clients, Corporates and Institutions. In year 2007 Citigroup Venture Capital International joined the group as a financial partner and 19. 9% stake held by Citigroup Venture Capital International (CVC) THE VISION TEAM Anand Rathi | Founder Chairman Pradeep Gupta | Co-founder Vice chairman Amit Rathi | Managing Director P G Kak odkar | Director Dr. S A Dave | Director C D Arha | Director Ajit Bhushan | Director SERVICES’ PROFILE OF â€Å"Anand WEALTH MANAGEMENT Centers located Chennai, Bangalore, Hyderabad, Dubai, Bangkok and Singapore. Dealing with: * INSTITUTIONS * PRIVATE CLIENTS * PRIORITY CLIENTS * NON RESIDENT CLIENTS INVESTMENT BANKING AND CORPORATE FINANCE Centers located at Mumbai, Delhi, Chennai, Kolkata, Bangalore, Hyderabad and Ahmadabad dealings in: * Equity Capital Market – IPOs / FPO Real estate/ Private Equity / Advisory * M * Debt Raising, Syndication and Restructuring BROKERAGE AND DISTRIBUTION Present at 400 locations across India Dealings in: * EQUITIES * ? DERIVATIVES * BONDS * MUTUAL FUNDS * COMMODITIES * ? LIFE AND GENERAL INSURANCE AWARDS AND ACCOLADES * Ranked #1 Pvt bank Domestic and # 2 Private Bank –Overall by Asiamoney polls 2009. * They are consistently amongst the top 3 brokers in commodity and currency segments on MCX, NSE and MCX-SX. * They are amongst the top 10 brokers on DGCX. First to introdu ce structured p roducts in commodities. MAIN CUSTOMERS OF â€Å"Anand Rathi† * INDUSTRIAL GROUPS * ? BIRLA’s – Birla Sunlife Insurance, Grasim Industries, Hindalco, Indal, Indian Rayon, Indo Gulf, Transworks * VENDATA’s – Balco Industries, Hindustan Zinc Limited, Sterlite Industries, Vendata * TATA’s – Tata Investments, Tata Steel, Tata Motors Limited, Videsh Sanchar Nigam Limited * MULTINATIONALS – Bayer, Clariant, Godfrey Philips, Goodlass Nerolac, Hindustan Lever Limited, Nestle, Thomas Cook Travels and many more BANKS – Andhra Bank, Bank of India, Bank of Baroda, Canara Bank, HDFC Bank, General and Life Insurance Corp, Punjab National Bank and many more * 12 CORPORATES – ACC Cement, Berger Paints, Boots Piramal, Century Textiles, CRISIL, Crompton Greaves, Dabur, DCM, Emami, General Electrics Shipping, Globus, Godrej, Gujarat Ambuja, ICICI Ventures, HCL, Infosys, Indian Tobacco Company, Jet Airways, Jindal Steel, Larsen Tubro , Mahindra Mahindra, Radico Khaitan, Raymonds, Wipro, Varun Shipping and many more. AR Core Strengths Client-centric philosophy, with focus on providing long term value addition to clients, maintaining highest standards of excellence, ethics and professionalism * We always strive to develop strong relationships with our clients nurtured by personal attention of senior management * We approach our clients holistically with the goal of balancing their strategic and financial objectives * Proficiency in rendering consistent high quality value added services * A senior product team of retail specialists who provide hands on support to Personal Investment Advisors for all products Why Anand Rathi? Both domestic and International platform * Dedicated Corporate Setup * Regional penetration * Research capability * Offering tailor made solutions for specific exposure COMPETITORS OF Anand Rathi REMOTE COMPETITORS INDIAN BANKS:- * Kotak Bank * Housing Development and Finance Corporation Bank * Industrial Credit and Investment Corporation of India Bank * State Bank of India * 13 Bank of Baroda * Canara Bank * ING Vysya INDIAN ASSET MANAGEMENT COMPANIES * Cholamandalam * Lotus India * Principal * Optimix * Sahara FOREIGN BANKS and ASSET MANAGEMENT COMPANIES * ABN Amro Bank * Deustche Bank Hongkong Shanghai Bank Corporation * Franklin Templeton * DSP Merill Lynch * BNP Paribas * Quantum IMMEDIATE COMPETITORS RELIGARE ENTERPRISES 14 Religare Enterprises Limited group comprises of Religare Securities Limited, Religare Commodities . Limited and Religare Finvest Limited which deals in equity, commodity and financial services business. Religare Securities Limited is one of the leading broking houses of India and is dealing into Equity Broking, Depository Services, Portfolio Management Services, Institutional Equity Brokerage Research, Investment Banking and Corporate Finance. Art Program EssayRolling Settlement Cycle 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 excluded. Typically trades taking place on Monday are settled on Wednesday, Tuesdays trades settled on Thursday and so on. Concept Of Buying Limit Suppose you have sold some shares on NSE and are trying to figure out that if you can use the money to buy shares on NSE in a different settlement cycle or say on BSE. To simplify things for ICICI Direct customers, we have introduced the concept of Buying Limit (BL). Buying Limit simply tells the customer what is his limit for a given settlement for the desired exchange. Assume that you have enrolled for a ICICI Direct account, which requires 100% of the money required to fund the purchase, be