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PROJECT REPORTON

ONLINE TRADING

ATINDIABULLS SECURITIES LIMITED

IN PARTIAL FULFILLMENT OF THE AWARD OF MASTER OF BUSINESS ADMINISTRATION SUBMITTED TO

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DECLARATION

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ACKNOWLEDGEMENT:

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ABSTRACT:

The present project “Online Trading Mechanism” comprises of seven units.

Unit-I Deals with introduction about the project, objectives of the study, need, scope

and importance of the study.

Unit-II In this unit Research design, data sources, limitations, data collection methods

are discussed.

UNIT-III In this unit Industry profile i.e. Industry over view.

UNIT-IV In this unit, information regarding the project topic, different methods of

Theoretical base to the Study.

UNIT-V In this unit, analysis of data is done and presented.

UNIT-VI The findings and suggestions of the study are presented in this unit.

UNIT- VII In this unit, conclusions of the study is presented.

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CONTENTS

CHAPTER NUMBERS CONTENTS PAGE NO.

CHAPTER 1 INTRODUCTION 8

OBJECTIVES  10

NEED , SCOPE FOR STUDY 11-12

CHAPTER 2 METHEODOLOGY 14

LIMITATIONS 16

CHAPTER 3 ORGANIZATION PROFILE 29

CHAPTER 4 INTRODUCTION AND BRIEFING ABOUT PROJECT

TOPIC

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CHAPTER 5 INTERPRETATION 52

CHAPTER 6 FINDINGS AND SUGGESTION 77

CHAPTER 7 CONCULUSION 80

CHAPTER 8 BIBLIOGRAPHY 81

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CHAPTER – 1

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INTRODUCTION TO THE STUDY

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 tradeable on the stock

exchange. So are 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, National Stock Exchange, Inter-Connected Stock Exchange, Culcutta,

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

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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 spssecified for trading purpose. Contracts approved to be traded are the

following:

Spot delivery deals are for deliveries of shares on the same day or the next day as the

payment is made. Hand deliveries deals for delivering shares within a period of 7 to 14

days from the date of contract. 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)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.

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OBJECTIVES

The following are the objectives of the study

1. Reduce the eliminate operational inefficiencies inherent in manual system.

2. Increase trading capacities in the stock exchange.

3. Improve market transparency, eliminate unmatched trades and delayed reporting.

4. Provide on-line and off-line monitoring control and surveillance of the market.

5. Smooth market operation using technology while retaining the flexibility of

conventional trading practices.

6. Consolidate the trade’s data and interface with clearing settlement.

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NEED OF THE STUDY

Stock exchange integral part of capital market it is the most perfect type market for

securities whether government or semi-government bodies or other public bodies also for

shares and debenture issued by join stock enterprises.

Stock exchange provides liquidity to the listed company they give quotation to listed

companies and help in trading and raising funds from the market. Stock exchange

provides ready marketability and unequaled facilities of ownership of stocks, shares and

securities.

Stock market in India is more than a century old and has been functioning effectively

through the medium of recognized stock exchange the stock market which is an integral

part of the capital market has been major impact on the functioning opf the economy. In

turn, the agriculture industries growth and performance of corporate sector in particular,

reflecting the fundamentals in the economy would be influence the tone of capital and

stock markets, and since the capital market is playing major role in Indian Economy from

the past several years. There is need to study the capital market in India.

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SCOPE OF THE STUDY

The scope of the study is limited to ON-LINE trading mechanism of stock broking firm

in particular, Indiabulls, Hi-tech. City branch.

IMPORTANCE OF ON-LINE TRADING

In the present scenario to compete and survive the regional stock exchange would require

sound infrastructure and trading system as per international standards, due to the

following reasons.

With the introduction of on-line trading liquidity will improve considerably which

is very much essential for attracting small companies to the exchange.Before the

introduction of the on-line trading, outcry system was prevalent. Here the

member or the broker would stand at specified spot in trading hall. He is required

to shut out the name of the company, number of shares he has and the price of

shares. Ultimately a deal would be made between the buyer and seller and the

transfer of shares take place. With the use of online trading, surveillance became

easy as there is very less scope for speculation. The investor is provided with best

offer. Also transparency is observed in transactions.

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CHAPTER-2

RESEARCH

METHODOLOGY

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RESEARCH METHODOLOGY

Research design: - Research design is some statement or specification of procedure

for collecting and analyzing the information required for the solution of some specific

problem.

Here, the exploratory research is used to execute the study.

Data source: - The data source utilized to undertake the project is both primary and

secondary data.

The data collection methods include both primary and secondary collection

methods.

Primary data: This method includes the data collected from the personal interaction

with authorized members of Indiabulls Securities Limited.

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Secondary data: The secondary data collection method includes:

The lecturers delivered by the superintendents of respective departments.

The brochures and material provided by Indiabulls Securities Limited.

The data collected from the magazines of the NSE, BSE & Economic Times, etc.

Various books relating to the investments, capital market and other related topics.

LIMITATIONS OF THE STUDY:

1. The study is confined to online trading procedure only.

2. Problems of listing are not covered due to limited time and to keep the study

in manageable limits.

3. The study confined to the past 2-3 years and present system of the trading

procedure in the INDIABULLS SECURITIES LIMITED and the study is

confined to the coverage of all the related issues in brief.

4. The data is collected from the primary and secondary sources and thus is

subject to slight variation than what the study includes in reality.

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CHAPTER – 3

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INDUSTRY PROFILE

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INDUSTRY PROFILE

The following diagram gives the structure of Indian financial system:

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FINANCIAL MARKET:

Financial markets are helpful to provide liquidity in the system and for smooth

functioning of the system. These markets are the centers that provide facilities for

buying and selling of financial claims and services. The financial markets match the

demands of investment with the supply of capital from various sources.

According to functional basis financial markets are classified into two types.

They are:

Money markets (short-term)

Capital markets (long-term)

According to institutional basis again classified in to two types. They are

Organized financial market

Non-organized financial market.

The organized market comprises of official market represented by recognized

institutions, bank and government (SEBI) registered/controlled activities and

intermediaries. The unorganized market is composed of indigenous bankers,

moneylenders, individual professional and non-professionals.

MONEY MARKET:

Money market is a place where we can raise short-term capital.

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Again the money market is classified in to

Inter bank call money market

Bill market and

Bank loan market Etc.

E.g.; treasury bills, commercial papers, CD's etc.

CAPITAL MARKET:

Capital market is a place where we can raise long-term capital.

Again the capital market is classified in to two types and they are

Primary market and

Secondary market.

E.g.: Shares, Debentures, and Loans etc.

PRIMARY MARKET:

Primary market is generally referred to the market of new issues or market for

mobilization of resources by the companies and government undertakings, for new

projects as also for expansion, modernization, addition, diversification and up

gradation. Primary market is also referred to as New Issue Market. Primary market

operations include new issues of shares by new and existing companies, further and

right issues to existing shareholders, public offers, and issue of debt instruments such

as debentures, bonds, etc.

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The primary market is regulated by the Securities and Exchange Board of India

(SEBI a government regulated authority).

