Functions of stock brokers @Sharekhan ltd

1. AN INTERNSHIP STUDY REPORT
ON
FUNCTIONS OF STOCK BROKER
AT
SHAREKHAN SECURITIES LTD
Submitted in partial fulfillment of the
Requirements for the award of
MASTER OF FINANCE & ACCOUNT’S
MASTER DEGREE COURSE OF
BANGALORE UNIVERSITY
By
RAJU . S
12TUCFA039
3rd SEMISTER
DEPARTMENT OF COMMERCE
BANGALORE UNIVERSITY
BANGALORE
2013-14
1

2. CERTIFICATE
This is to certify that Mr.RAJU S 3rd semester student of MFA Department of
Commerce, Bangalore University has successfully completed Internship
Training on the Functions of Stock Brokers at SHAREKHAN SECURITIES LTD.
Dr.K.ERESHI
MUNIRAJU
Prof. Dean & Chairman
Department of Commerce
Bangalore University
Bangalore
CO-ORDINATER
Department of Commerce
Bangalore University
Bangalore
PLACE: BANGALORE
DATE:
2

3. AKNOWLEDGEMENT
I take this opportunity to express my sincere gratitude and thanks to
Professor Dr.K.ERESHI, Chairman and Dean, Department of Commerce,
Bangalore University for having given me the opportunity to undertake this
Internship project.
I wish to express my sincere thanks to Mr.VINAY manager (Branch),
SHAREKHAN SECURITIES LTD for providing an opportunity to carry out this
internship project in this esteemed organization. My thanks to Mr.MUKUND
NAIK Mr. RAHUL Mr.NAGESH and all the other staff for their guidance and
support throughout the study.
PLACE: BANGALORE
RAJU S
DATE:
3

4. CONTENTS
1. ABOUT STOCK EXCHANGE
5-11
2 .PROFILE OF SHAREKHAN LTD
12-17
3. ABOUT STOCK BROKER’S
18-23
4. OPEN OUTCRY SYSTEM AND ONLINE TRADING
24-28
5. PURCHASE AND SALE OF SECURITIES
29-34
6. ROLLING SETTLEMENT
35-39
7. ONLINE TRADIND SYSTEM IN SHAREKHAN LTD
40-46
8. CONCLUSION AND RECOMONDATION
47-49
4

5. CHAPTER - 1
ABOUT STOCK EXCHANGE
5

6. Definition of Stock Exchange:
The word “Stock Exchange” is made from two words 'Stock' and Exchange.
Stock means part or fraction of the capital of a company, and Exchange means a
transferring the ownership; representing a market for purchasing and selling.
Thus, we can describe the stock exchange as a market or a place where different
types of securities are bought and sold. Securities traded on a stock exchange
include shares issued by companies, unit trusts, derivatives, pooled investment
products and bonds.
Importance or Functions of Stock Exchange :
1. Providing a ready market
2. Providing a quoting market prices
3. Providing facilities for working
4. Safeguarding activities for investors
5. Creating the discipline
6. Maintenance of liquidity
7. Promotion of the habit of saving
8. Refining and advancing the industry
9. Promotion of capital formation
10.Provides clearing house facility
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7. History of Indian Stock Market
Indian stock market marks to be one of the oldest stock market in Asia.
It dates back to the close of 18th century when the East India Company used
to transact loan securities. In the 1830s, trading on corporate stocks and
shares in Bank and Cotton presses took place in Bombay.
Though the trading was broad but the brokers were hardly half dozen during
1840 and 1850.
An informal group of 22 stockbrokers began trading under a banyan tree
opposite the Town Hall of Bombay from the mid-1850s, each investing a (then)
princely amount of Rupee 1. This banyan tree still stands in the Horniman
Circle Park, Mumbai. In 1860, the exchange flourished with 60 brokers. In fact
the 'Share Mania' in India began with the American Civil War broke and the
cotton supply from the US to Europe stopped. Further the brokers increased to
250. The informal group of stockbrokers organized themselves as the The
Native Share and Stockbrokers Association which, in 1875, was formally
organized as the Bombay Stock Exchange (BSE).
BSE was shifted to an old building near the Town Hall. In 1928, the plot of land
on which the BSE building now stands (at the intersection of Dalal Street,
Bombay Samachar Marg and Hammam Street in downtown Mumbai) was
acquired, and a building was constructed and occupied in 1930.
Premchand Roychand was a leading stockbroker of that time, and he assisted
in setting out traditions, conventions, and procedures for the trading of stocks
at Bombay Stock Exchange and they are still being followed.
Several stock broking firms in Mumbai were family run enterprises, and were
named after the heads of the family.
The following is the list of some of the initial members of the exchange, and
who are still running their respective business:
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8. D.S. Prabhudas & Company (now known as DSP, and a joint venture partner
with Merrill Lynch)
Jamnadas Morarjee (now known as JM)
Champaklal Devidas (now called Cifco Finance
Brijmohan Laxminarayan
Introduction of BSE (BOMBAY STOCK EXCHANGE)
As we read in the history of Indian stock exchange; the stock exchange,
Mumbai, popularly known as "BSE". BSE was established in 1875 as "The Native
Share and Stock Brokers Association". It is the oldest one in Asia, even older than
the Tokyo Stock Exchange, which was established in 1878. It is a voluntary nonprofit making Association of Persons (AOP) and has converted itself into
demutualized and corporate entity. It has evolved over the years into its present
status as the Premier Stock Exchange in the country. It is the first Stock Exchange
in the Country to have obtained permanent recognition in 1956 from the Govt. of
India under the Securities Contracts (Regulation) Act, 1956.
The Exchange, while providing an efficient and transparent market for trading in
securities, debt and derivatives upholds the interests of the investors and ensures
redressal of their grievances whether against the companies or its own memberbrokers. It also strives to educate and enlighten the investors by conducting
investor education programs and making available to them necessary informative
inputs.
Introduction of NSE (NATIONAL STOCK EXCHANGE)
The National Stock Exchange (NSE) is India's leading stock exchange
covering 364 cities and towns across the country. NSE was set up by leading
institutions to provide a modern, fully automated screen-based trading system
with national reach. The Exchange has brought about unparalleled
transparency, speed & efficiency, safety and market integrity. It has set up
8

