ONLINE TRADING and

INVESTMENT MANAGEMENT

Presented By

Dr. Rana Singh

www.ranasingh.org
MBA (Gold Medalist)
Ph. D.
9811828987
singh_rana@yahoo.com
The ability to learn faster than your competitors may be
the only sustainable competitive advantage
- Peter Senge
The Fifth Discipline
Evolution of Online Trading
 Only a decade ago, the primary method by which individual
investors were able to get information and trade on the stock
market was by going to the stock broker's office or calling the
broker on the telephone.
 telephone automation allowed investors to dial into the broker's
computer system and place their trading orders without having
to go through a human operator.
 As personal computers and telecommunications became more
prevalent, investors started to use their computers to dial into
their broker's systems and conduct their transactions
electronically.
 Evolution of World Wide Web .
 Services Available
Investment Management

Content/Data Trading Financing Options

Advice Information Account Management

Content/Data
 Information
 Real time stock quotes
 Market Summaries
 News & Headlines
 Charts
 Report and trade alerts
 Advice
 Real time Chat with experts
 New Investment Ideas
 Forthcoming IPO advice & analysis
Financing Options
 Loans
 Credit on sales done
Online Trading
 What can you trade?
 Stocks
 Options
 IPO’s
 Mutual Funds
 Bonds
Trading (Continued)
 Ways of trading
 Online
 Interactive Voice Response(IVR)
 Traditional Broker Assisted
Account Management
 Account Summary
 Track Orders
 Check trading limits
 Check open positions
 View Transactions
 Cash & Securities due
 A Typical Online Transaction

Place Orders
Stock Exchange
Web Server
Web Server
User
Database
Stock Exchange
database
Confirmation
to User
Confirmation
To the Brokers Server
 Online Trading

A Simple Representation
Major Components
 Stock feed data source
 Storage of stock data
 Retrieving of data from the www
Stock feed data source
 Stock data is derived from a live data
feed connected to the exchange
 Modem based connection to an NT
stock feed processing server for
preprocessing of the data feed before
broadcasting over the net.
Storage of Stock data
 Database server receives the packets
containing the updated information
 It collects,reprocesses and stores the
information
Retrieving of data from www
 The web server running the software
accepts realtime stock data that is
updated on the database
 The software queries the
database,formats the information and
presents it to the users.
Typical Functionality Provided
 Stock information retrieval system
 Monitoring stock market movement
 Stock market analysis
 Personal portfolio management
 Simulated stock transactional services
Information Retrieval System
 NT server broadcasts the Stock feed on
the network
 Database server collects the stock feed
and stores it in the stock database
 Stock info retrieved by querying the
stock database
Subfunctionality Provided
 General information on all the stocks
arranged in various orders
 Up to date market summaries as well as
market indices.
 Top five gainers
 Top five losers
 Top five volumes
Monitoring market movement
 Stock database is updated continuously
for accurate monitoring from the
exchange
 If the information received is new the
database server changes the records of
the current stock information
Market Analysis
 User can analyze the information using
the utilities provided by the system
 User can download raw stock data in
the form of ASCII files and use them as
inputs for custom analysis tools
Portfolio Management
 Users can setup and manage their own
portfolio
 Stocks kept in the portfolio are stored in
tables so that users can keep track once
they login
 Portfolio profit calculation will aid the
users in their buy/sell decisions
Simulated Transactional
Services
 Users can trade as they do in the real
stock market environment
 User sends in a request which is queued
 After some time the request is processed
according to the current stock prices
 Brokerage fees ,contract stamp,clearing
fees are all taken into account while
preparing the bill which is sent to the user
Indian Scenario Opportunities
 Growing internet usage
 There were 5.5 million internet users in
india in january 2001 and 48% of the
users accessed the net daily.
 Nasscom predicts that there will be 300
million internet users in India by
December 2010.
Opportunities (cont.)
   e-commerce is now fully legal in
India with the information
technology act that took effect in
October 2000.
 Along with lending a coherent legal
framework the act provides
penalties for cyber crimes.
Opportunities (cont.)
 People are enthusiastic about e-trading
 Growing user base especially in
professionals and brokers.
 Many first time users are becoming
loyal customers of services from sites
like ICICI direct and sharekhan.com
Threats
 Security threats
 Internet penetration in India is still not good
enough.
 People are still reluctant to trade shares
online, and prefer their traditional calling the
broker options.
 Only the tech savvy, professionals and major
stock brokers are using it currently.
Threats
 Cyber laws have been formulated but
implementation is still not well tried out.
The general reasons for the use of the WWW for trading were as follows: -
 

