AWARENESS AMONG THE TRADERS

ABOUT THE SETTLEMENT OF ONLINE TRADING AT INDIA BULLS

ABSTRACT

The trading on stock exchanges in India used to take place through open outcry without
use of information technology for immediate matching or recording of trades. This was
time consuming and inefficient. This imposed limits on trading volumes and efficiency.
In order to provide efficiency, liquidity and transparency, NSE introduced a nation-wide
on-line fully automated screen based trading system in 1996 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. Screen based electronic system electronically matches orders 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. A Dematerialized account is opened
by the investor while registering with an investment broker (or sub-broker). The
Dematerialized account number is quoted for all transactions to enable electronic
settlements of trades to take place. Every shareholder will have a Dematerialized account
for the purpose of transacting shares. After the introduction of the depository system by
the Depository Act of 1996, the process for sales, purchases and transfers of shares
became significantly easier and most of the risks associated with paper certificates were
mitigated.

The trading and settlement process in a secondary market begins with the selection of a
broker or sub-broker and ends with settlement of shares. For secondary-market trading,
you need first to open a dematerialised (DEMAT) account with a broking house or bank.
Once your account is active, you can buy or sell securities. Once your order is executed,
and you get a contract note, that’s when your trade is settled.

1
 CONTENTS

CHAPTER NO NAME OF THE CHAPTER PAGE NOS.

CHAPTER-I INTRODUCTION 03
Need Of The Study
Scope Of The Study
Objectives Of The Study
Research Methodology
Limitations Of The Study

CHAPTER -II REVIEW OF LITERATURE 13

CHAPTER -III INDUSTRY & COMPANY PROFILE 36

CHAPTER - IV DATA ANALYSIS AND INTERPRETATION 55

CHAPTER -V CONCLUSION, FINDINGS & 67

SUGGESTIONS

APPENDICES QUESTIONNAIRE, 71
BIBLIOGRAPHY

2
 CHAPTER I
INTRODUCTION

3
INTRODUCTION

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

Under the Securities Contract Regulation Act of 1956, securities’ trading is regulated by
the Central Government and such trading can take place only in stock exchanges
recognized by the government under this Act. As referred to earlier there are at present
23 such recognized stock exchanges in India. Of these, major stock exchanges, like
Bombay Stock Exchange (BSE), National Stock Exchange (NSE), Kolkata, Delhi,
Chennai, Hyderabad and Bangalore etc. are permanently recognized while a few are
temporarily recognized. The above act has also laid down that trading in approved
contract should be done through registered members of the exchange. As per the rules
made under the above act, trading in securities permitted to be traded would be in the
normal trading hours (10 A.M to 3.30 P.M) on working days in the trading ring, as
specified for trading purpose. Contracts approved to be traded are the following:
A. Spot delivery deals are for deliveries of shares on the same day or the next day as the
payment is made.
B. Hand deliveries deals for delivering shares within a period of 7 to 14 days from the
date of contract.
C. Delivery through clearing for delivering shares with in a period of two months from
the date of the contract, which is now reduce to 15 days.(Reduced to 2 days in Demat
trading)

4
D. Special Delivery deals for delivering of shares for specified longer periods as may be
approved by the governing board of the stock exchange.

Except in those deals meant for delivery on spot basis, all the rest are to be put through
by the registered brokers of a stock exchange. The securities contracts (Regulation) rules
of 1957 laid down the condition for such trading, the trading hours, rules of trading,
settlement of disputes, etc. as between the members and of the members with reference
to their clients.

What is trade settlement?

Trade settlement is a two-way process which comes in the final stage of the transaction.
Once the buyer receives the securities and the seller gets the payment for the same, the
trade is said to be settled. While the official deal happens on the transaction date, the
settlement date is when the final ownership is transferred. The transaction date never
changes and is represented with the letter ‘T’. The final settlement does not necessarily
occur on the same day. The settlement day is generally T+2.
Earlier, when securities were held in physical format, it took five days to settle a trade
after the actual transaction. Investors made payment in cheques after receiving the
securities which came in the form of certificates and were delivered by post. The delay
caused differences in prices, posed risks and incurred a high cost. To control transaction
delay, market regulators decided to set a date within which the transaction had to be
completed. Due to paperwork, earlier the settlement date used to be T+5, which has now
been reduced to T+2 post computerisation.

Types of settlements in the stock market:

Trade settlements in the stock market have been broadly categorised into two:
1. Spot settlement – This is when the settlement is done immediately following the
rolling settlement principle of T+2.
2. Forward settlement – This happens when you agree to settle the trade at a future date
which could be T+5 or T+7.

5
What is rolling settlement?
A rolling settlement is one in which the settlement is made in the successive days of the
trade.  In a rolling settlement, trades are settled in T+2 days, which means deals are
settled by the second working day. This excludes Saturday and Sunday, bank holidays
and exchange holidays. So, if a trade is conducted on a Wednesday, it will be settled by
Friday. Similarly, if you buy a stock on Friday, the broker immediately deducts the total
cost of investment from your account the same day, but you receive the shares on
Tuesday. The settlement day is also the day you become the shareholder of record.
The settlement day is essential for those investors who are looking to earn dividends. If
the buyer wishes to receive a dividend from the company, then he must settle the trade
before the record date for a profit.

Rolling settlement rules in BSE:

1. In the Bombay Stock Exchange (BSE), securities in the equity segment are all settled
in T+2 days.
2. Government securities and fixed income securities for retail investors are also settled
in T+2 days.
3. Pay-in and pay-out of monies and securities need to be completed on the same day.
4. The delivery of securities and payment by the client has to be done within one
working day after the BSE completes the pay-out of the funds and securities.

What is pay-in and pay-out:

Pay-in is the day when the buyer sends the funds to the stock exchange, and the seller
sends the securities. Pay-out is the day when the stock exchange delivers the funds to the
seller, and the shares purchased to the buyer.

What is a bad delivery?

6
A bad delivery is when shares transfer is not completed because of the lack of
compliance with the norms of the exchange.

Conclusion:
A considerable volume is traded in the stock exchange regularly. For each trade to be
conducted smoothly, these processes are followed. For an investor to make informed
decisions, it is essential to know these before trading.

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 NEED OF THE STUDY: 

 The present study to review the online trading procedure a case study of AWARENESS
AMONG THE TRADERS ABOUT THE SETTLEMENT OF ONLINE TRADING at
INDIA BULLS as the exchange has changed its trading from the outcry mode to
online trading, there is need to assess the performance of the capital market
 It is to analyze the changes in trading after the exchange shifted from outcry to online
trading system.
 It is to study the functions of INDIA BULLS through various departments.
 To know the online screen based trading system adopted by INDIA BULLS and about
its communication facilities.
 The appropriate configuration to set the network, which would link the INDIA
BULLS to individual / members
 To know about the latest and future development in the stock exchange trading system

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SCOPE OF THE STUDY:

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

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OBJECTIVES OF THE STUDY

 To study the on-line screen based trading system adopted by INDIA BULLS and
about its communication facilities for the appropriate configuration to set network.
This would link the INDIA BULLS to individual brokers/members.
 To examine the backup measures with respect to primary communication facilities,
in order to achieve network availability and connectivity back-up options.
 To analyse the Clearing & Settlements in the stock exchanges for easy transfer and
error prone system. Also study about computerization demand process.
 To evaluate about the settlement procedure involved in INDIA BULLS and also
NSDL operations.
 To sumerize each and every term of the stock exchange trading procedures

HYPOTHESIS:
H0: Traders are aware of clearing and settlement procedure.
H!: Traders are not aware of clearing and settlement procedure.

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RESEARCH METHODOLOGY

The data collection methods include both Primary and Secondary collections methods:
- Primary data collection Method.
- Secondary data collection Method.

PRIMARY METHOD:
Primary method includes the data collected directly from the authorized members of
Bonanza securities. An appropriate questioner is served to the investing community for
collection primary data. And also data collected from discussion with INDIA BULLS
officially.

SECONDARY METHOD:
The secondary data collection method includes the lecturers delivered and material
provide by INDIA BULLS Ltd., the date collections from the magazines of the NSE,
Economics time various books relating the investment, Capital Market and other related
topics.

RESEARCH METHOD:
Descriptive method is adopted for the research work.

DATA SOURCES:
Both primary and Secondary data are used for the research work.

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LIMITATIONS OF THE STUDY
 The study confines to the past 2-3 years and present system of the trading procedure in
the INDIA BULLS and the study is confined to the coverage of all the related issues in
brief.
 The data is collected from the primary and secondary sources and thus is subject to
slight variation than what the study includes in reality.
 Hence accuracy and correctness can be measured only to the extent of what the sample
group has furnished.
 Time is a constraint. Only 45 days of time taken for my research work.
 Lack of availability of accurate date.