9. facilities that serve as a model for the securities industry in terms of systems,
practices and procedures.
NSE has played a catalytic role in reforming the Indian securities market in
terms of microstructure, market practices and trading volumes. The market
today uses state-of-art information technology to provide an efficient and
transparent trading, clearing and settlement mechanism, and has witnessed
several innovations in products & services viz. demutualization of stock
exchange governance, screen based trading, compression of settlement cycles,
dematerialization and electronic transfer of securities, securities lending and
Borrowing, professionalization of trading members, fine-tuned risk
management systems, emergence of clearing corporations to assume
counterparty risks, market of debt and derivative instruments and intensive
use of information technology.
The National Stock Exchange of India Limited has genesis in the report of the
High Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions
(FIs) to provide access to investors from all across the country on an equal
footing. Based on the recommendations, NSE was promoted by leading
Financial Institutions at the behest of the Government of India and was
incorporated in November 1992 as a tax-paying company unlike other stock
exchanges in the country. On its recognition as a stock exchange under the
Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced
operations in the Wholesale Debt Market (WDM) segment in June 1994. The
Capital Market (Equities) segment commenced operations in November 1994
and operations in Derivatives segment commenced in June 2000.
9

10. List of stock exchanges recognized under the
securities contracts (regulation), Act, 1956.
Those are:
• Ahmadabad Stock Exchange Association Ltd.
•
Bangalore Stock Exchange ltd
•
Bhubaneswar Stock Exchange Association
• Bombay Stock Exchange (BSE)
•
Calcutta Stock Exchange ltd
• Cochin Stock Exchange Ltd.
•
Coimbatore Stock Exchange ltd
• Delhi Stock Exchange Association
• Guwahati Stock Exchange Ltd
• Hyderabad Stock Exchange Ltd.
• Jaipur Stock Exchange Ltd
• Kanara Stock Exchange Ltd
• Ludhiana Stock Exchange Association Ltd
• Madhya Pradesh Stock Exchange Ltd.
• Madras Stock Exchange ltd
• Magadh Stock Exchange Ltd
• Meerut Stock Exchange Ltd.
• National Stock Exchange of India (NSE)
• OTC Exchange of India
• Pune Stock Exchange Ltd.
10

11. • Saurashtra Kutch Stock Exchange Ltd
• Uttar Pradesh Stock Exchange Association
• Vadodara Stock Exchange Ltd
11