SECONDARY MARKET

The primary market deals with the new issues of securities. Outstanding securities are

traded in the secondary market, which is commonly known as stock market or stock

exchange. “The secondary market is a market where scrip’s are traded”. It is a market

place, which provides liquidity to the scrip’s issued in the primary market. Thus, 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. Trading activities in the secondary market are done through the

recognized stock exchanges which are 23 in number including Over The Counter

Exchange of India (OTCE), National Stock Exchange of India and Interconnected Stock

Exchange of India.

Secondary market operations involve buying and selling of securities on the stock

exchange through its members. The companies hitting the primary market are mandatory

to list their shares on one or more stock exchanges in India. Listing of scrip’s provides

liquidity and offers an opportunity to the investors to buy or sell the scrip’s.

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STOCK MARKETS IN INDIA:

Stock exchanges are the perfect type of market for securities whether of government 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 free competition. Government securities are traded outside the trading ring

in the form of over the counter sales or purchase. The bargains that are struck in the

trading ring by the members of the stock exchanges are at the fairest prices determined by

the basic laws of supply and demand.

Definition of a stock exchange:

“Stock exchange means any body or individuals whether incorporated or not, constituted

for the purpose of assisting, regulating or controlling the business of buying, selling or

dealing in securities.” The securities include:

Shares of public company.

Government securities.

Bonds

History of Stock Exchanges:

The only stock exchanges operating in the 19th century were those of Mumbai setup in

1875 and Ahmedabad set up in 1894. These were organized as voluntary non-profit-

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marking associations of brokers to regulate and protect their interests. Before the control

on securities under the constitution in 1950, it was a state subject and the Bombay

securities contracts (control) act of 1925 used to regulate trading in securities. Under this

act, the Mumbai stock exchange was recognized in 1927 and Ahmedabad in 1937.

During the war boom, a number of stock exchanges 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’s

recommendations and public discussion, the securities contract (regulation) act became

law in 1956.

Functions of Stock Exchanges:

Stock exchanges provide liquidity to the listed companies. By giving quotations to the

listed companies, they help trading and raise funds from the market. Over the hundred

and twenty years during which the stock exchanges have existed in this country and

through their medium, the central and state government have raised crores of rupees by

floating public loans. Municipal corporations, trust and local bodies have obtained from

the public their financial requirements, and industry, trade and commerce- the backbone

of the country’s economy-have secured capital of crores or rupees through the issue of

stocks, shares and debentures for financing their day-to-day activities, organizing new

ventures and completing projects of expansion, diversification and modernization. By

obtaining the listing and trading facilities, public investment is increased and companies

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were able to raise more funds. The quoted companies with wide public interest have

enjoyed some benefits and assets valuation has become easier for tax and other purposes.

The Major Stock Exchanges in India are:

NSE

The National Stock Exchange of India Limited has genesis in the report of the High

Powered Study Group on Establishment of New Stock Exchanges, which recommended

promotion of a National Stock Exchange by financial institutions (FI’s) to provide access

to investors from all across the country on an equal footing. Based on the

recommendations, NSE was promoted by leading Financial Institutions at the behest of

the Government of India and was incorporated in November 1992 as a tax-paying

company unlike other stock exchanges in the country. On its recognition as a stock

exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE

commenced operations in the Wholesale Debt Market (WDM) segment in June 1994.

The Capital Market (Equities) segment commenced operations in November 1994 and

operations in Derivatives segment commenced in June 2000

NSE's mission is setting the agenda for change in the securities markets in India. The

NSE was set-up with the main objectives of:

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Establishing a nation-wide trading facility for equities and debt instruments.

Ensuring equal access to investors all over the country through an appropriate

communication network.

Providing a fair, efficient and transparent securities market to investors using

electronic trading systems.

Enabling shorter settlement cycles and book entry settlements systems, and

Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology, have become

industry benchmarks and are being emulated by other market participants. NSE is

more than a mere market facilitator. It's that force which is guiding the industry

towards new horizons and greater opportunities.

BSE

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as

"The Native Share and Stock Brokers Association". It is the oldest one in Asia, even

older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary

non-profit making Association of Persons (AOP) and is currently engaged in the process

of converting itself into demutualised and corporate entity. It has evolved over the years

into its present status as the premier Stock Exchange in the country. It is the first Stock

Exchange in the Country to have obtained permanent recognition in 1956 from the Govt.

of India under the Securities Contracts (Regulation) Act 1956.The Exchange, while

providing an efficient and transparent market for trading in securities, debt and

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derivatives upholds the interests of the investors and ensures redresses of their grievances

whether against the companies or its own member-brokers. It also strives to educate and

enlighten the investors by conducting investor education programmers and making

available to them necessary informative 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 (one third of them retire ever year by

rotation), 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 Rules,

Byelaws pertaining to constitution of the Executive Committee of the Exchange.

Accordingly, an Executive Committee, consisting of three elected directors, three SEBI

nominees or public representatives, Executive Director & CEO and Chief Operating

Officer has been constituted. The Committee considers judicial & quasi matters in which

the Governing Board has powers as an Appellate Authority, matters regarding annulment

of transactions, admission, continuance and suspension of member-brokers, declaration

of a member-broker as defaulter, norms, procedures and other matters relating to

arbitration, fees, deposits, margins and other monies payable by the member-brokers to

the Exchange, etc.

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REGULATORY FRAME WORK OF STOCK EXCHANGE

A comprehensive legal framework 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:

The securities contract regulation act 1956 has provided uniform regulation for the

admission of members in the stock exchanges. The qualifications for becoming a member

of a recognized stock exchange are given below:

The minimum age prescribed for the members is 21 years.

He should be an Indian citizen.

He should be neither a bankrupt nor compound with the creditors.

He should not be 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.

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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 exchange were transferred to the SEBI.

ABOUT INDIABULLS

Indiabulls is India’s leading Financial Services and Real Estate company having over 640

branches all over India. Indiabulls serves the financial needs of more than 4,50,000

customers with its wide range of financial services and products from securities,

derivatives trading, depositary services, research & advisory services, consumer secured

& unsecured credit, loan against shares and mortgage & housing finance. With around

4000 Relationship Managers, Indiabulls helps its clients to satisfy their customized

financial goals. Indiabulls through its group companies has entered Indian Real Estate

business in 2005. It is currently evaluating several large-scale projects worth several

hundred million dollars.

Indiabulls Financial Services Ltd is listed on the National Stock Exchange, Bombay

Stock Exchange and Luxembourg Stock Exchange. The market capitalization of

Indiabulls is around USD 3,330 million (30th September 2007). Consolidated net worth

of the group is around USD 950 million (30th September 2007). Indiabulls and its group

companies have attracted more than USD 800 million of equity capital in Foreign Direct

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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.

Business of the company has grown in leaps and bounds since its inception. Revenue of

the company grew at a CAGR of 159% from FY03 to FY07. During the same period,

profits of the company grew at a CAGR of 184%.

Indiabulls became the first company to bring FDI in Indian Real Estate through a JV with

Farallon Capital Management LLC, a respected US based investment firm. Indiabulls has

demonstrated deep understanding and commitment to Indian Real Estate market by

winning competitive bids for landmark properties in Mumbai and Delhi.

GROWTH STORY

Indiabulls has emerged as one of the leading and fastest growing financial company in

less than two year, since its initial public offering in September 2004. It has a market

capitalization of around 3,330 million (30th September 2007) and consolidated net worth

of the group is around USD 950 million.

