Assignment Stock Broker

8/8/2019 Assignment Stock Broker

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Introduction of Stock

Stockis a security issued in the form of shares that representownership interests in a company. There is both common stock

(often simply called "stock," "shares," or "equity") and preferredstock. Common stockholders elect the company'sboard of

directors and actively participate in the company's success (orfailure) through a rising (or falling) stock price. Common stockholders may also receive dividends, provided the company is

profitable, obligations to commercial creditors and bondholdershave been met, and the board sees fit to declare them. In the eventof liquidation, however, common stock holders have no right to

assets until all other obligations of the firm have been met.Common stock holders may have "pre-emptive" rights to maintaintheir percentage ownership of the firm. For example, a common

stock holder with 100 of the 1,000 outstanding shares of thecompany, or 10%, may (or may not) have the right to buy 10

shares of a new issue of 100 shares. Preferred stock holders, inturn, are generally guaranteed dividends at a fixed rate, but they

have limited voting rights.

The stock or capital stock of a business entity represents theoriginal capital paid into or invested in the business by its

founders. It serves as a security for the creditors of a business sinceit cannot be withdrawn to the detriment of the creditors. Stock isdistinct from the property and the assets of a business which may

fluctuate in quantity and value.
http://www.investorglossary.com/stock.htmhttp://www.investorglossary.com/common-stock.htmhttp://www.investorglossary.com/equity.htmhttp://www.investorglossary.com/common-stock.htmhttp://www.investorglossary.com/board-of-directors.htmhttp://www.investorglossary.com/board-of-directors.htmhttp://en.wikipedia.org/wiki/Security_(finance)http://www.investorglossary.com/stock.htmhttp://www.investorglossary.com/common-stock.htmhttp://www.investorglossary.com/equity.htmhttp://www.investorglossary.com/common-stock.htmhttp://www.investorglossary.com/board-of-directors.htmhttp://www.investorglossary.com/board-of-directors.htmhttp://en.wikipedia.org/wiki/Security_(finance)


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HISTORY OF THE STOCK

One of the ealiest stock by VOC

During Roman times, the empire contracted out many of itsservices to private groups calledpublicani. Shares in publicani

were called "socii" (for large cooperatives) and "particulae" whichwere analogous to today's Over-The-Counter shares of small

companies. Though the records available for this time areincomplete, Edward Chancellor states in his bookDevil Take theHindmostthat there is some evidence that a speculation in theseshares became increasingly widespread and that perhaps the first

everspeculative bubble in "stocks" occurred.The first company to issue shares of stock after the Middle Ageswas the Dutch East India Company in 1606. The innovation of

joint ownership made a great deal ofEurope's economic growthpossible following the Middle Ages. The technique of poolingcapital to finance the building of ships, for example, made the

Netherlands a maritimesuperpower. Before adoption of the joint-stock corporation, an expensive venture such as the building of a

merchant ship could be undertaken only by governments or byvery wealthy individuals or families.

Economic historians find the Dutch stock market of the 17thcentury particularly interesting: there is clear documentation of theuse of stock futures, stock options, short selling, the use of credit topurchase shares, a speculative bubble that crashed in 1695, and a

change in fashion that unfolded and reverted in time with themarket (in this case it was headdresses instead ofhemlines). Dr.Edward Stringham also noted that the uses of practices such as

short selling continued to occur during this time despite thegovernment passing laws against it. This is unusual because it

shows individual parties fulfilling contracts that were not legallyenforceable and where the parties involved could incur a loss.

Stringham argues that this shows that contracts can be created andenforced without state sanction or, in this case, in spite of laws to

the contrary.
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Types of stock

Stock typically takes the form of shares of eithercommon stockor

preferred stock. As a unit of ownership, common stock typicallycarries voting rights that can be exercised in corporate decisions.

Preferred stockdiffers from common stock in that it typically doesnot carry voting rights but is legally entitled to receive a certain

level ofdividend payments before any dividends can be issued toother shareholders.[3][4] Convertible preferred stock is preferred

stock that includes an option for the holder to convert the preferredshares into a fixed number of common shares, usually anytime

after a predetermined date. Shares of such stock are called"convertible preferred shares" (or "convertible preference shares"

in the UK)

New equity issues may have specific legal clauses attached thatdifferentiate them from previous issues of the issuer. Some sharesof common stock may be issued without the typical voting rights,

for instance, or some shares may have special rights unique tothem and issued only to certain parties. Often, new issues that have

not been registered with a securities governing body may berestricted from resale for certain periods of time.