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 CHAPTER-II
LITERATURE REVIEW

13
REVIEW OF THE LITERATURE

George (1996) in his article “Towards a paperless settlement system” explains about the
role of the NSDL in revolutionizing the paperless stock settlement system in the country.
He has examined steps taken by the depository to ensure that the scripless trading system is
a success. He has also stressed the importance of the role of regulatory body in making the
depository system successful.

Jeyanthi (2007) in his research work “A study on National Stock Exchange of India
Limited” has highlighted that the NSE has created a niche for itself not only in the national
arena but also in the international market with the adaptation of required structural
changes. Therefore there is no doubt that NSE will be an attractive destination for the
national & international investors to park their funds in the years to come.

Javaid (2003) in his thesis “ A study of operations of stock exchanges with the special
reference to Delhi Stock Exchange” discussed that Indian stock market has emerged as a
major source of finance for the corporate sector. It is an institution evolved in the industrial
developed capitalistic economies with free market mechanism. Stock exchange was termed
as institutional allocator of resources par excellence.

14
Kaur (2013) in her paper “Investors preference between DEMAT & REMAT and
awareness regarding depository & its various laws” explains the depository system in
India, focusing on the reasons for investors preference between REMAT & DEMAT. To
sum up she concludes that the growth rates of DEMAT account holder is increasing over
years. The Indian system of capital market is two tier system-Indian government allows
holding securities in any form i.e. either in physical securities or in electronic (DEMAT)
form. The respondents feel that the dematerialization provides enough services & it is
convenient to use. Majority of people are shifting towards dematerialization as compared
to the past history & study.

Olekar & Talwar (2013) in their paper “Online trading & DEMAT account in India – Some
issues” observed that the banks normally levy a lower service charges compared to other
depository participants. He also found that when the numbers of users are more online, the
speed of transactions is affected.

Rao (1995) in his paper “Depository System: A boon for India capital markets” holds the
view that the introduction of depositories would improve the market efficiency. It is also
expected to arrest the prolonged depression in the stock market. The paper analysis shows
the manner in which the depository would help to revive the stock market. To sum up, he
states that the eligibility criteria will require companies to improve their internal systems.
He is hopeful that depository system will bring a sea change in corporate democracy,
particularly in corporate management, price discovery in market place & proxy exercise
etc.

Sahoo ( 1995 ) in his article “ The depositories ordinance , 1995 explained” has explained
the provisions of Depositories Ordinance 1995, which provides a legal basis for the
establishment of depositories in securities with a view to ensure free & expeditious transfer
of securities.

15
Singh & Goyal ( 2011) in their paper entitled “ Analysis of factors affecting the Decision
Making of the Investors in Depository System” holds the view that most of the investors
think that the shorter settlement period , safety of securities with the depositories , attitude
of the staff available with the DPs, timely services provided by the DPs to the investors,
reduction in transaction costs , rapatriation of sales proceeds of shares / debentures are
some of the factors which affects the decision making of the investors in depository
system. Opening DEMAT account with DP is easy but they charge for providing this
service. The education of the investors plays an important role in decision making where
the difference in the opinions of the investors is found significant in most of the cases
followed by other factors such as occupation, age etc.

Dr. A Abdhul Rahim (2013) He discovered the pitfalls related to online trading. He
suggests that investors should be protected from all hassles and problems so as to remain
confident while trading online.

Brad M. Barber and Terrance odean (2001): He studied the deep relationship between the
investor and his major weapon the internet, suggesting that a combination of internet and
shareholders voting could become a new tool for organisations promoting special society
welfare like corporate social responsibility environmental actions and consumer help.

Rajagopalan, V He expressed the problem faced by him on online shares trading. What he
cannot stomach is how his ID number was interchanged with another client, and his
account debited to pay for derivatives, while he did not order. Worse his scripts were sold
to cover losses which he had not incurred. Luckily, the broker admitted his mistake and
compensated him.

16
Walia N. and Kumar R. (2012) Research report examined the investors' preference for
traditional trading and online trading, investor's perception on Online trading & comparing
current usage of online trading and offline trading. This study reveals that out of every 100
investors only 28 trade online, which points out a question as why investors were not able
to The major findings of the study are therealize the importance of technology in stock
trading. Indian investors are more conservative, they do not change brokers for trading,
whereas net traders are more comfortable with online trading for its transparency and
complete control of the terminal. Rebecca

Davies and Stuart Cunningham (2012) this work ties together existing literature relating to
the functions and contributions of eBay and online trading, discussing them in a cohesive,
meta-analytic fashion. To further increase knowledge in the field, two studies have been
undertaken to present a view of current online trading practices in the United Kingdom
(UK). Data was collected by conducting online questionnaires and performing interviews
using the Repertory Grid technique. This method has its roots in Personal Construct
Psychology and allows for the expression of participants’ perceptions and preferences in
their own terms or personal constructs.

Jaiswal M., Vashist D. and Kumar A (2009) traces the growth of online trading from the
year 2000 using statistics on volume of online trading from the year 2000 using statistics
on volume of online trading, number of e- broking firms, brokerages and demographic
patterns. Online trading has dramatically changed the way stock business has been
conducted over the years.

Hella Chemingui, Hajer Ben lallouna, (2013), study based on innovation acceptance and
explored consumer confidence drew reference from Rogers theory of innovations’
diffusion (2003), observed that compatibility, trialability and perceived enjoyment were
motivational factors behind using mobile financial services among the Tunisian
respondents and tradition act as a barrier force.

17
Tommi Laukkanen, (2007) advocated that efficiency, convenience and safety are salient in
determining the differences in customer value perceptions between internet and mobile
banking following Means-end approach and laddering interviewing technique. Tommi

Laukkanen, Suvi Sinkkonen, Marke Kivijärvi, Pekka Laukkanen, (2007), specifically

talked of resistance to innovation in terms of Usage, Value, Risk, Tradition and Image
barriers and identified that the value barrier is the most intensive barrier to mobile banking.

M. Gopi, T. Ramayah, (2007), advocated that subjective norm and perceived behavioural
control had a direct positive relationship towards behavioural intention to use internet stock
trading with specific reference to developing countries.

Laforet, S., & Li, X. (2005): Consumers’ attitudes towards online and mobile banking in
China. International journal of bank marketing, 23(5), 362-380: The aim of this study is to
investigate the market status for online/mobile banking in China. With the recent and
forecasted high growth of Chinese electronic banking, it has the potential to develop into a
world‐scale internet economy and requires examination.

Ha, H. Y. (2004). Factors influencing consumer perceptions of brand trust online. Journal
of Product & Brand Management, 13(5), 329-342. Unlike the traditional bricks‐and‐mortar
marketplace, the online environment includes several distinct factors that influence brand
trust. As consumers become more savvy about the Internet, the author contends they will
insist on doing business with Web companies they trust. This study examines how brand
trust is affected by the following Web purchase‐related factors: security, privacy, brand
name, word‐of‐mouth, good online experience, and quality of information. The author
argues that not all e‐ trust building programs guarantee success in building brand trust. In
addition to the mechanism depending o n a program, building e‐brand trust requires a
systematic relationship between a consumer and a particular Web brand. The findings
show that brand trust is not built on one or two components but is established by the
interrelationships between complex components. By carefully investigating these variables
in formulating marketing strategies, marketers can cultivate brand loyalty and gain a
formidable competitive edge.

18
Carlos Roca, J., José García, J., & José de la Vega, J. (2009):. The importance of perceived
trust, security and privacy in online trading system information Management & Computer
Security, 17(2), 96-113. The purpose of this paper is to test an augmented technology
acceptance model (TAM) in the online financial trading context. This research aims to
investigate how e‐investors are influenced by perceived trust, security, and privacy jointly
with traditional TAM constructs.

Hassanein, K., & Head, M. (2007): Manipulating perceived social presence through the
web interface and its impact on attitude towards online shopping. International Journal of
Human-Computer Studies, 65(8), 689-708. Electronic commerce typically lacks human
warmth and sociability, since it is more impersonal, anonymous and automated than
traditional face-to-face commerce. This paper explores how human warmth and sociability
can be integrated through the web interface to positively impact consumer attitudes
towards online shopping. An empirical study was undertaken to investigate the impact of
various levels of socially rich text and picture design elements on the perception of online
social presence and its subsequent effect on antecedents of attitudes towards websites.
Higher levels of perceived social presence are shown to positively impact the perceived
usefulness, trust and enjoyment of shopping websites, leading to more favorable consumer
attitudes. Implications of these finding for practitioners and future research are outlined.