2000-01:

Indiabulls Financial Services Ltd. established India’s one of the first trading platforms with the development of an in house team.

2001-03:

Indiabulls expands its service offerings to include Equity, F&O, Wholesale Debt, Mutual fund, IPO distribution and Equity Research.

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2003-04:

Indiabulls ventured into Insurance distribution and commodities trading. Company focused on brand building and franchise model.

2004-05:

Indiabulls came out with its initial public offer (IPO) in September 2004. Indiabulls started its consumer finance business.

2005-06:

Indiabulls has acquired over 115 acres of land in Sonepat for residential home site development.

Merrill Lynch and Goldman sac, one of the renowned investment banks in the world have increased their shareholding in Indiabulls.

Indiabulls is a market leader in securities brokerage industry, With around 31% share in online trading,

2006-07:

Indiabulls entered in a 50/50 joint venture with DLF, Kenneth Builders & Developers (KBD). KBD has acquired 35.8 acres of land from Delhi Development Authority through a competitive bidding process for Rs 450 crore to develop residential apartments.

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CHAPTER – 4

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HISTORY OF ONLINE TRADING

TRADING DEFINITION

“The act of buying or selling of goods, services, securities or commodities”

ONLINE TRADING

The number of online “do-it-yourself” investor has grown at a remarkable rate since the

first electronic brokerage opened with virtual doors in 1994. this brokerage have

attracted over 6 million investors in less than have years. Now accounting for over 33%

of retail stock trades. While the numbering of online trading accounts represents just

12.5% of all accounts, that proportion is expected to increase to 33.2% by the end of

2005 as reported Fortune magazine on (October 2005) the number of e-brokerages has

also grown from 123 in 1994 to more than 200 in 2004.

With increased competition, commission per trade has fallen dramatically, roping

an average of 60 percent in 2002 and leveling off 2004. These developments are

commonly attributed to the efficiently of “fraction – free” electronic market that lower

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transaction information processing cost by reducing human intermediation. But how

efficient electronic markets, really? Rating of e-brokerage typically evaluates ease of use

quality of research, reliability, commission rates, customer service and reporting. These

studies however, have given insufficient attention to some less obvious factors, including

timeless of transaction execution and the ability of investors to obtain the “best prices”

these factors heavily influence investors total transaction costs.

A closer analysis of the online trading process reveals that, in many cases the only

thing that has changed as for as investment concerned is the interface, which now

involves web-based interaction. Despite proposed change in the securities trading

process and introduction of electronic trading system such as OptiMark, other process

determining market efficiency order flow, price discovery and order execution – remain

virtually unchanged.

In order to evaluate the true cost of on-line transaction we must separate the

efficiency, “perceived” by investors from the real efficiency of the transaction and

patterns of information flow beyond the interface itself. To understanding the difference

between perceived and real efficiency we have examined how the trade process

structured (often invisible to the investor).

Perceived efficiency determine largely by information provided by e-brokerage

that customer can verify, such as commission rates, and research, and is tempered by

investors attitude about risk and the degree to which they trust online brokerages. In

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contrast, real efficiency influenced by market structure and related transactional

arrangement. For example, overall cost structure for the investors can differ depending

on how intermediaries co-ordinates among themselves.

Global scenario:

Online Trading has become very popular in the last couple of years

because of the conveniences of ease and use. The numerous companies have gone

existed for as long as we can remember and talk about it. We are referring to the trade

gin the financial dealings, in current context trading buying and selling of financial

services including security through www.

Online Trading has basically replaces a phone call with Internet. Instead of

interacting with the brokers over the phones the customer is clicking the mouse though

Online Trading.

INVESTOR’S REASON S TO TRADE ONLINE

They have control over their accounts. Can make the own decision for

there.

Actions, there are independent.

It interesting cheap and easy, fast and convenience.

A lot of information is online so they can keep up-to date.

It will give greater choice and better realization.

Increase the business afloat

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It will lead brokerage commission

It will help to reduce the fraudulent rather than manually

It helps to increase the efficiency of the operation.

To easy to buy or sells the share through Online Trading

Transaction makes very quickly (T+2)

Easy transferable etc.

ONLINE TRADING IN INDIA

India ranks amongst the top 10 companies in terms of the market capitalization of

its stock market. India is gradually opening its stock market to foreign investors. A

beginning was made on 27 January 2000. when the chairman of securities and exchange

board of India (SEBI) authorized stock exchanges to provide Internet based trading

services to investors and also announced that foreign companies and individuals could

now trade on Indian aced against stocks to increase purchasing power.

TRADING METHODOLOGY

Trading in an interconnected the market would permit members of one exchange

to trade directly with the member of another participating exchange. This trading would

be in any form described as, exclusive regional trading, exclusive national market.

Hybrid trading system and the members would able to trade from his trade work station

by switching from one screen to another screen which deals with local trading to another

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screen which deals with inter-market trades would be communicated from the member

terminal via. The VAST to the central system to Bombay where they would match.

With the introduction of on-line trading liquidity will improve considerably which

is very much essential for attracting small companies to the exchange.

The Bombay Stock Exchange on-line security trading come in to existence in the

year 2000 the terminals in the members offices connected to the main server by telephone

lines and one operated through modems. Before the introduction of the on-line trading

outcry system was prevalent. Here the member or the broker would stand at specified

spot in trading hall. He is required to shut out the name of the company, number of

shares he has and the price of shares. Ultimately a deal would be made between the buyer

and seller and the transfer of shares take place by the present system of on-line trading.

DISADVANTAGES OF MANUAL SYSTEM

The scope for manipulation and speculation and malpractices were more.

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The time gap in many of the trading operations used to be more and liquidity

requirements could not meet quickly and early.

The audibility was another demerits of outcry system.

ADVANTAGES OF ON-LINE TRADING

Surveillance is easy as there is very less scope for speculation.

The investor is provided with best offer

Transparency in transaction

If enables arbitrate trading for members who one having NSE terminal also.

Easier transaction processing

PROCEDURES FOLLOWED IN ONLINE TRADING

Individual / Sole Proprietorship: Assets held in an individual account are owned and

may be used by only one person: You. A sole proprietorship is closely related in the

sense that the account is registered to a business with a single owner who is, in effect, the

business and therefore controls all of the assets in the account. If the individual or sole

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proprietor dies, the account assets pass to his or her personal estate. This is the most

popular account type at XPRESSTRADE.

Joint: If you’d like to trade with a spouse or friend, a joint account is your best bet.

However, there’s an important distinction between a tenancy-in-common account and a

right of survivorship account. As tenants-in-common, if one of the account owners dies,

interest and control of that person’s share of the assets passes to his or her estate. Thus, if

something were to happen to you, your share of the account would pass to the person or

persons you’ve specified in your will. With right of survivorship, if one of the account

holders dies, total interest and control of his or her share of the assets passes immediately

to the surviving account holder.

Corporation: This account is owned and registered in the name of a chartered

corporation. To open a corporate account, the organization will need to submit a

corporate resolution (we provide the appropriate form in our account application) that

approves the opening of the account and designates those officers, directors, or

employees authorized to act on behalf of the company. The corporate secretary, as well as

one other officer/director, must sign the application.

