Online Trading


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Online Trading

  1. 1. ONLINE TRADING and INVESTMENT MANAGEMENT Presented By Dr. Rana Singh MBA (Gold Medalist) Ph. D. 9811828987 [email_address]
  2. 2. The ability to learn faster than your competitors may be the only sustainable competitive advantage - Peter Senge The Fifth Discipline
  3. 4. Evolution of Online Trading <ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>Evolution of World Wide Web . </li></ul>
  4. 5. Services Available <ul><li>Investment Management </li></ul>Advice Information Content/Data Trading Account Management Financing Options
  5. 6. Content/Data <ul><li>Information </li></ul><ul><ul><li>Real time stock quotes </li></ul></ul><ul><ul><li>Market Summaries </li></ul></ul><ul><ul><li>News & Headlines </li></ul></ul><ul><ul><li>Charts </li></ul></ul><ul><ul><li>Report and trade alerts </li></ul></ul><ul><li>Advice </li></ul><ul><ul><li>Real time Chat with experts </li></ul></ul><ul><ul><li>New Investment Ideas </li></ul></ul><ul><ul><li>Forthcoming IPO advice & analysis </li></ul></ul>
  6. 7. Financing Options <ul><li>Loans </li></ul><ul><li>Credit on sales done </li></ul>
  7. 8. Online Trading <ul><li>What can you trade? </li></ul><ul><ul><li>Stocks </li></ul></ul><ul><ul><li>Options </li></ul></ul><ul><ul><li>IPO’s </li></ul></ul><ul><ul><li>Mutual Funds </li></ul></ul><ul><ul><li>Bonds </li></ul></ul>
  8. 9. Trading (Continued) <ul><li>Ways of trading </li></ul><ul><ul><li>Online </li></ul></ul><ul><ul><li>Interactive Voice Response(IVR) </li></ul></ul><ul><ul><li>Traditional Broker Assisted </li></ul></ul>
  9. 10. Account Management <ul><li>Account Summary </li></ul><ul><li>Track Orders </li></ul><ul><li>Check trading limits </li></ul><ul><li>Check open positions </li></ul><ul><li>View Transactions </li></ul><ul><li>Cash & Securities due </li></ul>
  10. 11. A Typical Online Transaction User Web Server Database Stock Exchange Web Server Stock Exchange database Place Orders Confirmation To the Brokers Server Confirmation to User
  11. 12. Online Trading A Simple Representation
  12. 13. Major Components <ul><li>Stock feed data source </li></ul><ul><li>Storage of stock data </li></ul><ul><li>Retrieving of data from the www </li></ul>
  13. 14. Stock feed data source <ul><li>Stock data is derived from a live data feed connected to the exchange </li></ul><ul><li>Modem based connection to an NT stock feed processing server for preprocessing of the data feed before broadcasting over the net. </li></ul>
  14. 15. Storage of Stock data <ul><li>Database server receives the packets containing the updated information </li></ul><ul><li>It collects,reprocesses and stores the information </li></ul>
  15. 16. Retrieving of data from www <ul><li>The web server running the software accepts realtime stock data that is updated on the database </li></ul><ul><li>The software queries the database,formats the information and presents it to the users. </li></ul>
  16. 17. Typical Functionality Provided <ul><li>Stock information retrieval system </li></ul><ul><li>Monitoring stock market movement </li></ul><ul><li>Stock market analysis </li></ul><ul><li>Personal portfolio management </li></ul><ul><li>Simulated stock transactional services </li></ul>
  17. 18. Information Retrieval System <ul><li>NT server broadcasts the Stock feed on the network </li></ul><ul><li>Database server collects the stock feed and stores it in the stock database </li></ul><ul><li>Stock info retrieved by querying the stock database </li></ul>
  18. 19. Subfunctionality Provided <ul><li>General information on all the stocks arranged in various orders </li></ul><ul><li>Up to date market summaries as well as market indices. </li></ul><ul><ul><li>Top five gainers </li></ul></ul><ul><ul><li>Top five losers </li></ul></ul><ul><ul><li>Top five volumes </li></ul></ul>
  19. 20. Monitoring market movement <ul><li>Stock database is updated continuously for accurate monitoring from the exchange </li></ul><ul><li>If the information received is new the database server changes the records of the current stock information </li></ul>