12. CHAPTER - 2
PROFILE OF SHAREKHAN LTD
12

13. COMPANY PROFILE
Name of the company : Sharekhan ltd.
Year of Establishment : 1922
Headquarter
: Share Khan SSKI A-206 Phoenix
House, Phoenix mills Compound
Lower parel , Mumbai Maharashtra ,
I
INDIA- 400013
Nature of Business
: Service Provider,
Services
: Depository services Online Services
And Technical Research.
Number of Employees : Over 3500
Website
: www.sharekhan.com
Slogan
: Your Guide to financial jungle.
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14. Vision & Mission
Vision :
To be the best retail brokering brand in the retail business of stock marketing.
Mission :
To educated and empower the individual investor to make better investment
better decision through the quality advice and superior services.
Brief about Sharekhan
Sharekhan is one of the top retail brokerage houses in India with
strong online trading platform. The company provides equity based products
(research, equities, derivatives, depository, margin funding, etc.). It has one of
the largest networks in the country with 1288 share shops in 325 cities. It is
the retail broking arm of the Mumbai-based SSKI [SHANTILAL SHEWANTILAL
KANTILAL ISWARNATH LIMITED] Group. Sharekhan brings a user- friendly
online trading facility, coupled with a wealth of content that will help to stalk
the right shares.
Achievement of company
 A rated among the top 20 wired companies along with Reliance,
Infosys, etc by ‘Business Today’, January 2004 edition.
 Awarded ‘Top Domestic Brokerage House’ four times by Euro money
and Asia money.
 Pioneers of online trading in India amongst the top 3 online trading
websites from India.
 Most preferred financial destination amongst online broking
customers.
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15.  Winners of “Best Financial Website” award.
 India’s most preferred brokers within 5 years. “Awaaz customers
Award”.
SWOT ANALYSIS
STRENGTHS
It is a pioneer in online trading with a turnover of Rs.400crores and more than
3000 peoples working in the organization. Employees are highly empowered
and strong communication network. Number 1 registrar and transfer agent
and dealer of investment products in India Good co-operation between
employees.
WEAKNESS
Localized presence due to insufficient investments for country wide
expansion. High brokerage charges but now they have overcome this by a new
prepaid scheme in which brokerage is reduced to half. High employee turnover
Lack of awareness among customers because of non-aggressive promotional
strategies (print media, newspapers, etc).
OPPORTUNITIES
With the booming capital market it can successfully launch new services and
raise its client’s base. Marketing at rural and semi-urban areas. Increasing
usage of online trading may boost a whole new breed of investors for trading
in securities. As interest on fixed deposits with post office and banks are all
time low, more and more small investors are entering into stock market.
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16. THREATS
Lack of sufficient branch-offices for speedy delivery of services. Increasing
number of Competitors. Constant pressure to be cost competitive to meet
customer’s expectations. Aggressive promotional strategies by close
competitors may hamper ShareKhan’s acceptance by new clients.
SHAREKHAN LIMITED’S MANAGEMENT TEAM
Dinesh Murikya : Owner of the company
Tarun Shah : CEO of the company
Shankar Vailaya : Director (Operations)
Jaideep Arora : Director (Products & Technology)
Pathik Gandotra : Head of Research
Rishi Kohli : Vice President of Equity Derivatives
Nikhil Vora : Vice President of Research
16

17. PRODUCTS AND SERVICES OF SHAREKHAN LIMITED
The different types of products and services offered by Sharekhan Ltd. are as
follows:
• Equity and derivatives trading
• Depository services
• Online services
• Currencies & Commodities trading
• Dial-n-trade
• Portfolio management
• Share shops
• Fundamental research
• Technical research
17

18. CHAPTER – 3
ABOUT STOCK BROKER
18

19. MEMBERSHIP OF STOCK BROKE
Conditions for grant of certificate to stock-broker
The Board may grant a certificate to a stock-broker subject to the following
conditions namely:
(a) he holds the membership of any stock exchange;
(b) he shall abide by the rules, regulations and bye-laws of the stock exchange
or stock exchanges of which he is a member;
(c) in case of any change in the status and constitution, the stock broker shall
obtain prior permission of the Board to continue to buy, sell or deal in
securities in any stock exchange;
(d) he shall pay the amount of fees for registration in the manner provided in
the regulations; and
(e) he shall take adequate steps for redressal of grievances of the investors
within one month of the date of the receipt of the complaint and keep the
Board informed about the number, nature and other particulars of the
complaints received from such investors.
FUNCTIONAL ASPECTS OF BROKERS
For the purpose of the stock exchange, the major activities of
the broker’s fall into three categories:1. Those in primary market
2. Those in the secondary market or stock market
3 .Other services, as indicated in the adjacent chart.
19