Limited Liability Company: This account is owned and registered in the name of a

Limited Liability Company, a specialized form of company created pursuant to the laws

of individual states with the U.S. This account is not available for use by non-U.S.

companies. The company will need to designate those managing members, members, or

other persons authorized to act on behalf of the company.

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Partnership: This account type can be used when a formal partnership (with a

partnership agreement and federal taxpayer ID number) – or an informal group of

individuals – wishes to open a trading account. In either case, the XPRESSTRADE

account would be registered in the name of the partnership itself. To open this type of

account, the formal partnership must submit a copy of its partnership agreement, and only

the general partner(s) need sign the account application. By contrast, in the case of the

informal group of people trading together, every individual participating in the account

must sign the application.

Trust: Trusts are separate, distinct legal entities, created by a formal trust instrument,

under which the trustee(s) holds legal title to assets for the benefit of others, known as

beneficiaries. To open a trust account at XPRESSTRADE, you must furnish the

agreement creating the trust, along with a completed trust account application.

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INTERNET TRADING AND ONLINE INVESTING

Information is the investor’s best tool when it comes to investing wisely. But

accurate information about “micro stops”. the low price stock receive by smallest of the

companies. May be difficult to find many micro cap companies do not find any financial

reports with SEC. So it is hard for investors to get the fact about the companies

management, products, services and finance. When reliable information is scares.

Frauds can easily false information about the micro cap companies. Making profits while

creating losses for unsuspecting in the battle against micro cap fraud.

What is Micro Cap stock trades?

In the term of micro cap stock applies to the companies with low or micro

capitalization. The total value of the company stock. Micro Cap Company typically

have limited assets. For Example in case were the SEC suspended trading in micro cap

stocks, the average company had only $6 Million in net tangible assets and nearly less

than $1.2 Million Micro Cap stock tend to be low priced and trading in low volumes.

Where do micro cap stocks trade?

Many micro stocks trade in the “Over the counter” (OTC) market and are quoted

on OTC systems, such as the OTC Bulletin Board (OTCBB) or the “Pink Sheets”.

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OTC Bulletin Board: The OTCBB is an electronic quotation system that displays real

time quotes. Last sale price and volume information for many OTC Securities that are

not listed on the NASIDAQ stock market or a national securities exchange. Brokers who

subscribers to the system can use the OTCBB to look up price to enter quotes for OTC

securities. Although the NASD oversees to OTCBB, the OTCBB is not part of the

NASDA2W. Stock Market. Fraudsters often claim that an OCTBB company is a

NASDAQ company to mislead investors in to thinking that the company is bigger than it

is.

The “pink sheets” named for the color of paper on which the have historically

been printed – are listing of price quotes for companies that trade in the OTC market.

How are micro cap stocks different from other stocks:

Lack of public information: the biggest difference between a micro cap stock and

other stocks is the amount of reliable, publicly available information above the company.

Large public companies file reports with the SEC that any investors can get for free from

the SECs website. The professional stock analysts regularly and write about large public

companies. And it’s easy to find stock price in the newspapers. In contract information

about micro cap companies can be extremely difficult to find, making them more

vulnerable to investment fraud scheme.

No minimum listing standards companies that their stocks on major exchange and

in the NASDAQ stock market must meet minimum listing standards. For example. They

must have minimum amount of net assets and minimum numbers of shareholders of

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shareholdes. In contrast, companies on the OTTCBB or the pink sheets do not have to

meet any minimum standards.

Risk: While all investments involve risk. Micro cap companies tend to be new and have

no prevent track record. Some of these companies have no assets or operation. Others

have products and services that are still in development or have yet to be tested in the

market. Another risk pertain to micro cap stocks involves the low volumes of trades.

Because micro cap stocks trade in low volumes, any size of trade can be have large

percentage impact on the price of the stock.

Which Companies file report with the SEC?

In general the federal laws required all about the smallest of public companies to

file reports with the SEC. A company can become a “public” in one of two ways – by

issuing securities in an offering or transaction that’s registered with SEC.

How to open online trading account for individual

Applying Electronically: If you decide to apply to establish a Trading Account with

GCI Financial Ltd (“GCI”), you agree to receive a Risk disclosure Statement, Trader

Agreement, Trader Account Letter, and Off Exchange Transaction Disclosure

Electronically.

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Electronic Communications: Risk Disclosure Statement, Trader Agreement, Trader

Account Letter and Off Exchange Transaction Disclosure and any notices, instructions,

agreements or any other communications regarding Transactions and your Account (all

of which are referred to herein as the “Communications”) may be presented, delivered,

stored, retrieved and transmitted electronically.

Executing Transactions Electronically: The Agreement and Transactions will be

executed using electronic records and electronic signatures.

Consenting to Do Business Electronically: The decision whether to do business

electronically is yours and you should consider whether you have the necessary hardware

and software capabilities. Your consent to do business electronically and our agreement

to do so, only applies to the establishment and maintenance of your Account and the

execution of Transactions in connection with your Account.

Withdrawal of Consent: You have the right to withdraw your consent to doing

business electronically at any time. However, if you withdraw such consent, any

Communications or Transactions between us during the period after your consent to

doing business electronically and before your withdrawal of such consent, will be valid

and binding on all parties.

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Changes to your Contact Information: You should keep us informed of any change

in your electronic or mailing address or other contact information.

Printing: You may print this document by selecting Print from the File menu.

Your Ability to Access Communications: When you select the “I Agree” button

below, you acknowledge that you have the capability to access the Communications.

Consent to Electronic Communications: When you select the “I Agree” button

below, you consent to having all Communications provided or made available to you in

electronic form.

Consent to Executing Transactions Electronically: When you select the “I Agree”

button below, you consent to executing the Agreement and Transactions by electronic

record and / or electronic signature.

Risk Disclosure Statement:

This brief statement (even though not required for OTC Trading) does not disclose

all of the risks and other significant aspects of trading in leveraged investments. In light

of the risks, you should undertake such transactions only if you understand the nature of

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the contracts (and contractual relationships) into which you are entering and the extent of

your exposure to risk. You should carefully consider whether trading is appropriate for

you in light of your experience, objectives, financial resources and other circumstances.

1. Effect of ‘Leverage’ or ‘Gearing’

Transactions in OTC accounts carry a high degree of risk. The amount of initial

margin is small relative to the value of the OTC contract so that transactions are

‘leveraged’ or ‘geared’. A relatively small market movement will have a proportionately

larger impact on the funds you have deposited or will have to deposit; this may work

against you as well as for you. You may sustain a total loss of initial margin funds and

any additional funds deposited with the firm to maintain your position. If the market

moves against your position or margin levels are increased, you may be called upon to

maintain your position. If the market moves against your position or margin levels are

increased, you may be called upon to pay substantial additional funds on short notice to

maintain your position. If you fail to comply with a request for additional funds within

the time prescribed, your position may be liquidated at a loss.

2. Risk-reducing orders or strategies

The placing of certain orders (e.g. ‘Stop-loss’ order, where permitted under local

law, or ‘Stop-limit’ orders), which are intended to limit losses to certain amounts, may

not be effective because market conditions may make it impossible to execute such

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orders. Strategies using combinations of positions, such ‘spread’ and ‘straddle’ positions

may be as risky as taking simple ‘long’ or ‘short’ positions.