Lee, S., Lee, S., & Park, Y. (2007): A prediction model for success of services in e-
commerce using decision tree: A customer’s attitude towards online service. Expert
Systems with Applications, 33(3), 572-581. This research attempts to identify some
characteristics of services which encourage customers to buy online and to develop a
prediction model for success based on customer recognitions of service offerings in e-
commerce. For the purpose, a survey was conducted on potential e-customers for their
understandings of service offerings extracted from Portal Sites. Collected data were used to
develop a prediction model using decision tree which showed superior prediction accuracy
to conventional techniques. The results will help predict online success judging from
customer acceptance and afford a better understanding of how to facilitate future adoption
of services in e-commerce.

19
Lee, M. C. (2009). Factors influencing the adoption of internet banking: An integration of
TAM and TPB with perceived risk and perceived benefit. Electronic commerce research
and applications, 8(3), 130-141: Online banking (Internet banking) has emerged as one of
the most profitable e-commerce applications over the last decade. Although several prior
research projects have focused on the factors that impact on the adoption of information
technology or Internet, there is limited empirical work which simultaneously captures the
success factors (positive factors) and resistance factors (negative factors) that help
customers to adopt online banking. This paper explores and integrates the various
advantages of online banking to form a positive factor named perceived benefit. In
addition, drawing from perceived risk theory, five specific risk facets – financial,
security/privacy, performance, social and time risk – are synthesized with perceived benefit
as well as integrated with the technology acceptance model (TAM) and theory of planned
behavior (TPB) model to propose a theoretical model to explain customers’ intention to use
online banking. The results indicated that the intention to use online banking is adversely
affected mainly by the security/privacy risk, as well as financial risk and is positively
affected mainly by perceived benefit, attitude and perceived usefulness. The implications
of integrating perceived benefit and perceived risk into the proposed online banking
adoption model are discussed.

J. K Mani. (2009). Factors influencing the adoption of internet banking: An integration of

TAM and TPB with perceived risk and perceived benefit. Electronic commerce research
and applications. This study investigates how stock investors perceive and adopt online
trading in Taiwan. We developed a research model which integrates perceived risk,
perceived benefit and trust, together with technology acceptance model (TAM) and theory
of planned behavior (TPB) perspectives to predict and explain investors' intention to use
online trading. The model is examined through an empirical study involving 338 subjects
using structural equation modeling techniques. The results provide support for the
proposed research model and confirm its robustness in predicting investors' intentions to
adopt online trading. In addition, this study provides some useful suggestions and/or
implications for the academician and practitioners in the area of online trading.

20
TRADING PROCEDURE BEFORE ON-LINE
THE TRADING RING:
Trading on stock exchanges is officially done in the ring for a few hours from 11.00 A.M to
2.30P.M. trading before or after official hour is called KERB TRADING. In the trading ring
space is provided for specified and non-specified sections. The members of their authorized
assistants have to wear a badge or carry with them identify cards given by the exchange to
enter the trading ring. They carry a Sauda book or confirmation memos duly authorized by
exchange. The stock exchanges operations at floor level are highly technical in nature. Non-
members are not permitted to enter into stock market. Hence, various stages have to be
completed in executing a transaction at a stock exchange. The steps involved in the methods of
trading have been given below:

A.CHOICE OF BROKER:
The prospective investor who wants to buy shares or the investor who wants to sell his shares
cannot enter into hall of the exchange and transact business. They have to act through only
member brokers. They can also appoint their bankers for this purpose. Since, bankers can
become members of stock exchange as per the present regulations.
So, the first task in transacting business on stock exchanges is to choose a broker of repute or
banker. Such people’s can ensure prompt and quick execution of a transaction at the possible
price.

INTRODUCTION TO ONLINE TRADING

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

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

TRADING NETWORK

HUB
ANTENNA SATELITE

22
 NSE MAINFRAME BROKERS PREMISES

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

Corporate
Manager

Branch 1 Branch 2

Dealer 1 Dealer 2 Dealer 11 Dealer 12

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The users of the trading system can logon as either of the user type. The significance of each
type is explained below:
A. Corporate Manager: The corporate manager is a term assigned to a user placed at the
highest level in a trading firm. The facility to set Branch order value limits and user order
value limits is available to the corporate manager.
B. Branch Manager: The branch manager is term assigned to a user who is placed under the
corporate manager. The branch manager can set user order value limits for each of his branch.
B. Dealer: Dealers are users at the lower most level of the hierarchy. A dealer can view and
perform order and related activities only for oneself.

OBJECTIVES OF ON-LINE TRADING:

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

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  To face stiff competition from other stock exchange.
 Consolidate trader’s data and interface with clearing and settlement.

PLACEMENT OF ORDER:
The next step in planning of order for the purchase or sale of Securities with the broker. The
order is usually by telegram, telephone, letter, fax etc., or in person. To avoid delay it is placed
generally over the phone. The orders may take any one of the forms such as at best order, limit
order, immediate or cancel order, discretionary order, limited discretionary order, open order
and stop loss order.

ENTRY OF ORDER INTO THE BOOKS:

After receiving the order, the member enters them in his books and the purchase and sale
orders are distributed among his assistants to handle them separately in non-specified and odd-
lots.

EXECUTION OF ORDER:
Big brokers transact their business through their authorized clerk. Small ones out their business
personally. Orders are executed in the trading ring of the India bulls. This works from 12:00
noon to 2:00 p.m discretionary order on all working days from Monday to Friday and a special
hour session on Saturday.
The floor of the stock exchange is divided into number of markets (pits) according to the
nature of security deal in. The authorized clerk/broker goes to the pit and jobbers offer two
way quotes for the scrips they deal in. they act as market makers and provide liquidity to the
market. The system has been designed to get the bet lids and offers from the jobber’s book as
well as the best buy and sell orders from the book. If the quotation is not acceptable to the
brokers, he may make a counter bid/offer

25
Ultimately the bargains may be closed at a price mutually acceptable to both the parties. In
case the quotation is not acceptable to him, the broker may go to another dealer and make a
bargain. All bargains on the stock exchanges are settled by word of mouth and there is no
written contract signed immediately by the parties concerned. Once the transaction is finalized,
the deals are recorded in a Chaupri Rough notebook or transaction note or confirmation
memos. Soudha block books or confirmation memos are provided by the stock exchange. The
details are recorded in these books also. The prices at which different scrips are traded on a
particular day published on the next day in the newspapers. An authorized representative of the
stock exchange is also present in the hall to supervise the trading.

PREPARATION OF CONTRACT NOTES

Usually, the authorized clerks enter the particulars of the business transacted during a
particular day in ‘Kacha Sauda Book’ they are transferred to ‘Pucca Sauda Book’, which are
maintained separately for the ready delivery contracts. Then the broker/authorized clerk
prepares a contract note. A contract note is a written agreement between the broker and his
client for the transaction executed. It contains the details of the contract made for the
purchase/sale of Securities, the brokerage chargeable, name of the company, number of shares
bought/sold, net rate, etc., it is prepared in a prescribed from and a copy of it is also sent to the
client.

 PLACING ORDER WITH THE BROKER:

The next step is placing an order for the purchase/sale of securities with the broker. The order
is usually placed over telephone, fax. It can also take the form of telegram or letter or in
person. The order placed may be any of the following varieties (largely classified on the basis
of price limits that it imposes.)

 AT BEST ORDER (OR) BEST RATE ORDER:

“Buy 1000 XYZ ltd.”, it does not specify any price. It means buy XYZ Ltd. Securities at the
prevailing market price. These are executed very fast as there is no price limits.

 LIMIT ORDER:

26
“Buy 100 XYZ Ltd. At Rs 100”, it is an order for the purchase of shares at a specified price by
the client.(Rs 100)

 LIMITED DISCRETIONARY ORDER:

“Buy 1000 XYZ Ltd., around Rs.100”. it gives discretion to the broker. The price can be a
little above Rs 100. How much discretion is implied depends on how the broker and client
define around.

 OPEN ORDER:
It is an order to buy or sell without fixing any time or price limit on the execution of the order.

 STOP LOSS ORDER:

“Buy 100 XYZ Ltd. @ Rs 12 to stop Rs 10”. It means buy 100 XYZ Ltd securities at the
market rate of Rs. 12 but if on the same day the price falls to Rs. 10 immediately sell of the
securities /shares. Thus an attempt is made to limit the loss of sudden unfavorable shift in the
market.
 NET RATE ORDER:
“Buy 1000 XYZ Ltd. @Rs.30 net “would mean that the client is willing to buy 1000 XYZ Ltd.
For no more than Rs.30 per security inclusive of brokerage payable to the broker. Net rate is
purchase or sale rate minus brokerage.