Preferred stock may be hybrid by having the qualities of bonds offixed returns and common stock voting rights. They also have

preference in the payment of dividends over common stock andalso have been given preference at the time of liquidation overcommon stock. They have other features of accumulation in

dividend.
http://en.wikipedia.org/wiki/Common_stockhttp://en.wikipedia.org/wiki/Preferred_stockhttp://en.wikipedia.org/wiki/Preferred_stockhttp://en.wikipedia.org/wiki/Dividendhttp://en.wikipedia.org/wiki/Stock#cite_note-investor_guide-2%23cite_note-investor_guide-2http://en.wikipedia.org/wiki/Stock#cite_note-investments-3%23cite_note-investments-3http://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Restricted_stockhttp://en.wikipedia.org/wiki/Common_stockhttp://en.wikipedia.org/wiki/Preferred_stockhttp://en.wikipedia.org/wiki/Preferred_stockhttp://en.wikipedia.org/wiki/Dividendhttp://en.wikipedia.org/wiki/Stock#cite_note-investor_guide-2%23cite_note-investor_guide-2http://en.wikipedia.org/wiki/Stock#cite_note-investments-3%23cite_note-investments-3http://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Restricted_stock


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Common Stock

Common stock is, well, common. When people talk about stocks

they are usually referring to this type. In fact, the majority of stockis issued is in this form. We basically went over features ofcommon stock in the last section. Common shares represent

ownership in a company and a claim (dividends) on a portion ofprofits. Investors get one vote per share to elect theboard

members, who oversee the major decisions made by management.

Over the long term, common stock, by means of capital growth,

yields higher returns than almost every other investment. Thishigher return comes at a cost since common stocks entail the most

risk. If a company goes bankrupt and liquidates, the commonshareholders will not receive money until the creditors,

bondholders and preferred shareholders are paid.

Preferred Stock

Preferred stock represents some degree of ownership in a companybut usually doesn't come with the same voting rights. (This mayvary depending on the company.) With preferred shares, investorsare usually guaranteed a fixed dividend forever. This is differentthan common stock, which has variable dividends that are neverguaranteed. Another advantage is that in the event of liquidation,

preferred shareholders are paid off before the common shareholder

(but still after debt holders). Preferred stock may also be callable,meaning that the company has the option to purchase the sharesfrom shareholders at anytime for any reason (usually for a

premium).

Some people consider preferred stock to be more like debt thanequity. A good way to think of these kinds of shares is to see them

as being in between bonds and common shares.
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Different Classes of Stock

Common and preferred are the two main forms of stock; however,it's also possible for companies to customize different classes ofstock in any way they want. The most common reason for this isthe company wanting the voting power to remain with a certaingroup; therefore, different classes of shares are given different

voting rights. For example, one class of shares would be held by aselect group who are given ten votes per share while a second class

would be issued to the majority of investors who are given onevote per share.

When there is more than one class of stock, the classes aretraditionally designated as Class A and Class B. Berkshire

Hathaway (ticker: BRK), has two classes of stock. The differentforms are represented by placing the letter behind the ticker

symbol in a form like this: "BRKa, BRKb" or "BRK.A, BRK.B".
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History of Stock marketThe Phiroze Jeejeebhoy Towers house the Bombay Stock

Exchange since 1980.

The Bombay Stock Exchange is the oldest exchange in Asia. Ittraces its history to the 1850s, when 4 Gujarati and 1 Parsi

stockbroker would gather under banyan trees in front of Mumbai'sTown Hall. The location of these meetings changed many times, as

the number of brokers constantly increased. The group eventuallymoved to Dalal Street in 1874 and in 1875 became an official

organization known as 'The Native Share & Stock BrokersAssociation'. In 1956, the BSE became the first stock exchange to

be recognized by the Indian Government under the SecuritiesContracts Regulation Act. The Bombay Stock Exchange developed

the BSE Sensex in 1986, giving the BSE a means to measureoverall performance of the exchange. In 2000 the BSE used this

index to open its derivatives market, trading Sensex futurescontracts. The development of Sensex options along with equityderivatives followed in 2001 and 2002, expanding the BSE'strading platform. Historically an open outcry floor trading

exchange, the Bombay Stock Exchange switched to an electronictrading system in 1995. It took the exchange only fifty days to

make this transition. This automated, screen-based tradingplatform called BSE On-line trading (BOLT) currently has a