3. Terms and conditions of contracts

You should ask the firm with which you deal about the terms and conditions of the

specific currencies which you are trading and associated obligations (e.g. the

circumstances under which you may become obligated to make or take delivery of the

full currency value).

4. Suspension or restriction of trading and pricing relationships

Market conditions (E.g. ill liquidity) and /or the operation of the rules of certain

markets (e.g. suspension of trading in any currency because of price limits, government

intervention or “circuit breakers”) may increase the risk of loss by making it difficult or

impossible to effect transactions or liquidate/offset positions.

5. Deposited cash and property

You should familiarize yourself with the protections accorded money or other

property you deposit for domestic and foreign transactions, particularly in the event of a

firm insolvency or bankruptcy. The extent to which you may recover your money or

property may be governed by specific legislation or local rules. In some jurisdictions,

property, which had been specifically identifiable as your own, will be pro-rated in the

same manner as cash for purposes of distribution in the event of a shortfall.

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6. Commission and other charges

Before you begin to trade, you should obtain a clear explanation of all commission,

fees, markups, markdowns, rollovers, interest rate differential and other charges for

which you will be liable. These charges will affect your net profit (if any) or increase

your loss.

7. Transactions in other jurisdictions

Transactions on currencies of other countries in other jurisdictions, including

markets formally linked to a domestic market, may expose you to additional risk. Such

markets may be subject to regulation, which may offer different or diminished investor

protection. Before you trade you should inquire about any rules relevant to your

particular transactions. Your local regulatory authority will be unable to compel the

enforcement of the rules of regulatory authorities or markets in other jurisdictions where

your transactions have been effected. You should ask the firm with which you deal for

details about the types of redress available in both your home jurisdiction and other

relevant jurisdictions before you start to trade.

8. Currency risks

The profit and loss in transactions in foreign currency-denominated contracts

(whether they are traded in your own or another jurisdiction) will be affected by

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fluctuations in currency rates where there is a need to convert from the currency

denomination of the contract to another currency.

9. Trading facilities

OTC business is not traded on a regulated market and therefore does not require

open-outcry. Even though quotations or prices are afforded by many computer-based

component systems, the quotations and prices may very due to market liquidity. Many

electronic trading facilities are supported by computer-based component systems for the

order-routing, execution or matching of trades. As with all facilities and systems, they are

vulnerable to temporary disruption or failure. Your ability to recover certain losses

maybe subject to limits on liability imposed by the system provider, the market, the bank

and/or financial institution. Such limits may very; you should ask the firm with which

you deal for details in this respect. GCI offers trading in CFDs on shares, market indices,

and futures; not trading in the underlying instruments themselves. CFD trading with GCI

therefore does not entitle the Trader to dividends, delivery, or possibly certain other

characteristics of buying or selling the underlying instrument. Furthermore, CFD and

Foreign Exchange trading with GCI is not conducted on any futures or stock exchange

and is not subject to the rules of any futures or stock exchange.

10. Electronic trading

Trading on an electronic trading system may differ not only from trading in the

inter bank market but also from trading on other electronic trading systems. If you

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undertake transactions on an electronic trading system, you will be exposed to risks

associated with the system including the failure of hardware and software. The result of

any system failure may be that your order is either not executed according to your

instructions or is not executed at all.

Disclaimers:

Internet and System failures: Since GCI does not control signal power, its reception

or routing via Internet, configuration of your equipment or reliability of its connection,

we cannot be responsible for communication failures, distortions, delays when you trade

on-line (via Internet). Furthermore, any losses or foregone profits in Traders account are

the responsibility of the Trader and not GCI, even if software, hardware, or other system

failures or errors contributed to such losses or foregone profits.

Market risks and on-line trading: Trading currencies involves substantial risk that is not

being suitable for everyone. See Trader Agreement for more detailed description of risks.

Trading on-line, no matter how convenient or efficient, does not necessarily reduce risks

associated with currency trading.

Password protection: The Trader is obligated to keep passwords secret and ensure that

third parties do not obtain access to the trading facilities. The Trader will be liable to GCI

for traders executed by means of the Trader’s password even if such use may be

wrongful.

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Quoting errors: Should quoting errors occur due to a dealer’s mistype of a quote, errors in

an automatic price feed, or an erroneous price quote from a dealer, such as but not limited

to a wrong big figure quote, GCI will not be liable for the resulting errors in account

balances. GCI reserves the right to make the necessary corrections or adjustments on the

account involved. Any dispute arising from such quoting errors will be resolved on a

basis of a fair market value of a currency or CFD at the time such an error occurred.

11. Off-exchange transactions

In OTCFX, firms are not restricted to effect off-exchange transactions. The firm

with which you deal may be acting as your counterparts to the transaction. It may be

difficult or impossible to liquidate an existing position, to assess the value, to determine a

fair price or to assess the exposure to risk. For these reasons, these transactions may

involve increased risks. Off-exchange transactions may be less regulated or subjected to a

separate regulatory regime. Before you undertake such transactions, you should

familiarize yourself with applicable rules and attendant risks.

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CHAPTER – 5

Interpretation

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NSE INDEX

Index   Prev Close Open High Low Last % Change  

S&P CNX NIFTY 5202.00 5202.85 5315.40 5104.75 5302.90 1.94

S&P CNX DEFTY 4546.00 4549.05 4646.00 4463.05 4636.55 1.99

S&P CNX 500 4343.55 4274.40 4441.15 4274.40 4432.60 2.05

NIFTY MIDCAP 50 2731.10 2702.15 2809.30 2676.85 2801.20 2.57

CNX NIFTY JUNIOR 9743.00 9600.90 9946.70 9540.40 9927.20 1.89

CNX MIDCAP 7051.40 7008.00 7223.00 6972.85 7216.25 2.34

CNX IT 3921.60 3877.40 3969.50 3857.75 3956.60 0.89

CNX 100 5062.75 4993.25 5171.65 4974.90 5160.60 1.93

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BANK NIFTY 9125.20 9059.20 9403.70 8951.10 9380.05 2.79

WORLD MARKET

Index Change % Change Level

Japan Nikkei 225 -3.89 -0.03% 13,622.56

Europe DJ Stoxx -70.19 2.17% 3,167.64

Canada CDNX +11.98 +0.47% 2,584.99

Hong Kong Hang Seng +126.75 +0.53% 24,148.43

As on February 15, 2008

BASIC STEPS FOR INVESTMENT

Becoming A Customer:

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How do I become an Indiabulls customer?

You can open an Indiabulls e-Invest account by filling a single application form. This

form will help you open an Indiabulls Brokerage Account along with a Bank Account

and one or more Demat accounts as required.

How do I request a form?

You can request our representative to visit you by registering online through our website.

You could also visit any of the Centres, where our trained personnel help you in

becoming Indiabulls e-Invest customer.

I have sent in my application, what happens next?

Your application will be processed and you will be informed once your application is

accepted and all the required accounts are set up. In case your application is not

processed because of lack of some details, you will be contacted by our representative or

by mail.

How do I know my application has been accepted?

As soon as your application is accepted, we will inform you by e-mail and mail.. In case,

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you login and your application has been accepted, you will be prompted to change your

password.

Existing Indiabulls Customers:

If I already have a Scheduled Bank account and Indiabulls Demat account, can I use

these accounts for online investing?