 MARKET RATE ORDER:

Market rate is net rate plus brokerage for purchase and net minus brokerage for sale. So, “Buy
1000 XYZ Ltd. @Rs.30 market” would mean that the client is willing to pay Rs.30 plus
brokerage for each security of XYZ Ltd.

CLEARING HOUSE

27
The exchange has a clearing house as a part of its Market Operations Department to collect the
securities from all members and distribute to each member, all the securities that are due to
him in respect of every settlement. The whole of the operations of the clearing house are
computerized. CH is like are bank where all the members of India bulls. maintain their
accounts. CH acts as a member between the buyer and seller. It gets a record of all the
transactions (buying and selling) done by a particular week and process these transactions and
directs the members to deliver the shares or make payment on the pay-in day.

On the payout day, the CH gives the delivery and the payment to the members according to
their respective positions. There are 5 counters in the India bulls, CH where bad deliveries,
auction, odd-lot shares transaction, spot transaction etc.., are dealt in respect of all the
transactions done from Monday to Friday all the shares will have to be delivered through the
India bulls. CH as per the settlement program field, which is generally, a Saturday on next.

NORMAL TRANSACTION:
In case of regular transaction, shares are deposited in clearing house on Tuesday and
Wednesday. Payout will be on Thursday. Deliveries will also be on Thursday.

STOCK MARKET TRADING ON INTERNET

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

ADVANTAGES OF INTERNET TRADING

 It will help in reducing transaction costs particularly for overseas and remote
located investors.

28
  It will provide real time quotes and on-line trading facility at a much cheaper cost.
 Facility of transaction business from the terminal of the investors and will help him
making rational judgment or decisions.
 It will bring down the brokerages fees and increases the trading volumes.
 Quick response in transaction i.e. giving the order verification and
acknowledgement.
 It allows transparent companies of services and easy price discovery.
 It is easy enough to set up either as individual account for margins trading or settle
transactions by credit card.
 It is easy for brokers to monitor and maintain online accounts and the possibility of
miss-trading is less.
 Surveillance is easy as there is very less scope for speculation
 The investor is provided with best offer
 Trading procedure is easy and fully automated.

Easier transaction processing.

Profit in time:
Investor can make profits by selling shares when the going is good. They do not have to
instruct their brokers on the cut off price to sell shares.

Ease and transparency:

Since the broking, bank and demat account are all electronically connected, all transaction get
updated, demat account shows the latest stockholding statement while the bank account shows
the balance amount after buying or selling of shares.

Precaution:
Check for hidden costs of broker’s age. Beware of net seamstress. Never double click the
mouse during execution of trade avoids cyber cafes and change password regularly.
Less fees:
Shares traded online require no human intervention to match buys and sells. This means that
commission costs are cut dramatically for the frequent investor.

29
PROBLEMS OF ONLINE TRADING
 All the stock exchanges in India were mechanized in the year 1994
November. That was the year when the stock exchanges introduced screen based
trading across the country.
 While on line trading gives you speed and price advantage, there is some
risk and disadvantage to entering orders on-line. The page alerts you to any pitfalls
you should watch out for if you want to use the internet to trade stocks.
 If you do commit to trading online, you must be careful when you enter
stock orders. It is easy to make mistakes, but the market and your brokers may not
be sympathetic. Once an order is submitted, there may be nothing you can do to take
it back if you made a mistake. The various types of orders you enter can be
confusing.
 Individuals are restricted to first hand financial guidance. This simply
means that the individual is himself/herself alone to make the decisions.
 Tax (sales tax and value added tax) evaluation becomes an issue, especially
when you are trading internationally.
 Changes are that one has no idea who is dealing with on the other end, so it
is advisable to gather all the possible information about the party one is dealing
with. In short are full knowledge is to be known.
 Online trading as left individual open to too much information. This is
harmful since it leaves brokerages wide open to sensitive data.
When network crashes there will be problems and delays due to a large influx of traffic and
rapid online trading criteria. For instance on 27th Oct 1997 there was a one day crash, which
caused online trading on the New York Stock Exchange to stop and brokers were unable to
conduct business.
If you are going to trade online, you were obviously the one making all the trading choices. To
make your trading decisions, you need to research your stocks and constantly pay attention to
market news. This will require some time, as you pursue your sources of market information
and use online tools

CLEARING & SETTLEMENT TRADING MECHANISM

30
The clearing and settlement mechanism in India securities market has witnessed several
innovations during the last decade. These include use of the state-of-art information
technology, compression of settlement cycle, dematerialization and electronic transfer of
securities, securities lending and borrowing, professionalization of trading members, fine-
tuned risk management system, emergence of clearing corporation to assume counterparty risk
etc., though many these are yet to permeate the whole market.
Till recently, the stock exchanges in India were following a system of account period
settlement for cash market transactions, expert for transaction in a few active securities, which
were settled under t+3 rolling settlement. The rolling settlement has been introduced for all
securities. With effect from April 1, 2003 T+2 rolling settlement has been introduced. The
stock exchanges were also offering deferral products to provide leverage to members to
postpone their settlement obligations. The transactions are not settled immediately but after 2
days after the trade day. The members receive the funds/securities in accordance with the pay-
in/pay-out schedules notified by the respective exchanges. Given the growing volume of trades
and market volatility, the time gap between trading and settlement gives rise to settlement risk.
In recognition of this, the exchanges and their clearing corporation employ risk management
practices to ensure timely settlement of trades. The regulators have also prescribed elaborate
margining and capital adequacy standards to secure market integrity and protect the interests of
investors. The exchanges not providing counter-party guarantee have been advised by SEBI to
set up trade guarantee funds, which would honor pay-in liabilities in the event of default by a
member. In pursuance to this, 16 out of 23 exchanges have set up trade/settlement guarantee
funds. The trades are settled irrespective of default by a member and the exchange follows up
the defaulting member subsequently for recovery of his dues to the exchange. The market has
full confidence that settlements will take place in time and will be completed irrespective of
possible default by isolated trading members.
Movement of securities has become almost instantaneous in the dematerialized environment.
Two depositories viz., National Securities Depositories Ltd. (NSDL) and Central Depositories
Services Ltd. (CDSL) provide electronic transfer securities and more than 99% of turnover is
settled in dematerialized form. All actively traded scrip’s are held, traded and settled in Demat
form. The obligations of members are downloaded to members/custodians by the clearing
agency. The members/custodians make available the required securities in their pool accounts
with Depository Participants (DPs) by the prescribed pay-in time for securities. The depository

31
transfers the securities from the pool accounts of members/custodians to the settlement account
of the clearing agency. As per the schedule determined by the depository from the settlement
account of the clearing agency to the pool accounts of members/custodians. The pay-in and
pay-out of securities is affected on the same day for all settlements.

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

TRANSACTION CYCLE

Decision to Placing
Trade order

32
 Transaction cycle
Funds/ Trade
Securities Execution

Settlement Clearing of
of Trades Trades

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

a) Trade Recording: The key details about the trades are recorded to provide basis for
settlement. These details are automatically recorded in the electronic trading system of the
exchanges.
b) Trade Confirmation: The counterparties to trade agree upon the terms of trade like
security, price, and settlement date, but not the counterparty which is the NSCCL. The
electronic system automatically generates confirmation by direct participants. The ultimate
buyers/sellers of securities also affirm the terms, as the funds-securities would flow from them,
although the direct participants are responsible for settlement of trade.
c) Determination of obligation: The next step is determination of what counter-parties owe,
and what counter-parties are due to receive on the settlement date. The NSCCL interposes
itself as a central counterparty between the counterparties to trades and nets the positions so

33
 that a member has security wise net obligation to receive or deliver a security and has to either
pay or receive funds.
d) Pay-in or funds and Securities: The members bring in their funds-securities to the
NSCCL. They make available required prescribed pay-in time. The depositories move the
securities available in the accounts of members to the account of the NSCCL. Likewise
members with funds obligations make available required funds in the designated accounts with
clearing banks by the prescribed pay-in time. The CC sends electronic instructions to the
clearing banks to debit member’s accounts to the extent of payment obligations. The banks
process these instructions, debit accounts or members and credit accounts of the NSCCL.
e) Pay-out of Funds and Securities: After processing for shortages of funds/securities and
arranging for movement of funds from surplus banks to deficit banks through RBI clearing, the
NSCCL sends electronic instructions to the depositories/clearing banks to release pay-out of
securities/funds. The depositories and clearing banks debit accounts or the NSCCL and credit
accounts or members. Settlement is complete upon release of pay-out of funds and securities to
custodians/members. The settlement process for transactions in securities in the CM segment
of NSE is presented in the Figure 3.3.
f) Risk Management: A sound risk management system is integral to an efficient settlement
system. The NSCCL ensures that trading members’ obligations are commensurate with their
net worth. It has put in place a comprehensive risk management system, which is constantly
monitored and upgraded to pre-empt market failures. It monitors the track record and
performance of members and their net worth; undertakes on-line monitoring of members’
positions and exposure in the market collects margins from members and automatically
disables members if the limits are breached.