available. Suppose you have Rs 1,00,000 in your Bank A/C and you set aside Rs 50,000 for which you would like to make some purchase. Your Buying Limit is Rs 50,000. Assume that you sell shares worth Rs 1,00,000 on the NSE on Monday. The BL therefore for the NSE at that point of time goes upto Rs 1,50,000. This means you can buy shares upto Rs 1,50,000 on NSE or BSE. If you buy shares worth Rs 75,000 on Tuesday on NSE your BL will naturally reduce to Rs75,000. Hence your BL is simply the amount set aside by you from your bank account and the amount realized from the sale of any shares you have made less any purchases you have made. Your BL of Rs 50,000, which is the amount set aside by you from your Bank account for purchase is available for BSE and NSE. As you have made the sale of shares on NSE for Rs. 100000, the BL for NSE BSE rises to 1,50,000. The amount from sale of shares in NSE will also be available for purchase on BSE. ICICI Direct SUCCESS FACTORS FOR ONLINE TRADING There are three key success factors for e-broking, (i) Scalability and robustness of the trading system: The fundamental difference between the Internet as a transaction medium and the conventional closed user group network is that the Net is a universal platform providing concurrent access to infinite users at any given point in time. Consequently, it becomes imperative for any Net-based application to have a proven capability for scalability and robustness which ensures the ability to handle and process requests from multiple users at any given point in time. (ii) Bandwidth optimization: In the Indian context where availability of a sufficient bandwidth is limited, the application software should demonstrate intelligence in optimizing the available bandwidth by deploying advanced technologies such as streaming. (iii) Integration with third party systems: On the Net, with information feeds available from multiple points, it is prudent to deploy applications that are built on open architecture methodology for interfacing with third party systems in the new Net age. CHALLENGES IN INTERNET TRADING For Internet trading to succeed, it is imperative to have both – 1. A robust business model and 2. Comprehensive technology strategy. Some of the challenges are discussed: Transaction fulfillmentIn the Net-based economy, it is both prudent and essential for a broker/intermediary to offer total solution to the clients at a single point. Total solutions would essentially mean offering interfaces with banks, depositories, information feeds, etc. for efficiency in trade completion and reducing duplication of client information. The service providers will have to go beyond the stage of mere order execution and emerge as informediaries rather than intermediaries. This will not only ensure lower trading costs in terms of offering cross services but will also help in maximizing ROIs. A true Internet trading system should deliver cost effective transaction fulfillment at a single point. System Requirements For online trading client computer should have at least the following configuration: * Pentium 3 PC, Minimum 128 MB RAM * Windows 2000/XP * Internet Connection * Internet Explorer 6. 0 * Java enabled in IE * VM java(Download) FUTURE OF INTERNET TRADING International marketplaces are already witnessing re-alignments and changes with the emergence of electronic communication networks (ECNs) such as INSTINET and ISLAND, which are already contributing substantial business volumes to mainline exchanges such as NASDAQ and the NYSE. Concurrently, exchanges worldwide are looking at striking strategic alliances such as the Global Equity Market (GEM). With Net trading in securities and rapid consolidation between multiple stock exchanges, the international securities marketplace is fast becoming a global village through the creation of a universal virtual equity market. Therefore the challenge for the technology providers is to develop and deploy advanced e-trading tools and applications using electronic straight through processing technologies. OFFLINE TRADING Nevertheless, with all the convenience of online trading there are still investors who prefer the old fashion way of offline trading. Offline trading has lost some popularity but it is still the main form of investing. Offline trading offers many benefits as well. Benefits of offline trading: 1. The one benefit that an investor appreciates the most is that they are not alone when making investment decisions. 2. There are experienced and professional brokerage companies that handle their investments for them. 3. Investors are not faced with the challenge of making these vital investment decisions; especially, if they do not have the experience necessary to make the appropriate investments. 