ONLINE TRADING and
INVESTMENT MANAGEMENT
Presented By
Dr. Rana Singh
[Link]
MBA (Gold Medalist)
Ph. D.
9811828987
singh_rana@[Link]
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 [Link]
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