SETTLEMENT PROCESS IN CM SEGMENT OF NSE

NSE
1

8 9

DEPOSITORIE NSCCL CLEARING

S BANKS

34
6 7

2 3
5 4
CUSTODIANs/CMs
10 11

Explanations:

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

35
36
 CHAPTER-III
INDUSTRY & COMPANY PROFILE

INDUSTRY PROFILE

FINANCIAL MARKET:

Financial Markets are helpful to provide liquidity in the system and for smooth.
Functioning of the system. These markets are the provide facility for buying and selling
of financial times and services). The financial market match the demands of investment
with the supply of capital from various sources.

Based on functions financial markets are classified in two types. They are:
→ Money Market (Short term)

37
→ Capital Market (Long term)

According to Institutional basis classified into two types they are:

→ Organized financial market
→ Non- organized financial market
The organized market comprises of officials market represented by re organized
institutions bank and govt. (SEBI) registered/ controlled activities and intermediaries.
The unorganized market is of indigenous bank’s money lenders individuals professional
and non-professionals.

MONEY MARKET:
Money market is place where we can raise short term capital.
the money market Is classified into
→ Inter Bank call money market
→ Bill Market, and
→ Bank zone Market etc,

CAPITAL MARKET:
Capital Market is a place where we can raise long term capital.
Again the capital market is classified in two types and they are
→ Primary Market
→ Secondary Market

PRIMARY MAREKET:
Primary Market is generously referred to the market of new issues or market or
mobilization of resources by the companies and govt. undertaking for new project as also
for expansion modernization addition and diversification and up gradation. Primary
market also referred to as new issues market primary market operation include new
issues shares by new and existing companies further and right issue to existing shares
holders public offers and issue of debt instruments such as debentures, bonds etc.
The Primary market is regulated by the securities and exchange Board of India (SEBI)
govt. regulated authorities.

38
FUNCTION:
The main services of the primary market are organization underwriting and distribution
origin of the new issue underwriting contract make the shares predicable and remove the
element of uncertainty in the subscription, distribution refer to the sale of securities of
the investors.

The market intermediaries associates with the market.

1) Merchant buyer / book building leader manager.
2) Register and transfer agent.
3) Underwriter / Broker to the issue.
4) Advise to the issue.
5) Banker to the issue
6) Depository
7) Depository Participant

INVESTORS PROTECTION IN THE PRIMARY MARKET:

To ensure healthy growth of primary market the investing public should be protected, the
term investor protection has widely of investor protection are:
→ Provision of all the relevant information.
→ Provision of accurate information and
→ Transparent automate procedure without any bias.

SECONDARY MARKET:
The primary market deals with new issue of securities are trade in the secondary market
which is commonly known as stock market or stock exchange “the secondary market is a
market where script are traded”, it is a market place which provide liquidating to the
script issued in the primary market, these the growth of secondary market depends on the
primary market. More the number of companies entering the primary market the greater
are the volume of trade at the secondary market.

39
Trading activities in the secondary market are done through the recognized stock
exchange which the 23 in number including over the counter exchange of India (OTCE)
national stock exchange of India and inter com stock exchange of India.
Secondary market operations involve buying and selling of securities on the stock
exchange through its members, the companies hitching the primary market are
mandatory to list their shares on one or more, stock exchanges in India. Listing of scripts
provides liquidity and offers an opportunity to the investor to buyer sell the scripts.
The following are the intermediaries in the secondary market.

HISTORY OF STOCK EXCHANGE:

The only stock exchange operating in the 19th century were those of Bombay set up in
1875 and Ahmadabad set up in 1894. These were organized as voluntary nonprofit
marketing associated of brokers to regulate and project their interests, before the control
on securities under the Bombay securities contracts act to 1925 used to regulate trading
in securities. Under this act the Mumbai stock exchange was recognized in 1927 and
Ahmadabad in 1937, during the war boom a number of stock exchange were organized.
Soon after it became a Central subject Central legislation was proposed and a committee
headed by A.D. Gorwala went into the bill for securities regulation on the basis of the
committee recommendations and public discussion. The securities recommendations
and public discussion the security contract act become law in 1956.

FUNCTIONS OF STOCK EXCHANGE:

Stock Exchange provides liquidity to the listed Companies. By giving to the listed
Companies they help trading and raise funds from the market over the hundred and
twenty year during which the stock exchange have existed in this country and through
their medium the central and state Govt. have raised crores of rupees by floating public
loans, municipal corporations trust and local bodies have oriented from the public their
financial requirement and industry trade and commerce the back bone of the country
economy have secured capital shares and debentures for financing their day-to-day
activities, organizing new venture and completing projects of expansion diversification
and modernization. By obtaining the listing and trading facilities public investment in

40
increased and companies were able to raise more in increased and companies were able
to raise more funds, the quoted companies with wide public interest have enjoyed some
benefits and assets valuation has became easier for tax and other purpose.
1) Broker/ member of stock exchange buyer’s broker and server broker.
2) Portfolio Manager.
3) Investment Advisor
4) Share Transfer agent
5) Depository
6) Depository Participation.

STOCK MARKET IN INDIA:

Stock exchanges are the perfect type of market for securities whether of Govt. and semi
Govt. bodies or other public bodies as also for shares and debentures issued by the Joint
stock Companies in the stock market purchases and sales of shares are affected in
conditions of competition, Govt. securities are traded outside the trading ring in the form
of over the counter sales or purchase.
The bargains that are stock in the trading ring by the member of the stock exchanges are
at the fairest price determined by the basis laws of supply and demand.

DEFINITION OF STOCK EXCHANGE:

Stock Exchange means anybody or individuals whether incorporated or not constituted
for the purpose of assisting regulating or controlling the business of buying selling or
dealing securities, the securities includes:
→ Shares of Public Company
→ Government Securities
→ Bonds

NSE:

41
The National Stock Exchange of India limited has genesis in the report of the high
powered study group on establishment of new stock exchange, which recommended
promotion of a national stock exchange by financial institutions to provide access to
investor from all across the country on an equal footing. Based on the recommendation
(NSE was promoted by leading financial institutions at the best of the government of
India and was incorporated in November 1992). As a term paying company unlike other
stock exchange in the country on its recognition as a stock exchange under the securities
contracts act 1956 in April 1993 NSE commenced operations in the wholesale debt
market (WPM) segment in June1994. The capital market segment commenced
operations in November 1994 and operations in derivatives segment commenced in June
2000.
NSE mission is setting the agenda for change in the securities market in India. The NSE
was set up with the main objectives are:
→ Establishing a nationwide trading facility for equities and debt instruments.
→ Ensuring equal access to investor all over the country through and appropriate
communication network.
→ Providing a fair efficient and transparent securities market to investor using
electronic trading system.
→ Establishing shorter settlement cycles and book entry settlement system
→ Meeting the current international standard of securities market
The standard set by NSE in terms of market practices and technology, have became
industry bench mark and are being cumulated by other market participants. NSE is more
than a more market facilitator. It’s that force which is guiding the industry towards new
horizons and greater opportunities.

BSE:
The stock exchange Bombay popularly known as “BSE” was established in 1875 as
“The Native share and stock broken Associates”. It is the oldest one in Asia even older
than the Tokyo stock exchange which was established in 1878. It is a voluntary non-
profit making association of personal and is currently engaged in the process of
converting itself into demutualised and corporate entity. It has involved over the years
into its present status as the premier stock exchange in the country. (It is the first stock

42
exchange in the country to have obtained permanent recognition in 1956 from the Govt.
of India under the securities contracts 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 ensure redresses of their grievances whether against the
companies or its own member brokers, it also strives to educate and en lighter the
investor education programmer and making available to them necessary information
inputs.
A Governing Board having 20 directors is the apex body which decides the policies and
regulates the affairs of the exchange, the governing board consists of 9 elected directors
who are from the broking community three SEBI nominees six public representatives
and an executive director & chief executive officer and a chief operating officer.
The Executive Director as the chief Executive Officer is responsible for the day to day
administration of the exchange and the chief operating officer and other heads of
Department assist him.
The exchange has inserted new rule No.126 A in its rule By laws pertaining to
Constitution of Executive Committee of the exchange. Accordingly an executive
committee consisting of three elected directors three SEBI nominees or public
representative executive director & CEO and chief operating officer has been
constituted, the committee considers judicial & Quasi matter in which the governing
board has power as an appellate Authority matters regarding annulment of transactions,
admission continuance and suspension of member brokers declaration of a member –
broker as defaulter norm procedures and other matter relating to arbitration fees deposits
margins and other monies payable by the member – brokers to the exchange.
Regulatory frame work of Stock Exchange:
A comprehensive legal frame work was provided by the “Securities Contract Regulation
Act, 1956” and “Securities Exchange Board of India 1952”.three tier regulatory structure
comprising.
→ Ministry of Finance
→ The Securities and Exchange Board of India.
→ Governing Body
Members of the Stock Exchange:

43
The Securities Contract Regulation Act 1956 has provided uniform regulation for the
admission of member in the Stock Exchanges; the qualifications for becoming a member
of recognized stock exchange are given below.
→ The minimum age prescribed for the member is 21 years.
→ He should be an Indian
→ He should be neither a bankrupt nor compound with the creditors.
→ He should not convicted for fraud or dishonesty.
→ He should not be engaged in any other business connected with a company.
→ He should not be a defaulter of any other stock exchange.
→ The minimum required education is a pass in 12th standard examination.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI):

The Securities and Exchange Board of India was constituted in 1988 under a resolution
of Government of India, it was later made statutory body by the SEBI Act, 1992.
According to this act the SEBI shall constitute of a Chairman and four other members
appointed by the Central government.
With the coming into effect of the Securities and Exchange Board of India Act 1992
some of the powers and functions exercised by the Central Government in respect of the
regulation of stock exchanges were transferred to the SEBI.
Objectives and functions of SEBI:
→ To protect the interest of investor in Securities.
→ Regulating the business in Stock Exchange and any other securities market.
→ Registration and regulating the working of intermediaries associated with
securities market as well as working of mutual funds
→ Promoting and regulating self – regulatory organizations
→ Prohibiting insider trading in securities
→ Regulating substantial acquisition of shares and takeover of Companies.
→ Performing such function and exercising such powers under the provisions of
Capital issues Act 947 and the Securities to it by the Central Government.

SEBI GUIDELINES TO SECONDARY MARKETS (STOCK EXCHANGE):

44
Board of Directors of Stock Exchange has to be reconstituted so as to include non-
member public representative and Government representative to the extent of 50% of
total number of members.
Capital adequacy norms have been laid down for the members of various stock
exchanges depending upon their turnover of trade and other factors.
All recognized stock exchanges will have to inform about transactions with in 24 hrs.

TYPES OF ORDERS:
Buy and sell orders placed with members of the stock exchange by the investors, the
orders are to different types.

Limit Orders:
Orders are limited by a fixed price, eg.” Buy Reliance Petroleum at Rs.50/- Here the
order has clearly indicated the price at which it has to be bough and the investor is not
willing to give more than Rs.50/-.

Best Rate Order:

Here the buyer or seller gives the freedom to the Broker to execute the order at the best
possible rate quoted on the particular date for buying it may be lowest rate for buying
and highest rate for selling.

Discretionary Order:
The Investor gives the range of price for purchase and sale, the broker can use his
discretion to buy within the specified limit. Generally the approximation price is fixed,
the order stands as this “buy BRC 100 shares around Rs.40/-”.

Stop Loss Order:

45
The Orders are given to limit the loss due to unfavorable price movement in the market.
A Particular limit is given the broker is authorized to sell the shares to prevent further
loss.
Eg:- Sell BRC Limited at Rs.24/-, stop loss at Rs.22/-.

BUYING AND SELLING SHARES:

To buy and sell the shares the investor has to locate register broker or sub broker who
render prompt and efficient service to him, the order to buy or sell specifying the number
of shares of the company of investors choice is placed with the broker. The order may b
of any type. After receiving the order the broker tries to execute the order in his
computer terminal. Once matching order is found. The order is executed, the broker then
delivers the contract note to the investor, it gives the details regarding the name of the
company number of shares bought, price, brokerage and the date of delivery of share in
this physical trading form one the brokers gets the share certificate through the clearing
houses he delivers the share Certificate along with transfer deed and stamp, it the stamp
duty is one of the percentage considerations the investor should lodge the share
certificate and transfer deed to the register or transfer deed to the register or transfer
agent of the company.
If it is bought in the DEMAT Form the broker has to give a matching instruction to his
depository participant to transfer share bought to the investor account, the investor
should be account holder in any of the depository participant to transfer shares case of
sale of shares on receiving payment from the purchasing broker the broker effects the
payment to the investor

SHARE GROUPS:
The scrips traded on the BSE have been classified into A1, B1, B2, C, F and Z groups,
the ‘A’ group represent those which are in the carry forward system. The ‘F’ group
represents the debt market segment, the Z group scripts are of the black listed
companies, the ‘C’ group covers the odd lost securities in ‘A’, ‘R1’ & ‘R2’ groups.

46
HOLDING SETTLEMENT SYSTEM:
Under rolling settlement system the settlement takes place n days, after the trading day
the shares bought and sold paid in for n days after the trading day to 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
advantage of the system. Generally settlement periods are short end gradually.
SEBI made is 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. one crore or
more.
Then it was extended to stocks in modified carry forward scheme automated lending and
borrowing mechanism and borrowing and lending securities scheme with effect from
Dec 31 2001.
SEBI has introduced its 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 investor from 1st April, 2003.

COMPANY PROFILE

Indiabulls is India’s leading Financial and Real Estate Company with a wide presence
throughout India. They ensure convenience and reliability in all their products and
services. Indiabulls has over 640 branches all over India. The customers of Indiabulls are
more than 4,50,000 which covers from a wide range of financial services and products

47
from securities, derivatives trading, depositary services, research & advisory services,
consumer secured & unsecured credit, loan against shares and mortgage & housing
finance. The company employs around 4000 Relationship managers who help the clients
to satisfy their customized financial goals. Indiabulls entered the Real Estate business in
the year 2005 with its group of companies. Large scale projects worth several hundred
million dollars are evaluated by them.
Indiabulls Financial Services Ltd is listed on the National Stock Exchange (NSE),
Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange. The market
capitalization of Indiabulls is around USD 2500 million (29thDecember, 2006).
Consolidated net worth of the group is around USD 700 million. Indiabulls and its group
companies have attracted USD 500 million of equity capital in Foreign Direct
Investment (FDI) since March 2000. Some of the large shareholders of Indiabulls are the
largest financial institutions of the world such as Fidelity Funds, Goldman Sachs, Merrill
Lynch, Morgan Stanley and Farallon Capital.

Growth of India bulls

Year 2000-01:
One of India’s first trading platforms was set up by India bulls Financial Services Ltd.
with the development of an in-house team.
Year 2001-03:
The service offered by India bulls was increased to include Equity, F&O, Wholesale
Debt, Mutual fund, IPO Financing/Distribution and Equity Research.
Year 2009-2010:
In this particular year India bulls ventured into Distribution and Commodities Trading
business.

India bulls Financial Services Ltd

The Board of Directors
 Sameer Gehlaut Chairman and CEO
 Gagan Banga Executive Director
 Rajiv Rattan CEO
 Shamsher Singh Director

48
 Aishwarya Katoch Director
 Karan Singh Director
 Prem Prakash Mirdha Director
 Saurabh K Mittal Director
 Amit Jain Company Secretary

49
 Senior Vice President

Regional Manager

Branch Manager
Senior Sales Manager

Support System Sales Function

RM/SRM
Back Office Local Compliance
Executive Officer

ARM

Dealer

ORGANIZATION STRUCTURE- BOARD OF DIRECTORS:

50
 TRADING PRODUCTS OF INDIA BULLS SECURITIES

Indiabulls Securities
Trading Products

Cash Account Intraday Account Margin Trading

51
India bulls Securities provide three products for trading. They are
 Cash Account
 Intraday Account
 Margin Trading (Mantra)

Cash Account: It provides the client to buy 4 times of cash balance in his trading
account.
Intraday Product: It provides the client to buy 8 times of his cash balance in the trading
account.
Mantra Account: Also called as margin trading, is a special account to buy on leverage
for a longer duration

India bulls Financial Services Ltd

India bulls Financial Services Ltd. was incorporated in the year 2005.The Auditors of
India bulls Financial Services Ltd. are Deloitte, Haskins & Sells. The main activity of
this company is in relation to securities and stock brokerage. It was also responsible for
setting up one of India’s first trading platforms.

The subsidiaries of India bulls Financial Services Ltd. include:

 India bulls Capital Services Ltd.
 India bulls Commodities Pvt. Ltd.
 India bulls Credit Services Ltd.
 India bulls Finance Co. Pvt. Ltd
 India bulls Housing Finance Ltd.
 India bulls Insurance Advisors Pvt. Ltd.
 India bulls Resources Ltd.
 India bulls Securities Ltd.