4. Also, there is someone there to answer any questions that may cause concerns. Not to mention, with offline trading mistakes are less likely to take place. No one wants to throw their money away or stand by and watch someone else throw their money away. It may be wise to hire a professional to assist you in making the correct investment decisions if you feel you lack the knowledge necessary. Points of difference between online trading and ofline trading are as follows: 1. Online trading is very expensive as compare to manual trading or offline trading. 2. Online trading consumes less time as compare to manual trading. 3. Online trading has very helpful to finding the records easily but offline trading takes more time to finding the records. 4. In the help of online trading, there is no chance of any errors while doing the trading. in offline trading there are some errors exist like barriers of communication . . With the help of online trading, we know the international market rate of share very easily. ONLINE TRADING INFRASTRUCTURE The emergence of online exchanges has facilitated faster transactions by providing online trading portals and brokerage houses ease and flexibility. The Internet has indeed opened up new opportunities for conducting the business. The worldwide stock exchanges has made a major shift from the traditional method of trading and now conduct a bulk of its business online through its brokers and partners. In the developed countries majorly all the exchange transactions are conducted online. The trend took off slowly in India and the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) two of the largest exchanges in India have been conducting online trading for some times ONLINE TRADING BY NSE BSE The central computer located at the Exchange is connected to the workstations of the Brokers through satellite using Very Small Aperture Terminals (VSATs). Orders placed at the Brokers workstations reach the central computer and are matched by the computer based on price and time priority. Both the exchanges have switched over from the open outcry trading system to a fully automated computerized mode of trading known as BOLT (BSE On Line Trading) and NEAT (National Exchange Automated Trading) System. It facilitates more efficient processing, automatic order matching, faster execution of trades and transparency. The scrips traded on the BSE have been classified into A, B1, B2, C, F and Z groups. The A group shares represent those, which are in the carry forward system (Badla). The F group represents the debt market (fixed income securities) segment. The Z group scrips are the blacklisted companies. The C group covers the odd lot securities in A, B1 B2 groups and Rights renunciations. Key regulator governing Stock Exchanges, Brokers, Depositories, Depository participants, Mutual Funds, FIIs and other participants in Indian secondary and primary market is the Securities and Exchange Board of India (SEBI) Ltd. The NSE and BSE are among the largest exchanges in the country handling very large daily trading volumes, support large amounts of data traffic, and have a very large nationwide network. The trading volume in year 2000 was huge with the average daily turnover in the capital markets segment at NSE is around Rs 2300 crore and in the derivatives segment, around Rs 1300 crore. The market has grown in scope and scale in a way that could not have been imagined at the time. Average daily trading volumes have jumped from Rs. 17 crore in 1994-95 when NSE started its Cash Market segment to Rs. 11,325 crore in 2008-09. Similarly, market capitalization of listed Indian firms went up from Rs. 363,350 crore at the end of March1995 to Rs. ,896,194 crore at end March 2009. Indian equity markets are today amongthe most deep and vibrant markets in the world. The average daily traffic volume was around one million trades per day in the capital markets segment and around 50,000 trades per day in the derivatives segment and there were around 13,000 registered users in both segments and an average of around 9500 users is logged in at a time. At BSE the average daily turnover in 2001-2002 (April-March) was Rs 1244. 10 crore and the number of average daily trade was 5. 17 lakh. WHY ONLINE TRADING ENTERED LATE IN INDIA The Indian exchanges and brokering houses have been very slow in moving their transactions online and the major reason has been the lot government regulations. The initial delay was due to laying down the specifications for creating Closed User Groups (CUGs). This issue was resolved between the Department of Telecommunications (DoT) and the Finance Ministry around 1998 and after that soon came the online trading portals like ICICIDirect. com, motilaloswal. com, sharekhan. com and smartjones. com. Connectivity related issue was perhaps the most important technological factor. Traditionally the cost of leased lines and VSAT links has been very high and the reliability of the links was very low. To commission the links it took a long time as one had to