Yes, you just need to tell us the account details and we shall link up your existing

accounts with Indiabulls e-Invest account for online investing. You can link up only an

existing Bank account or only one or more Demat account(s) or both the existing Bank

account and Demat Account(s). However, at present, your Scheduled Bank account on

which you have opted for Quantum Optima cannot be linked. Anyway, you can always

opt to open a new Demat and Bank account with your Indiabulls e-Invest account.

Bank Account/Demat Account:

What type of Bank Account can I use with my e-invest account?

You will need an ordinary savings account with Scheduled Bank Ltd for your e-Invest

account. You can specify the account in the form and it will be linked with your e-Invest

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account. In case you do not have a Scheduled Bank account, an online banking savings

account can be opened with an e-Invest account.

How frequently will I be able to know the status of my accounts?

The status of your Bank, Demat and e-Invest account shall be available to you completely

online 24 hours a day through the Internet. You will be able to access all details regarding

your orders and trades on the website. You will be able to see the results of your trade

reflected in your Bank and Demat account on the very day of the settlement, without

waiting for the statements from the DP and the Bank

New Indiabulls e-invest Customers:

I want to buy some shares. I do not have any money in my Bank Account. What do I

do?

Please deposit a cheque/cash in your Bank Account by filling the pay-in slip. In case of a

cheque, the money should come into your Bank account as soon as the cheque is cleared.

Once you have funds in your bank account, you need to allocate the required amount for

trading. Alternatively you can sell some shares from your Demat Account in the Cash

Segment and use the money to purchase the shares you want to buy. The amount of

money required before placing a buy order or a margin sell order would depend on the

value of the order.

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Can I withdraw the amount allocated for trading?

The way you can allocate funds for trading, you can always reduce the amount allocated

by you for trading to the extent that the amount allocated has not been blocked on

account of orders placed by you. Once any amount is deallocated, it can be withdrawn

from the bank.

Can I borrow or get a line of credit against my Demat Account?

Currently, we are not offering this service. But, we are evaluating ways to add to our

product range. We would appreciate if you could give us feedback on the facility you

want

Online Investing:

On which exchanges will I be able to buy and sell shares?

Indiabulls offers its customers execution capability on the National Stock Exchange of

India Ltd. (NSE) and Stock Exchange of Mumbai (BSE).

What kind of orders can I place?

You can place both market and limit orders.

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Limit Order is an order to buy or sell securities in which you specify the maximum price

per unit in case of a Buy order and the minimum price per unit in case of a Sell order.

The actual transaction can be at a price more favourable than the price specified.

Market Orders have different interpretations for both NSE and BSE.

Market Orders in NSE: This is an order to buy or sell securities at the best price

obtainable in the market at the time it is matched by the exchange. Therefore, chances of

its getting executed are better. In case of market orders for NSE, all market orders placed,

which are not executed, become limit orders at the last traded price. Where a market

order is not executed fully, it becomes a limit order for the balance quantity at the last

traded price.

Market orders can be placed only during market hours (i.e. when the Exchange is open

for trading)

Which shares will I be able to buy and sell?

You will be able to buy and sell all shares in the Cash Segment that are traded in the

compulsory dematerialised form on the exchanges. As of date, there are more than 850

such shares. These shares are the most heavily traded shares on the exchanges and

account for over 90% of the market capitalisation. More and more shares are being added

to this category every month by the regulatory authorities. Of these shares, you may place

orders for select shares in the Margin Segment.

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Can I modify my order?

Yes, you can modify an order any time before execution. You can do this by accessing

the Order Book page and clicking on the hyperlink for 'Modify' against the order which

you wish to modify. However, you cannot modify your order while it is queued with the

exchange, i.e., confirmation is awaited from the exchange for the acceptance of the

placement of any order or any modification/cancellation request. In case the order is

already partly executed, only the unexecuted portion of the order can be modified.

Can I cancel my order into the system?

Yes, you can cancel an order any time before execution. You can do this by accessing the

Order Book page and clicking on the hyperlink for 'Cancel against the order which you

wish to cancel. In case the order is already partly executed, only the unexecuted portion

of the order can be cancelled.

Settlement Of Trades:

If I have purchased a share, do I have to take delivery?

Rolling Segment : You can choose to sell the share before the end of settlement cycle.

However once the settlement cycle is over you have to take delivery by paying for it.

TT Segment : Settlement of securities will be done without any netting off of positions. If

you have purchased shares, you will have to mandatorily take delivery. You will not be

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permitted to sell the same in the same settlement.

The Segment to which the stock belongs can be seen from the 'Stock List'.

I buy a share, how will the payment be made and how will I get the shares?

The payment will be made on the Pay-In day which depends on the settlement cycle and

the exchange. The shares received from the exchange will be automatically transferred to

your Demat Account. The money required for purchase will be transferred from your

Bank account. A similar process takes place when you sell the share.

What is a short delivery?

Short delivery refers to a situation where a client, who has sold certain shares during a

settlement cycle, fails to deliver the shares to the member either fully or partly.

What is an auction?

An auction is a mechanism utilized by the exchange to fulfill its obligation towards the

buying trading members. Thus, in case for a settlement, the selling trading members have

delivered short, their deliveries are bad or they have not rectified the company objection

reported against them, the exchange purchases the requisite quantity from the market and

gives them to the original buying member. Auctions are generally held on Friday.

What factors give rise to an auction?

There are three factors, which primarily give rise to an auction:

1. Short deliveries

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2. Un-rectified Bad Deliveries - this is relevant only in respect of shares in physical form

3. Un-rectified Company Objections

What happens if the shares are not bought in the auction?

If the shares could not be bought in the auction i.e. if the shares were not offered for sale

in the auction, the Exchange squares up the transaction as per SEBI guidelines. The

guideline in force stipulates that the transaction is squared up at the highest price on the

NSE from the relevant trading period till the auction day or at 20% above the last

available closing price on the NSE on the auction day, whichever is higher. The pay-in

and payout of funds for Auction Square up is held along with the pay-out for the relevant

auction.

Taxation for Resident Indians:

Adequate efforts have been taken to ensure that material contained in this website is error

free. The material is not intended to be advice on any particular matter. Visitors to the site

should cross check all the facts, law and contents with the text of the prevailing statutes

or seek appropriate professional advice before acting on the basis of any information

contained herein. INDIABULLS Web Trade Ltd expressly disclaims any liability to any

person, in respect of anything done or omitted to be done by any such person by placing

reliance upon the contents of this write-up. The below mentioned FAQs are restricted to

the tax implications for the resident investors only.

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What is a capital asset?

Capital asset means property of any kind held by an assessee, whether or not connected

with his business or profession, but does not include 1. Stock-in-trade 2. Personal effects

such as jewellery, furniture, motorcar held for personal use. 3. 61\2 % Gold Bonds, 1977.

4. 7% Gold Bonds, 1980. 5. National Defence Gold Bonds, 1980. 6. Special bearer Bonds

1991 7. Gold deposit Bonds under the gold deposit scheme, 1999 notified by the central

government.

What is a short-term asset?

Capital asset is divided as long term and short term with reference to the period of

holding of the asset by you. The period of holding is computed from the date of

acquisition to the date immediately preceding its sale. If the shares, units of specified

mutual fund u/s 10(23D) or any other listed security are held by you for less than 12

months then such shares/units or listed security would be treated as short term assets. In

all other cases, the asset is required to be held for 36 months so as to qualify for long-

term capital gain.

