ONLINE TRADING andINVESTMENT MANAGEMENT

Presented By

Dr. Rana Singhwww.ranasingh.orgMBA (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

Advice

Information

Content/Data Trading

Account Management

Financing Options

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

User

Web Server Database

Stock ExchangeWeb Server

Stock Exchangedatabase

Place Orders

ConfirmationTo the Brokers Server

Confirmation to User

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 Phone

8 8.6%   9.4% 20.0%

 Modem to Broker

11 11.8%   14.1% 20.0%

  WWW 20 21.5%   26.6% 30.0%

Preferred Source Traditional. Broker

12 15.0%   18.8% 0.0%

of Information Automated Phone

4 5.0%   3.1% 20.0%

  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

Find a way to remember

Myth -Clarification

Symmetric Encryption and decryption

HI Bob.

Plain text

Encryption &#@*;t

Ciphertext

Decryption Hi Bob.

Plain text

A B

Key e

Key e = Key d

Key d

Thank You