make an application and wait for a few weeks for the link to be up and running. Many other issues like security, backup and recovery procedural costs also acted as deterrents in the process. Now with the resolution of regulatory issues India no longer have any pressing connectivity and bandwidth issues. The entry of private players into the broadband scenario and the government opening up the telecom sector these issues have become almost non-existent. Security solutions and services available in the market have matured and it doesnt cost a pretty packet anymore to put a simple back up solution inplace Through online trading everyday large volumes of data is being transacted. At BSE the average daily turnover in 2001-2002 (April-March) was Rs 1244. 10 crore and the number of averagedaily trades was Rs 5. 17 lakh. To control Online Trading RBI made regulations making it mandatory for companies to store at least 7 years of transactional and financial data. 1. Design needs to be always-on, secure, redundant, and have adequate backup and recovery Processes. 2. For such high amounts of critical data its natural to deploy network-based storage like NAS or SAN. 3. Security is a vital and integral part of the design architecture. The hardware and software elements should be built around layered security architecture and should be held in place with a well-documented security policy. 4. Ideally online exchanges should have five-nines availability. 5. Its difficult to deploy out-of-the-box applications at exchanges as each has a unique architecture based on factors like operations flow, trading volumes, number of members, number of users, and number of locations. 6. NSE has deployed NIBIS (NSEs Internet Based Information System) for real-time dissemination of trading information over the Internet and NEAT a client-server-based application to help its operations. 7. BSE has deployed an OnLine Trading system (BOLT) on a Tandem platform which has a two-tier architecture. It claims to be able to support up to 2 million trades a day THE NETWORK DESIGN Any online exchange should always be-on, safe, secure, redundant and should have adequate backup recovery processes. The Vice President of NSE-IT G. M Shenoy tells that the basic design objective of NSE was to provide fair, equal and transparent access across all NSE nationwide locations and to provide connectivity to the trading members as soon as possible. The telecom sector is fairly liberal nowadays but way back in 1993 the technology was maturing and was very costly. The cost of lease lines was almost ten times as much as it is today. Satellite technology was a boon since it allowed quicker deployment than leased lines. Today NSE has the countrys largest VSAT network with over 3000 VSATs and expects to grow to more than 4000 V sats very soon NETWORK ELEMENTS When there are massive trading volumes and traffic bulk it makes one tensed even to think of the expected losses in case of a ten minute downtime when daily trade crosses Rs 3000 crore. Network elements like security, storage, backup and recovery processes, availability and other different applications are to be planned carefully and commissioned. Also the RBI regulations to store at least 7 years of transactional and financial data has to be followed and to store such high amounts of critical data its natural to deploy network-based storage like NAS or SAN. NSE is implementing a SAN as it feels that its data volumes have grown widely. Security is a vital and integral part of the design architecture and the hardware and software elements should be built with layered security architecture around and it should also be held in place with a well-documented security policy. According to Shenoy the security is the most crucial element in the network and at NSE all applications have been built with a conscious approach towards security. All the security policies are tightly integrated and regularly scrutinized thus not providing any room to compromise with Also all the applications and OSs are hardened time to time for safety The Backup and recovery has emerged as one of the most important and vital aspects of business continuity. When online exchanges were designed earlier a lot of emphasis was perhaps not placed on this aspect as it is done nowadays. However its not difficult to add continuity processes to a programme which is existing. Shenoy said that a terrestrial-based trading network was deployed as a backup to NSE VSAT network in the middle of 2000 and it have more than 850 leased lines connecting to different locations in India. NSE is the only stock exchange in the country which has a fully-redundant business continuity site in Chennai Availability: Ideally online exchanges should have five-nines availability. Exchanges usually likes to host its infrastructure in-house and not use the services of an external or other data center. NSE claims to achieve uptime greater than 99. 