What is a long-term asset?

If the shares, units of specified mutual fund u/s 10(23D) or any other listed security are

held by you for more than 12 months then such shares/units or listed security would be

treated as long term assets.

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To illustrate, if you have purchased and sold shares on the following dates, they would

be treated as short term or long-term capital asset as below.

Date of Purchase Date of sale Period of holding Type of asset

1.4.2007 3.8.2007 4 months 2 days Short term asset

1.4.2007 31.10.2007 7 months Short term asset

11.5.2006 31.10.2007 17 months Long term asset

18.6.2006 1.4.2007 9 months 12 days Short term asset

14.2.2005 18.6.2007 2 years 4 months Long term asset

The period of holding for the above purpose could be different from the actual period of

holding in certain situations:

In case the shares or securities are held in a company in liquidation, the period

subsequent to the date on which the company goes into liquidation shall be

excluded.

In case the shares or securities have been acquired as gift or under will, the

period of holding shall include the period for which the previous owner held the

asset.

In case the shares or securities held in an amalgamating company, the period of

holding will include the period for which the shares have been held by the assess

in the amalgamating company.

In case of shares subscribed to by the person to whom such a right issue is

offered or who has acquired the right from another person, the period of holding

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of the shares for the first person shall be reckoned from the date of allotment of

such shares.

In case a person has renounced his right to subscribe to certain shares in favour

of another person, then the period of holding of such rights for the first person

shall be reckoned from the date of offer of such right by the company or

institution.

In case of shares or securities have been acquired as a bonus issue, then the

period of holding these bonus shares shall be reckoned from the date of allotment

of such shares.

Corporate Benefits:

What is a 'No Delivery' period?

Whenever, a book closure or a record date is announced by a company, the exchange sets

up a 'No Delivery' period for that security. During this period, trading is permitted in the

security. However, these trades are settled only after the No-Delivery period is over. The

start of No-Delivery period is the ex-date of the settlement. The settlement is clubbed

with the settlement of the week whose pay-out date falls just after the end of the no-

delivery period. This is done to ensure that investor's entitlement for the corporate

benefits is clearly determined. No-delivery period generally extends to all weekly cycles

touched from 15 days prior to the record date and 4 days subsequent to the record date

(both inclusive).

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What is an ex-date?

The first day of the 'No Delivery' period is the ex-date viz., if there is any corporate

benefit such as rights, bonus, dividend etc. announced for which book closure/record date

is fixed, the buyer of the shares on or after the ex-date will not be eligible for the benefits

while the seller would be eligible for the same.

Password:

How do I get my Logon ID and PASSWORD for the first time?

In order to ensure that you get secure Logon Id and Password, we request you to set your

own LOGON ID AND PASSWORD when you fill a form. While getting the Logon Id

and Password you will be given an Account Reference Number(ARN). Please ensure that

the ARN is written on your application form. This ARN will be used for tracking the

customer registration request. We will inform you when your application is processed

and your account is set up. Once your account is set up, we will inform you by e-mail and

you will be prompted to change your Password, the fist time you login after your account

is set up.

If you have filled up the application forms for E-invest account directly without

registering on the site, We would dispatch your LOGON-id and password by normal post

in a sealed envelope. Your account shall be activated for trading only after we receive

your confirmation of you having received the same in a sealed condition.

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Security:

How secure are my transactions?

Indiabulls brings you the highest standards of security, which are commercially available

on the net. Millions of customers are dealing in shares on the net. We bring you the same

level of security standards, which are used by leading international trading sites.

We use two level of securities on our web site : Secure Socket Layers (SSL) and 128 bit

encryption technology to provide you the higher commercial available security standard

on our web site. This is a worldwide standard of security adopted by all international

online trading sites. SSL is a method of sending private documents through the internet

by using a private key to secure messages. Data encryption methods are used to achieve

data security.

IMPLICATION OF ONLINE TRADING

Online trading also engenders some changes in the traditional investing scenario.

First, the wide range of variation in investor knowledge of the stock market and of

trading in crucial in the online setting. The cost of investors of bad judgment are likely to

borne by new entrants to the world of individual investing, these investors are pleased

with the simplicity of the interactive user - friendly formats of e-brokerage but are seldom

proficient in the\mechanisms and arrangements beyond the interface, experienced

investors can better identify the benefits and cost of choosing specifics e-brokerage.

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Second, the frequency of online investors trading deserves special attention. . Many

market analysis suggest that the growing U.S economy and the low commission charged

by e-brokerages influence investors to trade more often. For example, an average Merill

Lynch (full service broker) customer makes four to five trades per year while the core

investors in an ©-brokerage such as E* trade group include. Make an average of 5.6

trades per quarter. Frequent trading is generally contrary to recommendations of financial

theory. Ultimately, it is possible for an e-brokerage to allow investor trade frequently at

very low or even zero costs per trade while earning large profits on the fraction of

increasingly large bid-ask spread that is pushed back by investors or market maker. At

the same time, the investors may be unaware of the indirect costs incurred with each

trade.

Third the evaluation of electronic trading may increase market fragmentation in

the short run. E-brokerage may increasingly channel trades away from the exchanges and

towards market makers to compensate for lost revenue resulting from low direct

commission. Market fragmentation may have negative impact on prices, increasing the

bid-ask spread and potential for arbitrage opportunities (e.g., buy low in one market and

sell high in another market with in short term period of time). This is contrary to the

belief that electronic markets may force centralization and increase liquidity (that is

ability to buy and sell securities quickly).

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THE INDIAN PROBLEM

Some other structural aspects need to be kept in mind while analyzing the e-broking

scenario in India. The breath of participation in the stock market in India is significantly

lowers was compare to western market with only 12.5 Million equity owing household

and 4 Million depositors accounts. The brokerage rate sin India are significantly lower

than US rates, with Indian broker has charging commission of 0.87% to 12.7% per trade.

For INDIABULLS direct, the pricing strategy for e-broking for the retail\segment is as

follows: for the cash segment, the brokerage charged varies from 0.40% to 0.85% based

on the volume of trade done per quarter while for the margin segment, the brokerage

charge varies from 0.10% to 0.15% based on the volume trade done per quarter. The

above charges are inclusive of depository charges and all other statutory charges. For

Motilal Oswal, the charges for online service are 0.15% of value and offline is 0.75%.

The scope for expansion of the market through reduction in brokerage is thus lower

than the USA. Adds annup Baghcim, chief operating officer,ICICI-direct.com, "a reason

for the popularity of online trading in the USA was that t lot of people took day training.

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In India, speculative trading is already rampant and it is estimated that delivery is taken

for only 15% of the total trade volume. Hence, the surge in volume due to day trading

may not be of the same magnitude." Internet based on trading typically takes place

through bank account with an online bank. Here the number of banks and foreign banks.

Both have lesser reach wing to a smaller network in the country. The relatives inability of

large public sector banks to offer to facilitate for internet banking is barrier in the record.

Besides Internet penetration in India still very low concern about security and also tend to

be predominate. In market like the US online brokerage are advertised very heavily.

Online trading in India has so for not seen similar levels of aggressive advertising, with

exception of ICICI direct and home trade besides, only scrip's that have been

compulsorily dematerialized can be traded on the NSE and BSE.