20. The objectives of the all stock brokers are same, namely to earn
income in the form of brokerage, commission and charges for service
rendered. But some services are essential part of the activity and
necessary for the survival of the stock brokers, such as advice and
consultancy, research and post trading services. The quality services
also counts for the growth of the activity and survival of stock
brokers.
FUNCTION’S OF STOCK BROKERS IN NEW ISSUE MARKET
Stock brokers who are the registered members of the stock exchange
who undertake a variety of financial services. Primarily their functions fall into
two major categories depending on the market, they operate.
1. New issue market: If the brokers are operating in new issues
market, their functions are normally underwriting and marketing of
new issues through a network of sub-brokers. More recently, some
of them are undertaking the important merchant banking functions.
(a)
Merchant bankers – performing the whole amount of
financial services, namely, preparation of project report,
market evaluation, advice, consultancy, and to act as lead
managers or co-managers of an issue, coordinating with the
government agencies, stock exchange, bankers etc.
20

21. (b)
Lead managers & co-managers, advice, consultancy,
portfolio managers, etc.
(b)
Investment consultants, advisors, etc. The fourth category
recognized and licensed by SEBI is just to do consultancy.
These three categories require the license of SEBI to operate in the
market and a minimum net worth of 50 lakhs cr is required depending upon
the category of the operations, they undertake. Besides, many brokers
operate only as a brokers, underwriters or sub-underwriters or undertake
marketing of only new issues for a commission, the permission of stock
exchange is necessary for such brokers if any financial liability like
underwriting is incurred by them and their liability is to be limited to 5% of
any such issues of shares, debentures, etc. if they operate for any such issues
as brokers, they attend all the broker’s and investor’s conferences of the
company, visit the plant site and help the sale of these securities to the
public.
In this case, they are eligible for a fixed number of free copies of
prospectus and application forms. These are the arranged through stock
exchange is where the shares are to be listed.
21

22. FUNCTION’S OF STOCK BROKER’S IN STOCK OR
SECONDARY MARKET
2. Stock market : If the brokers are operating in the stock
market, they are eligible to have a limited number of sub-brokers
or authorized clerks who can go to the trading ring, solicit business
or help in trading and broking business. There can be many subbrokers who do not enter the trading ring, but bring in business, for
a share in brokerage.
In this market, the broker can operate as a jobber, offering bid
and offer rates for selected scrip’s making his profits only on the
difference or margins between offer and bid rates. He can do line
business, namely, arbitrage business, buying in one
center(Calcutta) and selling in another center (Bombay) or vice
versa and earning profits through the differences in prices (also
called as arbitrage business). The broker can also act as dealer
doing business in his own account, both wholesale and retail and
arrange for private sale and purchases of shares. If a broker is
acting as a principle for any client, he has to separate their business
from client business and take the written consent of client for him
act as principle.
A separate contract note is to be passed for such business, different
from that he passes for client business.
22

23. A broker can also act as a badla financier for financing the
carry forward business in the market. Here he earns interest on his
money or for the shares lent. Acting as a broker, he earns only the
brokerage is 0.5% to 2.5% depending upon on the volume of
business or customer relations. Some brokers serve the customers
by lending the money for payments of margins, sending shares for
transfer to the company, collections of dividends, rights and bonus
entitlement or manage the portfolios of the customers or provide
only investment advice and consultancy. So, the changes made by
the broker also vary with the services rendered for the clients. A
broker’s strong hold is his analytical and research ability, which will
enable him to advise his clients on investment decisions on what to
buy or sell and when to buy or sell.
23

24. CHAPTER – 4
OPEN OUTCRY AND ONLINE TRADING SYSTEM
24

25. OPEN OUTCRY SYSTEM
The broker has to buy or sell securities for which he has
received the orders. For this, the broker or his authorized
representatives goes to the stock exchange. This method is called
the ‘open outcry system’.
Basically the brokers shout while buying or selling the
securities. The floor of the stock exchange is divided into a number
of markets also known as ‘post pit’ or wing based on particular
securities dealt there. In the post pit or wing, the broker using ‘open
outcry’ method makes an offer or bid price. For making the
necessary bargain, he quotes his purchase or sale price, also known
as offer or bid price. The dealer, to whom the price is quoted, quotes
his own price when the quotation of the dealer suits the broker, he
may loss the bargain. If he is not satisfied with the quote price, he
may turn to some other dealer. On the close of the bargain, the
dealer as well as the broker makes a brief note of the particulars of
the deal. Such notes are made on some pad and on it the number of
shares, the price agreed upon, the name of the party, what
membership number etc.
DISADVANTAGES OF OUTCRY SYSTEM
• It lacks transparency.
• The scope of manipulation, speculation and mal practice is more
.• Signal were more important in the outcry system any member
who could not interpret the buy/sell signal correctly often landed
himself in disaster situation.
• In audibility was another disadvantage of the outcry system.
25