  20. 21. Market Analysis <ul><li>User can analyze the information using the utilities provided by the system </li></ul><ul><li>User can download raw stock data in the form of ASCII files and use them as inputs for custom analysis tools </li></ul>
  21. 22. Portfolio Management <ul><li>Users can setup and manage their own portfolio </li></ul><ul><li>Stocks kept in the portfolio are stored in tables so that users can keep track once they login </li></ul><ul><li>Portfolio profit calculation will aid the users in their buy/sell decisions </li></ul>
  22. 23. Simulated Transactional Services <ul><li>Users can trade as they do in the real stock market environment </li></ul><ul><ul><li>User sends in a request which is queued </li></ul></ul><ul><ul><li>After some time the request is processed according to the current stock prices </li></ul></ul><ul><ul><li>Brokerage fees ,contract stamp,clearing fees are all taken into account while preparing the bill which is sent to the user </li></ul></ul>
  23. 24. Indian Scenario Opportunities <ul><li>Growing internet usage </li></ul><ul><li>There were 5.5 million internet users in india in january 2001 and 48% of the users accessed the net daily. </li></ul><ul><li>Nasscom predicts that there will be 300 million internet users in India by December 2010. </li></ul>
  24. 25. Opportunities (cont.) <ul><li>   e-commerce is now fully legal in India with the information technology act that took effect in October 2000. </li></ul><ul><li>Along with lending a coherent legal framework the act provides penalties for cyber crimes. </li></ul>
  25. 26. Opportunities (cont.) <ul><li>People are enthusiastic about e-trading </li></ul><ul><li>Growing user base especially in professionals and brokers. </li></ul><ul><li>Many first time users are becoming loyal customers of services from sites like ICICI direct and </li></ul>
  26. 27. Threats <ul><li>Security threats </li></ul><ul><li>Internet penetration in India is still not good enough. </li></ul><ul><li>People are still reluctant to trade shares online, and prefer their traditional calling the broker options. </li></ul><ul><li>Only the tech savvy, professionals and major stock brokers are using it currently. </li></ul>
  27. 28. Threats <ul><li>Cyber laws have been formulated but implementation is still not well tried out. </li></ul>
  28. 29. 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%
  29. 30. 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%
  30. 31. 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%
  31. 32. Advantages of Online Trading over Traditional Modes <ul><li>Eliminates manual order entry and paper trail </li></ul><ul><li>Increases accuracy and speed of placing orders. </li></ul><ul><li>Better record keeping by investors, brokers and regulatory organizations. </li></ul><ul><li>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 </li></ul>
  32. 33. Advantages of Online Trading vs Traditional Modes(Cont.) <ul><li>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. </li></ul>
  33. 34. Reality Check <ul><li>Perception of inadequate security & privacy </li></ul><ul><li>Difficulty of electronic funds transfer </li></ul><ul><li>Information may be inaccurate or false </li></ul><ul><li>Risk of system failure </li></ul><ul><li>Slowness in internet access or a digital meltdown </li></ul>
  34. 35. Reality Check (Cont.) <ul><li>Digital meltdown </li></ul><ul><li>Caveat emptor </li></ul>
  35. 36. Future Trend <ul><li>Stock brokers will have to provide e-trading to remain competitive </li></ul><ul><li>Resolution of perceived security issues will give popularity to electronic trading </li></ul><ul><li>Advances in hardware and software will increase efficiency of electronic trade executions </li></ul>
  36. 38. Choosing a safe Password <ul><li>Should not be names or personal information </li></ul><ul><li>Should not be a word from the dictionary </li></ul><ul><li>Should not be sequence of letters or numbers </li></ul><ul><li>Should be at least 6 characters long </li></ul><ul><li>Mix UPPER CASE and lower case letters </li></ul><ul><li>Mix letters, numbers and punctuations </li></ul><ul><li>Find a way to remember </li></ul>
  37. 40. 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
  38. 41. <ul><li>Thank You </li></ul>