However technology bottlenecks are responsible for online trading laving not to taken

off the ground. The usual suspect -poor band with figures prominently as one of the main

reason why online trading hasn't taken off. Though players like Reliance and Bharathi

have announced broadband services, till the mile problem is solves online broking will

suffer from the band with problem. The three main technology obstacles which have

prevented internet broking from taking off lack of internet 'penetration, band with

infrastructure and poor quality of ISP infrastructure. Mr. ShukIa, says mostly investors

are sure of executing the online trading.

ONLINE INVESTMENT FRAUD

New Medium, Same Old scam:

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The type of investment fraud has seen online mirror. The frauds perpetrated over the

phone through the mail. Remember that fraudsters can use variety of Internet tools to

spread false information. Including bulletin boards. Online newsletters, Spam, or chat

(including internet rely chat or web page chat). They can also build a glitzy sophisticated

web page. All of these cost tools very little money and can be fraud at the fingertips of

fraudsters.

Consider all offers with skepticism, investment frauds usually fit one of the

following categories:

The “pump And Dump" Scam:

It's command to see the message posted online that urge readers to buy a stock

quickly or tell to sell before the price goes down. Often the writers will claim to have

"inside" information about an impending development or to use an "infallible"

combination of economic and stock market data to pick stocks. In reality there may be

insiders or paid promoters who stand to gain by selling their shares after the stock priced

is pumped up by.

Gullible investors. Once these fraudsters sell their shares and stop hyping the

stock. The price typically falls and investors lose their money fraudsters frequently use

this poly with small, thinly traded companies because it's easier to manipulate a stock

when there's little or information available about the company.

The pyramid:

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Be wary of message that read: How to make large money from your home

computers. Online promoters claimed that investors could "turn $5 in to $60,000 in just

three to six weeks. In reality this program was nothing more than products touted do not

even exists -they are merely scams. Be cautious of opportunity that promise speculator

profits or "guaranteed" returns. If the deal sounds to good to be true.

Offshore Frauds:

At one time offshore schemes targeting U.S. investors cost a great deal of money

and were difficult to carry out. Conflicting time zones differing currencies, and the high

cost of international telephone calls and overnight mailing made it difficult for fraudsters

to prey on U.S. law enforcement agencies to investigate and prosecute foreign frauds.

The SEC Is Trucking Fraud:

The SEC actively investigates allegations of Internet investment fraud and in

many cases in which the SEC took action to fight Internet fraud.

CASE STUDIES ABOUT THE INTERNET INVESTMENT FRAUD

1.Fruncis A.trihble and -sloune Fitzgerald, send more than six million unsolicited

e-mails through built bogus web sites, and distributed an online newsletter over a ten

month period to promote to small thinly traded "micro cap" companies. Because they

failed to tell investors those - companies they were touting had agreed to pay them in

cash and securities. The SEC sued both the fribble and sloane to stop them from violating

the law again and imposed a $15\900 penalty on fribble. Their massive shaming

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campaign triggered the largest number of complaints to the SEC's online enforcement

complaint center.

2. IVT Systems solicited investments to finance the construction of an ethanol plant

in the dominant republic. The Internet solicitation promised a return of 50% or more with

no reasonable basis for the prediction. Their literature contained lies about contracts with

well-known companies and omitted other important information for investors. After (lie

SEC filed a complaint they agreed to stop breaking the law.

3. Gene Block and Renute Hugg were caught offering "prime bank" securities, a type of

security that doesn't even exist. They collected over $3.5 million by promising to double

investors money in our month's. The SEC has frozen their assets and stopped them from

continuing their fraud.

ONLINE TRADING WITH GCI

It allows, "mini share trading" account allows to trade popular shares and indices

online, with minimal margin requirement. It welcomes all online traders to try a free

demo account. Which allows 30 days of "test trading" on our industry leading software.

Contract size are 100 shares per lot, allowing clients to efficiently trade shares on 1%

margin and $2 commission per lot-al with instant execution on the industry's leading

trading software. Traders can view prices and execute trade-in real time. Mini share

products include;

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Mini share products:

1) Stock market indices

2) S&P500

3) NASDAQ100

4) Dow Jones average

5) Dux30

6) CAC40

7) FTSE100

8) Nikkei225

9) SPI200 (S&PASX200)

10) Hang Sang

Foreign Exchange

1) BUR/USD

2) USD/JPY

3) GBP/USD

4) USD/CAD

5) AUD/USD

Individual shares

a) Microsoft

b) Vodafone

c) Barclays

d) I.B.M

e) Nokia

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f) eBay

g) Siemens AG

h) Deutsche. Bank

i) France Telecom

j) Unilever

k) And many North American and European shares

1) Commodities

m) Crude oil

n) Gold

o) Silver

All mini share products are traded as "lots", 1 lot is equal to 100 shares.

Mini share trading account details:

Account opening minimum:$500

Lot size: 100 shares

Margin requirement: $50 per lot

Spreads: Same as Standard share Trading

Commissions: $ 2 per lot (is equal to 2 cent per share)

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CHAPTER - 6

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FINDINGS & SUGGESTIONS

The exchange authorities should educate the investors about their rights and

duties.

Genuine investors are not at all interested in the speculative gain as their

investments is based on the future profits, therefore the authorities of the

exchange should be more vigilant in imposing heavy margin to curb the

speculative of securities.

Information plays a vital role in the secondary market. There are more speculators

than investors.

Previously rolling settlement is T+5 days, now it changed to T+2 days and further

it will be changed to T+1 day.

The number of players is increasing at a steady rate and today there are over a

dozen of brokerage houses who have opted to offer net trading to their customers

and prominent among them are INDIABULLS, Share Khan, kotakstreet, ICICI

direct and geojit.

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With the computerization of the trading activity, the number of transaction and

the volume of trading have increased to a great extent in India Bulls.

Bank account for instant transfer was not available earlier, but today,

INDIABULLS is providing the facility of giving instant bank account.

The Depository system has reduced the time lag in delivering and settlement of

securities and 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.

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CHAPTER - 7

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CONCLUSION

From beginning onwards Indiabulls is in to online trading system. So that

transactions are performed efficiently.

Things are better with the Indiabulls having online trading. New and advanced

technologies have breached geographical and cultural barriers, and have brought

the countries the countrywide market doorstep.

Tips are available for online trading and invest wisely. So the investors can avoid

the fraud.

Due to invention of online trading there has been greater benefit to the investors

as they could sell or buy shares as and when required that can easily transferable,

it will inspire the confidence in investors resulting increase in the business of the

exchange.

The regional stock exchange has greater scope than compared to earlier times

because of invention of Online Trading.

The longer trading time had helped the investors as well as the broker to take

much interest in the trading of the securities as they had taken extra time to take in

the security market.

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"Online Trading has the potential to turbo-charge the time you spend in

front of your computer. There is nothing more exhilarating, more daring, and

more conceivably rewarding than making the right trades at the right time."

BIBLIOGRAPHY

Indian Capital market—Sanjiv agarwal

Investment management—V.A. Avadhani

Investors guide literature

www.google.com

www.expresstrade.com

www.gci.com

www.bseindia.com

www.nseindia.com

www.Indiabulls.com

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