26. • Due to the above disadvantages of the outcry system the
SHAREKHAN has shifted from outcry system to online trading from
February 29th 1997.
ONLINE TRADING SYSTEM
“Online trading is a service offered on the internet for
purchase and sale of shares. In the real world you place orders on
your stockbroker either verbally (personally or telephonically) or in
a written form (fax).”
In online trading, you will access a stockbroker’s website
through your internet enabled PC and place orders through the
broker’s internet based trading engine. These orders are routed to
the stock exchange without manual intervention and executed
thereon in a matter of a few seconds. The net is used as a mode of
trading in internet trading. Orders are communicated to the stock
exchange through website.
In India Internet trading started in India on 1st April 2000
with 79 members seeking permission for online trading.
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.
26

27. 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 scripts 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 scripts are the blacklisted
companies. The C group covers the odd lot securities in A, B1 & B2
groups.
ONLINE TRADING HAS LED TO ADDITIONAL FEATURES SUCH AS:
1) Limit / stop orders: orders that can be go unfilled, but there is an
extra Charge for this leeway facility since one need to hold a price.
2) Market orders: orders can be filled at unexpected prices, but this
type is much more risky, since you have to buy stock at the given
price.
3) Cash account: where funds have to be available prior to placing
the order.
4) Margin account: where orders can be placed against stocks, to
increase Purchasing power.
27

28. ADVANTAGES OF ONLINE TRADING
1) Online trading has made it possible for anyone to have easy and efficient
access to more reports and charts than it was previously possible if one went
to any brokers office. Thus we have access to a lot more information online.
2) Online trading has let room for smaller organizations to compete with
multinational organizations since it is no longer a leg it issue. Being online does
not identify the size of any particular organization, therefore, this additional
power to the underdogs.
3) Online trading has allowed companies to locate themselves where they
want as physical location is not an issue anymore. Companies can establish
themselves according to their gains and losses, for instance where tax (sales
and value added taxes) is best suited to them.
4) Online trading gives control to individuals and they can exercise it over
accounts thus comprehend what is going on when they trade. It is like going
back to school and re-educating oneself on how to trade online.
5) Individuals’ benefit by saving comparatively a lot more when trading online
as the cost per trade is less.
6) Individuals can invest in a variety of products, unlike earlier when people
bought bonds, mutual funds, and stock for long-term basis and sat on them.
Now they can invest in stocks, stock and index options mutual funds,
government, and even insurance.
TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING
ShareKhan deals in buying and selling equity shares and debentures on the
National Stock Exchange (NSE), the Bombay Stock Exchange (BSE) and the
Over-The- Counter Exchange of India (OTCEI). Share Khan is provided with a
computer and required software from their registered stock exchanges. These
centers are called “Broker Work Stations”.
28

29. CHAPTER - 5
PURCHASE AND SALE OF SECURITIES
29

30. A. Procedure for purchasing dematerialized Securities:-The procedure
for purchasing dematerialized securities is also similar to the
procedure for buying physical securities.
1. Investor instructs DP to receive credits into his account in the
prescribed form. There may be one time standing instruction or
separate instruction each time to receive credits.
2. Investor purchases securities in any of the stock exchanges linked
to depository through a broker.
3. Broker receives payment from investor and arranges payment to
clearing corporation.
4. Broker receives credit to securities in clearing account on the
payout day.
5. Broker gives instructions to DP to debit clearing account and credit
client’s account. Investor receives shares into his account by way of
book entry.
30

31. B. The procedure for selling dematerialized securities is
given below:
1. Investor sells securities in any of the stock exchange linked to
depository through a broker.
2. Investor instructs his DP to debit his demat account with the
number of securities sold and credit the broker’s clearing account.
3. Before the pay-in-day, broker of the investor transfers the
securities to clearing corporation.
4. The broker receives payment from the stock exchange.
5. The investor receives payment from the broker for sale of
securities in the same manner as received in case of sale of physical
securities.
31