Category Response Number Percent   Male Female

Why use the WWW? Timely data 53 81.5%   81.0% 85.7%

  Access News 53 81.5%   81.0% 85.7%

  Discussions 22 33.8%   36.2% 14.3%

  Convenient 56 86.2%   86.2% 85.7%

  Faster Execution 16 24.6%   19.0% 71.4%

  Fun 36 55.4%   55.2% 57.1%

The following was the result of the most preferred form of trade on the net
 

Category Response Number Percent   Male Female

Preferred Trading Method Full Service 23 24.7%   31.3% 30.0%

  Discount Broker. 31 33.3%   39.1% 60.0%

Automated
  8 8.6%   9.4% 20.0%
Phone

Modem to
  11 11.8%   14.1% 20.0%
Broker

  WWW 20 21.5%   26.6% 30.0%

Traditional.
Preferred Source 12 15.0%   18.8% 0.0%
Broker

Automated
of Information 4 5.0%   3.1% 20.0%
Phone

  Electronic 7 8.8%   7.8% 20.0%

  WWW 57 71.3%   76.6% 80.0%

Percentage of people who believe that the net will be popular: -

Category Response Number Percent   Male Female

Interested in electronic Yes 59 79.7%   79.7% 80.0%

On-line trading? No 3 4.1%   4.7% 0.0%

  Don't Know 12 16.2%   15.6% 20.0%

Will the electronic trading Yes 44 59.5%   57.8% 70.0%

Become more popular No 17 23.0%   23.4% 20.0%

Than traditional brokers? Don't Know 13 17.6%   18.8% 10.0%

Will digital stock exchanges Yes 34 45.9%   46.9% 40.0%

Become more popular than No 20 27.0%   31.3% 0.0%

Traditional stock markets? Don't Know 20 27.0%   21.9% 60.0%

Advantages of Online Trading
over Traditional Modes
 Eliminates manual order entry and paper trail
 Increases accuracy and speed of placing orders.
 Better record keeping by investors, brokers and
regulatory organizations.
 Investors can make more informed investment
decisions because they have access to vast
amounts of data round the clock which can be
accessed from the convenience of home, office
or anywhere else the investor can get access to
the Internet
Advantages of Online Trading
vs Traditional Modes(Cont.)
 The WWW also provides a wide variety of analysis
tools to aid the serious investor. Such tools range
from simple graphs and charts of historical data,
to complex technical analysis that predicts the
movement of stock prices. Investors also have the
choice of using on-line portfolio tracking tools that
can automatically place a buy or sell order when
certain events are triggered such as an increase
or decrease in stock price. All these tools serve
the user by providing them with better
information for making investment decisions.
Reality Check
 Perception of inadequate security &
privacy
 Difficulty of electronic funds transfer
 Information may be inaccurate or false
 Risk of system failure
 Slowness in internet access or a digital
meltdown
Reality Check (Cont.)
 Digital meltdown
 Caveat emptor
Future Trend
 Stock brokers will have to provide e-
trading to remain competitive
 Resolution of perceived security issues
will give popularity to electronic trading
 Advances in hardware and software will
increase efficiency of electronic trade
executions
 Choosing a safe Password

Should not be names or personal

information

Should not be a word from the dictionary

Should not be sequence of letters or

numbers

Should be at least 6 characters long

Mix UPPER CASE and lower case letters

Mix letters, numbers and punctuations

 Symmetric Encryption
and decryption
A B
Plain text Ciphertext Plain text

HI Bob. Encryption &#@*;t Decryption Hi Bob.

Key e = Key d
Key e Key d

Myth -Clarification
 Thank You