9% which is mostly due to internally formulated procedures and continuous review of SLAs with hardware vendors Applications: It is tough to deploy out-of-the-box applications at exchanges as each has a unique architecture based on factors like operations flow, number of members, trading volumes number of users and number of locations. The applications like trading, surveillance, index computation,listing, membership, clearing, risk-management and accounts may be developed in-house or by external software developers. There are two popular types of architectures- . NSE architecture 2. BSE architecture These both exchanges keep on updating and upgrading their technology systems to keep delivering according to commitments and promises made to its members, partners and customer NEAT-THE NSE ARCHITECTURE NSE has deployed NIBIS (NSEs Internet Based Information System) for real-time dissemination it of trading information over the Internet and NE AT a client-server-based application to help its operations. All the trading information is stored in NEAT an in-memory database at the server end for achieving minimum response time and maximum system availability for users. The trading server software runs on a fault-tolerant STRATUS mainframe and the client software runs on Windows PCs. The telecommunications network uses the X. 25 protocol and is the backbone of the automated trading system. Each trading member trades on the NSE with other members through a PC located in the trading members office. The trading members on the Wholesale Debt Market segment are linked to the central computer at the NSE through dedicated 64 Kbps leased lines and VSAT terminals. These leased lines are multiplexed using dedicated 2 MB optical-fiber links. The WDM participants connect to the trading system through dial-up links. The exchange uses RISC- based Unix servers from Digital and HP for backoffice processing. Applications like Oracle 7 and SQL/Oracle Forms 4. 5 front ends are used for the exchange functions BOLT-THE BSE ARCHITECTURE BSE has deployed an OnLine Trading system (BOLT) on March 14, 1995. It works on a Tandem S74016 platform running on 16 CPUs. The Tandem Himalaya S74016 machines act as the backend to more than 8000 Trader Workstations networked on Ethernet, VSAT and Managed Leased Data Network (MLDN). The systems claim to handle up to two million trades a day. BOLT has a two- tier architecture. The trader workstations are connected directly to the backend server which acts as a communication server and a Central Trading Engine (CTE). Other services like information dissemination, index computation, and position monitoring are also provided by the system. A transaction monitoring facility in the Tandem architecture helps keep data integrity through non- stop SQL. With the help of MTNL, BSE has setup a MLDN Network comprising 300 2 Mbps lines and 1500 64 Kbps lines which connect all regional stock exchanges and offices in Mumbai. Access to market related information through the trader workstations is essential for the market participants to act on real-time basis and take instantaneous decisions. BOLT has been interfaced with various information vendors like Bloomberg, Bridge, and Reuters. Market information is fed to news agencies in real time. The exchange plans to enhance the capabilities further to have an integrated two way information flow RECOMMENDATIONS OF SEBI The SEBI has also played an important role in the issue of the guidelines regarding online trading so that the chances of fraud and misrepresentation are minimized. The some of recommendations are asfollows: The stock brokers which are being registered with Securities Exchange Board of India (SEBI) will have to apply to stock exchanges for a formal permission. The following conditions must be fulfilled- 1. The online trading company must have a minimum net worth of Rs 50 lakh 2. The encryption technology should be there in the system used by the brokers to ensure the provision for confidentiality ,security ,justifiability and reliability of data . The user id, first level and second level password, automatic expiry of passwords at the end of a reasonable period,secured socket level security for server access through Internet, suitable firewalls between the trading set-up directly connected to an exchange trading system and the Internet tradingset-up,microprocessor-based Smartcards,dynamic password, 64 bit/128- bit encryption are the basic minimum security standards. 3. The brokers must maintain adequate back-up systems and data storage capacity which must be checked by the stock exchanges. 4. The minimum qualification must be laid down by the stock exchange to ensure that the persons hired by the brokers must have the proper qualification regarding trading so as to guide the clients and he can communicate regarding trading instructions 5.