32. DIFFERENT CATEGORIES OF ORDERS
Orders received are time stamped and then processed. If an
order is not matched, it is stored in price-time priority in the
following sequence.
• Best price.
• Within price, by time priority. Various functions.
ORDER MATCHING RULES
• The best buy order is the one with highest price and the best sell
order is the one with the lowest price.
• Orders that came in to match the existing orders are called active
orders. Orders lying unmatched are the passive orders.
• Orders are always matched at the passive order price.
• System looks at all buy orders from the point of view of a seller
and all sell orders from the point of view of the buyes.
32

33. CONDITION OF ORDERS RECEIVED FOR EXECUTION BY
BROKERS
Brokers has three order condition options
• Price related conditions
• Quantity related conditions
• Time related conditions
Price Related Condition’s
Limit price order: investor/trader specifies the price to the broker
while entering the order into the system. Investor/trader specifies a
stated price to buy at below or to sell at or above.
Market price order: An order to buy or sell securities at best price
obtainable at a time it is received from the investor/trader.
Stop loss order: The orders are given to limit the loss due to
unfavorable price movement in the market. . If the price falls below the
limit, the broker is authorized to sell the shares to prevent further loss.
Quantity Related Condition
33

34. Disclosed Quantity: An order with an disclosed quantity condition
allow the broker to disclose only a part of the order quantity of the
order.
Time Related Conditions
Day order (DO): A day order valid for the day on which it is entered.
If the order is not matched until the trading close, it is cancelled
automatically.
Good till Cancelled (GTC): This is one order that remains in the
system until cancelled by the broker. It wills therefore, be able to
span trading days if not matched against.
Good till Date (GTD): It permits the broker to specify the date up to
which the order should stay in the system.
Immediate or Cancel (IOC): Such an order allows a broker to buy or sell
a security as soon as the order is released into the market, failing which
the order will be removed from the market.
34

35. CHAPTER-6
SETTLEMENT SYSTEM
35

36. ROLLING SETTLEMENT SYSTEM
Under rolling settlement system, the settlement takes place n days
(usually 1, 2, 3 or 5days) after the trading day. The shares bought and sold are
paid in for n days after the trading day of the particular transaction.
Share settlement is likely to be completed much sooner after the
transaction than under the fixed settlement system. The rolling settlement
system is noted by T+N i.e. the settlement period is n days after the trading
day.
A rolling period which offers a large number of days negates the
advantages of the system. Generally longer settlement periods are shortened
gradually. SEBI made RS compulsory for trading in 10 securities selected on the
basis of the criteria that they were in compulsory demat list and had daily
turnover of about Rs.1.26 crore or more. Then it was extended to “A” stocks in
Modified Carry Forward Scheme, Automated Lending and Borrowing
Mechanism (ALBM) and Borrowing and lending Securities Scheme (BELSS) with
effect from Dec 31, 2001.
SEBI has introduced T+5 rolling settlement in equity market from July
2001 and subsequently shortened the cycle to T+3 from April 2002.
After the T+3 rolling settlement experience it was further reduced to
T+2 to reduce the risk in the market and to protect the interest of the
investors from 1st April 2003.
Activities on T+1: conformation of the institutional trades by the
custodian is sent to the stock exchange by 11.00 am. A provision of an
exception window would be available for late confirmation. The time limit and
the additional changes for the exception window are dedicated by the
exchange.
36

37. BSE generates Delivery and Receive Orders for transactions done by the
Members in A, B, and F and G group scrips after netting purchase and sale
transactions in each scrip whereas Delivery and Receive Orders for "T", "C" &
"Z" group scrips and scrips which are traded on BSE on "trade-to-trade" basis
are generated on a gross basis, i.e., without netting of purchase and sell
transactions in a scrip. However, the funds obligations for the Members are
netted for transactions across all groups of securities.
The exchanges/clearing house/ clearing corporation would process and
download the obligation files to the broker’s terminals late by 1.30 p. m on
T+1. Depository participants accept the instructions for pay in securities by
investors in physical form up to 4 p .m and in electronic form up to 6 p.m. the
depositories accept from other DPs till 8p.m for same day processing .Activities
on T+2: The depository permits the download of the paying in files of securities
and funds till 10.30 a. m on T+2 from the brokers’ pool accounts. The
depository processes the pay in requests and transfers the consolidated pay in
files to clearing House/clearing Corporation by 11.00am/on T+2.
The exchange/clearinghouse/clearing corporation executes the pay-out
of securities and funds latest by 1.30p.m on T+2 to the depositories and
clearing banks. In the demat mode net basis settlement is allowed. The buy
and sale positions in the same scrip can be settled and net quantity has to be
settled.
SETTLEMENT OF TRANSACTIONS
Clearing of transaction in the form of shares and cash is called
settlement. Buyers will take the delivery of shares through the depository
participants like SHARE KHAN and others. Finally, the settlement is made by
means of delivering the share certificates along with the transfer deeds. The
transferor (or the seller) duly signed transfer deed. It bears a stamp of the
37