52
The Bankers of India bulls Financial Services Ltd. are as follows:
 ABN-Amro Bank
 Andhra Bank
 Bank of Maharashtra
 Bank of Rajasthan Ltd.
 Canara Bank
 Centurion Bank of Punjab Ltd.
 Citibank
 Corporation Bank
 Dena Bank
 HDFC Bank Ltd
 HSBC Ltd.
 ICICI Bank Ltd.
 IDBI Ltd
 Industrial Bank Ltd.
 ING Vysya Bank Ltd
 Karnataka Bank
 Punjab National Bank
 State Bank Of India
 Syndicate Bank
 Union Bank Of India
 UTI Bank Ltd.
 Yes Bank Ltd.

53
VISION

At MNCL success is built on teamwork, partnership and the diversity of the people. At
the heart of our values lie diversity and inclusion. They are a fundamental part of our
culture, and constitute a long-term priority in our aim to become the world's best
international bank.

VALUES
 Responsive
 Trustworthy
 Creative
 Courageous

MISSION

 Participation:- Focusing on attractive, growing markets where we can leverage

our relationships and expertise
 Competitive positioning:- Combining global capability, deep local knowledge
and creativity to outperform our competitors
 Management Discipline:- Continuously improving the way we work, balancing
the pursuit of growth with firm control of costs and risks Commitment to
stakeholders
 Customers:- Passionate about our customers' success, delighting them with the
quality of our service
 Our People:- Helping our people to grow, enabling individuals to make a
difference and teams to win
 Communities:- Trusted and caring, dedicated to making a difference
 Investors:- A distinctive investment delivering outstanding performance and
superior returns
 Regulators: - Exemplary governance and ethics wherever we are.

54
MANAGEMENT TEAM

Mr. Ashwini Omprakash Kumar Deputy Managing Director

Mr. Ajit Kumar Mittal Executive Director

Mr. Sachin Chaudhary Executive Director

Mr. Satish Chand Mathur Independent Director

Mr. Shamsher Singh Ahlawat Independent Director

Mr. Achuthan Siddharth Independent Director Justice(Retd)

Mr. Gyan Sudha Misra Independent Director

Mr. Dinabandhu Mohapatra Independent Director

Mr. Prem Prakash Mirdha Independent Director

Mr. Subhash Sheoratan Mundra Non Exe.Chairman & Ind Director

Mr.Gagan Banga VC & Mng Director & CEO

55
KEY EXECUTIVES

Mr. Mukesh Garg Chief Financial Officer

Mr. Nafees Ahmed Chief Information Officer

Mr. Sachin Chaudhary Chief Operating Officer

Mr. Naveen Uppal Chief Risk Officer

Mr. Amit Jain Co Secretary and Compl. Officer

Mr. Ashwin Mallick Head

Mr.Ramnath Shenoy Head

Mr. Somil Rastogi Head

56
 CHAPTER-IV
DATA ANALYSIS & INTERPRETATION

57
TRADING SYSTEM IN INDIA BULLS

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

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

CLEARING AND SETTLEMENT

58
In tune with the SEBI decision, INDIA BULLS has implemented T+2 settlement cycle
from April 1, 2003. The total delivery-in/delivery-out and pay-in/pay-out of Traders and
Dealers are computed on a netted basis. After netting, the net position for each centre is
computed. If there is a settlement position at a centre, then funds or securities are moved
in and out from one centre to another, as the case may be, so as to fulfill the total pay-in
or pay-out position of funds and securities. The movement of funds is through HDFC
Bank and ICICI Bank. The settlement of securities takes place only in a dematerialized
mode using both the depositories in India, i.e. National Securities Depository Limited
(NSDL) and the Central Depository Services(India)Limited(CDSL).Pay-in of funds is
done by way of direct debits to the settlement accounts maintained by the Traders and
Dealers with HDFC Bank and ICICI Bank. In the case of margins, debits are affected on
T+1 by electronically debiting the settlement accounts of Traders and Dealers.
Similarly, pay-out of funds is affected by the Exchange through direct credits to the
settlement accounts of the Traders and Dealers.

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

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

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

59
 INVESTOR PROTECTION
All settlement liabilities amongst Traders and Dealers of INDIA BULLS are guaranteed by the
Exchange’s Settlement Guarantee fund. In addition, investors are protected against non-
fulfillment of commitments by Traders/Dealers through the Investor Protection Fund.

Region wise Distribution of Traders and Dealers

(As on February 1, 2022)

Registered Registered
Region States Covered Total
Dealers Traders
West Goa, Gujarat, Maharashtra 194 45 349
Haryana, Jammu & Kashmir, Delhi, Punjab,
North 71 15 86
Rajasthan, Uttaranchal, Uttar Pradesh
Assam, Bihar, Jharkhand, Orissa, West
East 77 74 151
Bengal
Andhra Pradesh, Kerala, Karnataka, Tamil
South 11 119 130
Nadu
Central Chattisgarh, Madhya Pradesh 9 14 23
TOTAL 362 267 629

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DEMATERIALIZATION
Dematerialization is a process by which physical shares of investors are converted to an
equivalent number of Securities in electronic form and credited in the investor’s account with
his Depository Participant.
Dematerialized trading is now compulsory for all investors. Beginning of first week of January
1999, investor can trade in specific scripts in the Demoralization form. They can provide and
receive delivery only in a Dematerialized form and share certificate will not be changed for
these scripts.
A depository is an organization where Securities of shareholder are held in the electronic form
at the request of the shareholder through Depository Participant (DPs). The system is
comparable to that in a bank. If an investor wants services offered by a depository, he would
have to open an account with it through a DP- similar to opening an account with any other
branches of the bank in order to avail of its services.

Dematerialization is a process by which physical certificates of an investor are taken back by

the company/registrar and actually destroyed and an equivalent number of Securities are
credited in the depository account of those investors. A Depository Participant is investor’s
agent in the system. He maintains investor’s Securities account and intimates the status of
holdings from time to time to the investor.

61
 Basic Terminologies on Demat Settlement
Refers to the process whereby all those who have made purchases make a payment and
all those who have made sales deliver shares. The exchanges ensure that the buyers who
have paid for the shares purchased by them receive the shares. Similarly sellers who
have given delivery of shares to the exchange receive payment for the same.

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

PAY IN & PAY OUT:

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

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

Market Orders:

62
Market Orders can be placed only during market hours (i.e. when the exchange is open for
trading). Market Orders have different interpretations for both NSE and BSE.

SQUARE OFF:
Square Off means buying and selling, selling and buying on the same day. For example, if you
have bought 100 ` shares of INFTEC today morning and later on at the end of the day, if you
sell INFTEC, 100 shares, it just means that you have squared off your order.

1. OPENING CLEARING ACCOUNTS FOR SETTLEMENT OF TRADES:

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

CLEARING
ACCOUNT

DELIVERY POOL ACCOUNT RECEIPT

ACCOUNT ACCOUNT

63
 SELLING BUYING
CLIENT CLIENT

1. POOL ACCOUNT:
It has two roles to play in clearing of securities,
 Before pay in the selling client of the CM transfers Securities from his client account to
the CM pool account.
 The CM transfers the Securities from his pool account to the account of the buying client.

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

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

1. SETTLEMENT:
In the depository system, any trade that is cleared and settled through the clearing corporation
(CC/CH) is called market trade.

Procedure for pay-in of securities

64
 Give Receipt instruction to the DP for transfer of Securities from client account to the
pool account or give a standing instruction for the same.
 Delivery to CC/CH instruction for the transfer of Securities from pool and account to
delivery account for pay-in.

CLEARING DELIVERY POOL

ACCOUNT ACCOUNT

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

Procedure for pay-out of securities

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

CLEARING RECEIPT POOL

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

65
FLOW CHART TO EFFECT CLEARING AND SETTLEMENT OF MARKET
TRADES

Send receipt instruction for

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

Give delivery instruction to

your DP for transfer from
pool account to CC

On payout you will receive

securities from CC to your
pool a/c automatically Any time before or
after pay-out
Give delivery instruction
for transfer of securities
from pool a/c to client a/cs

Inter-Depository Transfers
A transfer of securities from an account in one depository to an account in another depository
is termed as an inter-depository transfer. This facility is quite similar to the account transfers
within NSDL.
It can be done only for Securities that are available for Dematerialization on both the
depositories. The account in NSDL can be either a clearing account or a beneficiary account.
For debiting the clearing account or the beneficial account with NSDL, the form for “inter-
depository delivery instruction” is required to be submitted by the clearing member/beneficial
owner to its DP.

