Post on 16-Dec-2015
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
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
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.
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
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