38. selling broker. The buyer then fills up the certificates fills up the particulars in
the transfer deed. Settlement can be done in the following way.
Spot settlement: under this method, the delivery of securities
and payment for them are affected on the day of the contract
itself.
Rolling settlement: Under this rolling settlement the trading is
on “T+2”,basis i.e. if Monday is trading day then Wednesday is the
paying day . In case on non-delivery, the securities will go for
auction.
DETAILS OF PROCEDURES
Delivery in : The members who are in pay-out position delivers share
certificates in to clearing house within the settlement period along with
the delivery Chelan filled in with the details of share certificates which
has folio numbers or distinctive numbers etc.
Delivery out: The buyer of shares who made pay in position will take
delivery of shares from the clearing house.
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39. Pay-in: The member who is in paying position shall pay for value of
shares with in the trading settlement period (T+2).
Payout: The cheques paid in the clearinghouse will be paid to
members who are in paying position. All disputes arising between
members regarding non-deliveries, non-payments, good and bad
deliveries pertaining to the settlement will be settled by the settlement
committee of the exchange.
39

40. CHAPTER - 7
ONLINE TRADING SYSTEM IN SHAREKHAN LTD
40

41. E-commerce
Electronic commerce is associated with buying and selling over
computer communication networks. It helps conduct traditional commerce
through new way of transferring and processing of information. Information is
electronically transferred from computer to computer in an automated way.
E-commerce refers to the paperless exchange of business information
using electronic data inter change, electronic technologies. It not only reduces
manual processes and paper transactions but also helps organization move to
a fully electronic environment and change the way they operated. PC’s and
networking attempts to introduce banks of the tools and technologies
required for electronic commerce.
ONLINE TRADING
The actual definition of “Online Trading” is as explained below:
“Online trading is a service offered on the internet for purchase and sale of
shares. In the real world you place orders on your stockbroker either verbally
(personally or telephonically) or in a written form (fax).”
In online trading, you will access a stockbroker’s website through your
internet enabled PC and place orders through the broker’s internet based
trading engine. These orders are routed to the stock exchange without manual
intervention and executed thereon in a matter of a few seconds. The net is
used as a mode of trading in internet trading. Orders are communicated to the
stock exchange through website
In India: Internet trading started in India on 1st April 2000 with 79
members seeking permission for online trading.
41

42. The SEBI committees on internet based securities trading
services has allowed the net to be used as an Order Routing System
(ORS) through registered stock brokers on behalf of their clients for
execution of transaction. Under the ORS the client enters his
requirements (security, quantity, price buy/sell) on broker’s site
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.
DEMAT ACCOUNT
On doing an online business ever customer has to open and demat
account in any bank whichever he likes.
Demat account is the account in which the trading done by the
customer is mentioned. If the customer sales or purchases any share the
details of this sale and purchasing are in demat account.
This account contents the name of the shares and also the number of
shares held Or sold and also the rate of the share with this demat account.
42