66
For crediting the clearing account or the beneficial account, the standard instruction given for
automatically crediting the account is applicable. In case the standard instructions are not
given, then the form for “inter-depository receipt instruction” is required to be submitted by
the clearing member/beneficial owner to its DP.
As both the depositories are connected to each other, the batches to effect inter-depository
transfers are presently exchanged twice on the working day.
The issuer/registrar and transfer agent is informed about the transfer by both the depositories
and it amends its records accordingly.
Government Securities cannot be transferred from one depository to another using this facility.

NATIONAL SECURITIES DEPOSITORY LIMITED

NSDL was inaugurated in 1996, as the depository in the country to avoid the myriad problems
in settlement.
In depository system, Securities are held in securities (depository) accounts, which is more or
less similar to holding funds in the bank accounts. Transfer of ownership is done through
simple account transfer. This method does away with all the risks and hassles normally
associated with paper work. Consequently, the cost of transaction in depository environment is
considerably lower as compared to transaction in physical certificates.
Trading in dematerialized Securities is quite similar to trading in physical Securities. The
major difference is that at the time of settlement, instead of delivery/receipt of Securities in the
physical form, the same is affected through account transfer. Currently dematerializes trading
is available at NSE, BSE and CSE.
Exclusive Demat segment follows rolling settlement (T+2) cycle and the unified (erstwhile-
physical) segment follows account period settlement cycle.
All investors, other than the institutional investors, can deliver Securities either in the physical
or dematerialized form in the market.
From January 4, 1999, all categories of investors can deliver only in Dematerialized form with
respect to a select list of securities. However initially this was applicable only at those
exchanges, which have joined the depository, but SEBI has also specified that this list is to be
expanded in a phased manner. The settlement of trades in the stock exchanges is undertaken by
the clearing corporation (CC)/clearing house (CH) of the corresponding stock exchanges.

67
While settlement of Dematerialized Securities is effected through NSDL, the funds settlement
is effected through the clearing banks. The physical Securities are settled by the clearing
members directly with the CC/CH.

BENEFITS OF DEPOSITORY SYSTEM

In the depository system, the ownership and transfer of Securities takes place by means of
electronic book entries. At the outset, this system rids the capital market of the danger related
to handling of paper. NSDL provides numerous direct and indirect benefits, like:
 Elimination of bad deliveries-in the depository environment, once holding of an investor
are Dematerialized, the question of bad delivery does not arise i.e. they cannot be hold “under
objection”.
 Elimination of all risks associated with physical certificates-dealing in physical Securities
have associates security risks of stocks, mutilation of certificates, loss of certificates during
movements through and from the registrars, thus exposing the investor to the cost of obtaining
duplicate certificates and advertisement, etc.., This problem does not arise in the depository
environment.
 No stamps duty for transfer of any kind of Securities in the depository.
 Immediate transfer and registration of securities- in the depository environment, once the
securities are credited to the investors accounts on pay-out, he becomes the legal owner of the
securities. There is no further need to send it to the company’s registrar for registration.
 Faster settlement cycle-the exclusive Demat segment follow rolling settlement cycle of
T+2 i.e. the settlement of trades will be on the 2nd working day from the trade day. This will
enable faster turnover of stock and more liquidity with the investor.
 Reduction in brokerage by many brokers for trading in Dematerialized Securities-brokers
provide this benefit to investors as dealing in Dematerialized Securities reduced their back
office cost of handling paper and eliminates the risk of being the introducing broker.
 Faster disbursement of non-cash corporate benefits like rights, bonus, etc..,
 Reduction of problems related to change of address of investor, transmission, etc., in case
of change of address or transmission of Demat shares, investors are saved from undergoing the
entire change procedure with each company or registrar. Investors have to only inform their
DP with all relevant documents and the required changes are effected in the database of all the
companies, where the investor is a registered holder of Securities.

68
 Elimination of problems related to selling Securities on behalf of a minor- a natural
guardian is not required to take court approval Demat Securities on behalf of a minor. Ease in
portfolio monitoring since statement of account gives a consolidated position of investment in
all instructions.

69
 CHAPTER-V
FINDINGS
SUGGESTIONS
CONCLUSION

FINDINGS

70
The online in INDIA BULLS is introduced to reduce and eliminate all the discrepancies that
arise out of manual trading system. It has been developed to computerize the trading activity of
the broker. With the computerization of the trading activity, the number of transaction and the
volume of trading have increased to a great extent. INDIA BULLS is dealing in both BSE and
NSE.
The turnover of INDIA BULLS has gone up during 1998 with the introduction of online
trading system. The trading of INDIA BULLS of the first day was Rs. 37.00 crores.
Now the companies are also taking orders on phone call. Only INDIA BULLS is not in phone
order. Trading in Z securities is not available. (Z securities are those securities which are not
traded regularly). Bank account for instant transfer is also not available, which all the
companies dealing with online trading are giving instant bank a/c. all companies are giving
offline option while INDIA BULLS is not giving any offline options. Portfolio valuation is not
available. Moreover, only Govt securities and bonds are allowed for mutual trading.

SUGGETIONS

71
The overall performance of INDIA BULLS, DP and ONLINE TRADING is good. Here are
the suggestions for further improvements of the performance in the future.
 Volume of paper work is small but it is very complicated to maintain data in system
so try to reduce that by regular audit and updating data.
 Most of DPs do not have the necessary infrastructure to handle the high workload
of transactions lending to many error by DPs, so by giving full infrastructure
information to every DP can avoid this problem
 The pool a/c does not know the true owner of the shares and hence dividends are
paid to the broker instead of owners, by this broker can do any manipulations or any
fraud with the owner, for this the owner can loose his dividend. Hence for this try to
pay the dividend directly to the owner.
 If the shares are fake/forged which delivered by the broker the shareholder can
loose that system and have to receive another lot of issued shares from the broker in 21
days, this system stands abused as soon as possible.
 The online trading is easy to work but it is costly to maintain and difficult to learn.
 It should increase the speed of executing the orders.
 Mutual funds trading for other companies have to be encouraged. If phone orders
are encouraged, trading in z securities are allowed, bank account for instant transfer are
provided and offline option are given then INDIA BULLS would be definitely
improving in the turnover.
 Necessary steps should be taken by the exchanges to deal with the situation arising
due to break down in online trading.
 Instant bank account should be provided as the other companies are providing,
because this helps the INDIA BULLS in dealing directly with the investors.

CONCLUSION

72
The comprehensive study of on “online trading system and Clearing & settlements at India
bulls has been an enlightening experience stressing on the position aspects on security trading.
Dematerialization of shares and online trading has done in whole lot of good to the issuer,
investor, companies and country.
The Depository system has reduced the time lag in delivering and settlement of securities but
also supported the cause of providing more liquidity to the security holder, the need for setting
up of a depository, paper less trading through online trading system and settlement became in
evitable and unavoidable for the smooth and efficient functioning of the capital market. This
system has proven its worthy ness by increasing in the settlement will be done with in the day
in future is in itself an indication of how great a boon in this system of Online trading.
E-brokerages provide convenience, encourage increased investor participation and lead to
lower up front costs. In the long run, they will likely reflect increased market efficiency as
well. In short run, however, there are a number of issues related to transparency, investor’s
misplaced trust, and poorly aligned incentives between e-brokerages and markets, that may
impede true market efficiency.
For efficiency to move beyond the user interface and into the trading process, consumers need
a transparent window to observe the actual flow of orders, the time of execution and the
commission structure are various points in the trading process. In this regard, institutional
rules, regulations and monitoring functions play a significant role in promoting efficiency and
transparency along the value chain in electronic markets. Our analysis confirms that in the
context of online stock markets, the need for such intervention and oversight it particularly
strong.

73
 BIBLIOGRAPHY

TEXT BOOKS

74
1. Research Methodology, R. Panneerselvam (2008), Research design and Hypothesis
Testing (Chi-square Test), Sixth Edition 2008, Prentice Hall of India Pvt. Ltd.
Publishers. PP. 285-298.
2. Financial Management, I.M Pandey (2010), Scope and Function of finance, Financial
goals, 10th Edition 2010, Vikash Publishing House Pvt. Ltd. New-Delhi. PP. 2-7.
3. Investment Analysis and Portfolio Management, Prasanna Chandra (2008), Investment
Alternatives PP. 5, Approaches to investment decision making PP. 14-15, Behavioural
Finance PP. 294-302, 3rd Edition 2008, McGraw Hill Publishers- New-Delhi.
4. Investment Analysis and Portfolio Management - Prasanna Chandra
5. Investments - Sharpe & Alexander
6. Security Analysis and Portfolio Management - Fischer & Jordan

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www.eastindiavyapaar.com

JOURNALS

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