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ONLINE SHARE TRADING

HISTORY

Online trading involves investment activity which takes place over the Internetandit does not require physical inclusion of the broker. An investor hastoregister with an online trading portal l ikeICICIdirect.com,motilaloswal.com andsharekhan.comand many companies likethat and investor gets into anagreement with the firm to trade in differentsecurities according to the termsand conditions given on the agreement. Asthe servers of the online tradingportal are connected all the time to the stockexchanges and designated banksthe order processing is done in real time andinvestors can also have updates onthe trading. They can also check the status of their orders either through e-mailor through the interface that it cannot be accessed by athird party.Someoptionsare usually given to users such as to link their bank account,Demat accountsand brokerage accounts into a single interface. A single window is also therefor al l exchang es and a s ingle scr een is there for the comp lete orde

r rout ingMechanism The reason why online trading has developed over conventionalofflinebrokerage firms is that this conventional method struggled withunfavorableeconomies. Staff cost is just one example of it. As the

markets opens for 330minutes a day one dealer can at best execute 500 tradesin a day while onlinecompany li ke IC IC I d ir ect executes 15 0, 000-200,000 trades a day on theNational Stock Exchange alone accounting for3-4% of NSE trades of 5 milliona da y. It wo ul d requ ir e a la rg e am ou nt of dealers to serv ice th is demand.Besides the salary costs it would also demand huge expenses in real estateandsupportsystems.The offline model has got a downfall in the form of lower

bandwidth and ITcosts and the cost of bandwidth has fallen to one-eighth of whatit was in 2000giving online broking an advantage especially in the case of lower-volumeretailinvestors.Today 30% of volumes on the NSE comes from this and it may go up to 50%inthree-four years providing explosive growth for online broking in India.To be a successfultrading portal it will definitely depend on bouquet of servicesprovided by it for an end-user.Most of the portals charge a smallreg i s t ra t i on fee and brokerage based on var i ous cond i t i ons but it ' s im p o r t a n t f o r t h eorganization to keep focusedon customer-centric 

THE EMERGENCE OF E-BROKING IN INDIA

The Indian trader is being fancied by the democratized world of online tradingoralso known as e-broking. The regular and attractive advertisements intheprint media and electronic media have added to this fancy world.But as we compare tothe Western countries, in India online trading has not stillgrasped the market , buthas done a very important amount of progress in thepast years and the futureof online trading is bright. That is why many newcompanies are cominginto this form of business structure and the existingcompanies are changingto this new format besides offline and other traditionalforms of business. With only

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a mere share of 10% online trading a combinedgross turnover of around Rs. 9000-10,000 crores handled by the BSE and NSEtogether there is a much greater scope for onlinetrading. At present some of thedominant players in the online trading market of share marketare ± 1. Sharekhan.com2. Icicidirect.com3. Unicon4.5paisa.com5. Indiabulls6. KotakSecurities7.Motilal Oswal8.GeojitSecuritiesEarlier the share market was not safe enoughto invest but some of the changesin the past ten years in the Indian sharemarket have created the interest of trading in the shares by the people.Broadly we can class ify three importantfactors which have contributed to thedevelopment of online trading in India-Firstly the major step was taken by the National Stock Exchange (NSE) in theyear1994 which allowed the electronic trading and seeing to this variousother s t o c k e x cha nge s i n I nd i a f o l l o wed s oo n . T h i s h e l p ed i nm a k i n g t h e f a s t .accurate and transparent transactions saving a lot of timethen the traditionalmethod of trading. The investors were also saved by theclutches of the fraudbrokers at the times when the clients were not aware of the true prices of theshares.Secondly, in the year 1996 the dematerialization of theshares came (also knownas DEMAT) which avoided the online presence of shares in an

electronic formavoiding them from theft, pilferage or from other losses likecounterfeiting andfrauds regarding share transfer

The third reason was the rapid growth of computer education and learningof internet by the people. With the evolving of internet the online trading became ahit and theinvestors became confident in investing just with a click of a mouse

Today the onl ine trading companies having cut-th ro at compet it io n in ou r offering whose brokerage discounts lower margin money and zero balanceaccounts. Due to the r ising educationawareness and use of internet there is ahuge potential for online trading

in future and companies must come up with innovative offerings to capture theuntapped marketADVANTAGES OF ONLINE TRADING

1. Provides with the Freedom of Information2. Provides Control to Investors Money3. Provides access to the market4. Ensures the best price for investors5. Online trading offers greater transparency6. Provides hassle free trading7. Online trading allows instant trade execution8. Online trading reduces the settlement risk

9. Keeps Information SecureDISADVANTAGES OF ONLINE TRADING

1. In online terminal, investor can¶t get customized expert advice, whereasin offlinethe broker gives suggestions according to investors strategy(i.e. short term or long-term)2. Brokerage is high compared to offline.3. Privacy is less due to hacking scandals4 . Transactional errors due to technical problems