43. It is also compulsory for every customer to open a saving account in
the bank because the amount which is to be received when the customers
sales the shares are transferred from the demat account to the saving account.
It is the responsibility of the customers that the share which he purchased or
sales are properly transferred in demat account from the stock exchange
whichever he deals.
The amount of dividend whichever to be received on the shares when held for
one or more year are also transferred in this demat account. It is compulsory
for every customer to have a PAN no. For opening a demat account. If PAN no.
Is not there is no chance for the customer to do any trading on line. There is no
limit of amount to deal in this account.
DOCUMENT’S REQUIRE TO OPEN ACCOUNT WITH
SHAREKHAN LTD
• Photocopy of the clients’ PAN Card which should be duly
attached
• Photo copy of any of the following documents duly attached
which will serve as correspondence address proof:
a. Passport (valid)
b. Voter’s ID Card
c. Ration Card
d. Driving License (valid)
e. Electricity Bill (should be latest and should be in the name of the
client)
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44. f. Telephone Bill (should be latest and should be in the name of the
client)
g. Insurance Policy (should be latest and should be in the name of
the client)
i. Lease or Rent Agreement.
j. Saving Bank Statement** (should be latest)
• Two cheques drawn in favor of Sharkhan Limited, one for the
Account Opening Fees and the other for the Margin Money (the
minimum margin money is Rs. 5000). ** A cancelled cheque should
be given by the client if he provides Saving Bank Statement as a
proof for correspondence address.
NOTE: Only Saving Bank Account cheques are accepted for the
purpose of Opening an account.
PROCEDURE FOR NET TRADING
Step 1: Those investors, who are interested in doing the trading over internet
system i.e. NEAT-IXS, should approach the brokers and get them selfregistered with the Stock Broker.
Step 2: After registration, the broker will provide to them a Login name,
Password and personal identification number (PIN).
Step 3: Actual placement of an order. An order can then be placed by using the
place order window as under:
44

45. (a) First by entering the symbol and series of stock and other parameters like
quantity and price of the scrip on the place order window.
(b) Second, fill in the symbol, series and the default quantity.
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 10 seconds is there
in executing the trade.
Step 8: It is regarding charging payment, for which there are different mode.
Some brokers will take some advance payment from the investor and will fix
their trading limits. When the trade is executed, the broker will ask the
investor for transfer of funds to his account. Internet trading provides total
transparency between a broker and an investor in the secondary market.
BENEFITS OF ON LINE BROKING
1) Less Costly
2) Peace of mind
3) Keeping Records
4) Access to Information and investment Tools
5) Unparalleled Liquidity
45

46. 6) Highly Safety
7) Reduces the settlement risk
8) Offers greater transparency
9) Ease of trade
TRADING SESSION
Equity and Derivative market
Trading timings are :
PRE-OPEN from
: 9:00 A.M to 9:15 A.M
MARKET OPEN
: 9:15 A.M to 3:30 P.M
on all 5 days of the trading period. Monday to Friday is the trading
period in all the stock exchanges.
Commodities market
MARKET OPEN
: 10:00 A.M to 11:30 P.M
Currency market
MARKET OPEN
:10:00 A.M to 5:00 P.M
46

47. CHAPTER - 8
CONCLUSION AND RECOMMENDATIONS
47

48. CONCLUSION AND RECOMMENDATIONS
1. Things have changed for the better with the SHAREKHAN going on-line coupled
with endeavor to stream line the whole trading system, things have changed
dramatically over the last 3 to 4 years. New and advanced technologies have
breached geographical and cultural barriers, and have brought the countrywide
market to doorstep.
2. In the present scenario to compete with the Broker’s would require sound
infrastructure and trading as per international standards.
3. The introduction of on-line trading would influence the investors resulting in
an increase in the business of the exchange. It has helped the brokers handling a
vast amount of transactions and this can be an efficient trading, delivering,
settlement system with adequate protection to investors. The trading of
SHAREKHAN of the first day was Rs. 1.8 crores.
4. Due to invention of online trading there has been greater benefit to the
investors as they could sell / buy shares as and when required and that to with
online trading.
5. The broker’s has a greater scope than compared to the earlier times because of
invention of online trading.
6. The concept of business has changed today, this is a service oriented industry
hence the survival would require them to provide the best possible service to the
clients.
7. I recommend the exchange authorities to take steps to educate Investors
about their rights and duties. I suggest to the exchange authorities to increase the
investors’ confidences.
8. I recommend the exchange authorities to be vigilant to curb wide fluctuations
of prices.
9. The speculative pressures are responsible for the wide changes in the price,
not attracting the genuine investors to the greater extent towards the market.
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49. 10. Genuine investors are not at all interested in the speculative gain as their
investment is based on the future profits, therefore the authorities of the
exchange should be more vigilant to curb the speculation.
11. Necessary steps should be taken by the exchange to deal with the situations
arising due to break down in online trading.
BOOKS REFFERED FOR PREPARE PROJECT REPORT
1. investment Analysis And Portfolio Management – prasanna
chandra
2. Indian Financial System -M.Y.Khan
NEWSPAPERS
• Business standard
• The Economic Times
WEBSITE’S
WWW.Sharekhan.com
www.rbi.co.in
www.sebi.co.in
www.nse.com
www.bse.com
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