capacity of 80 lakh orders per day. The BSE has also introduced

the world's first centralized exchange-based internet tradingsystem, BSEWEBx.co.in to enable investors anywhere in the

world to trade on the BSE platform. The BSE is currently housedin Phiroze Jeejeebhoy Towers at Dalal Street, Fort area.
http://en.wikipedia.org/wiki/Phiroze_Jeejeebhoy_Towershttp://en.wikipedia.org/wiki/Phiroze_Jeejeebhoy_Towershttp://en.wikipedia.org/wiki/Dalal_Streethttp://en.wikipedia.org/wiki/Fort_(Mumbai_precinct)http://en.wikipedia.org/wiki/Phiroze_Jeejeebhoy_Towershttp://en.wikipedia.org/wiki/Phiroze_Jeejeebhoy_Towershttp://en.wikipedia.org/wiki/Dalal_Streethttp://en.wikipedia.org/wiki/Fort_(Mumbai_precinct)


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History Of BSE

The Phiroze Jeejeebhoy Towers house the Bombay StockExchange since 1980.

The Bombay Stock Exchange is the oldest exchange in Asia. Ittraces its history to the 1850s, when 4 Gujarati and 1 Parsi

stockbroker would gather under banyan trees in front of Mumbai'sTown Hall. The location of these meetings changed many times, asthe number of brokers constantly increased. The group eventually

moved to Dalal Street in 1874 and in 1875 became an officialorganization known as 'The Native Share & Stock Brokers

Association'. In 1956, the BSE became the first stock exchange tobe recognized by the Indian Government under the Securities

Contracts Regulation Act. The Bombay Stock Exchange developedthe BSE Sensex in 1986, giving the BSE a means to measure

overall performance of the exchange. In 2000 the BSE used thisindex to open its derivatives market, trading Sensex futures

contracts. The development of Sensex options along with equityderivatives followed in 2001 and 2002, expanding the BSE'strading platform. Historically an open outcry floor trading

exchange, the Bombay Stock Exchange switched to an electronictrading system in 1995. It took the exchange only fifty days to

make this transition. This automated, screen-based tradingplatform called BSE On-line trading (BOLT) currently has a

capacity of 8 million orders per day. The BSE has also introducedthe world's first centralized exchange-based internet trading

system, BSEWEBx.co.in to enable investors anywhere in theworld to trade on the BSE platform. The BSE is currently housed

in Phiroze Jeejeebhoy Towers at Dalal Street, Fort area.

Bombay Stock Exchange is the oldest stock exchange in Asiawith a rich heritage of over 133 years of existence. Whatis now popularly known as BSE was established as "TheNative Share & Stock Brokers' Association" in 1875.


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BSE is the first stock exchange in the country whichobtained permanent recognition (in 1956) from theGovernment of India under the Securities Contracts

(Regulation) Act (SCRA) 1956. BSE's pivotal and pre-eminentrole in the development of the Indian capital market is

widely recognised. It migrated from the open out-cry systemto an online screen-based order driven trading system in

1995. Earlier an Association Of Persons (AOP), BSE is now acorporatised and demutualised entity incorporated under the

provisions of the Companies Act, 1956, pursuant to the BSE(Corporatisation and Demutualisation) Scheme, 2005 notifiedby the Securities and Exchange Board of India (SEBI). With

demutualisation, BSE has two of world's prominentexchanges, Deutsche Brse and Singapore Exchange, as its

strategic partners.

Today, BSE is the world's number 1 exchange in terms of thenumber of listed companies and the world's 5th in handlingof transactions through its electronic trading system. The

companies listed on BSE command a total market

capitalization of USD Trillion 1.06 as of July, 2009. BSEreaches to over 400 cities and town nation-wide and hasaround 4,937 listed companies, with over 7745 scrips being

traded as on 31st July 09.


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BSE indices

Bombay Stock ExchangeFor the premier stock exchange that pioneered the securities

transaction business in India, over a century of experience is aproud achievement. A lot has changed since 1875 when 318persons by paying a then princely amount of Re. 1, became

members of what today is called Bombay Stock Exchange Limited(BSE).

Over the decades, the stock market in the country has passed

through good and bad periods. The journey in the 20th century hasnot been an easy one. Till the decade of eighties, there was no

measure or scale that could precisely measure the various ups anddowns in the Indian stock market. BSE, in 1986, came out with a

Stock Index-SENSEX- that subsequently became the barometer ofthe Indian stock market.

The launch of SENSEX in 1986 was later followed up in January1989 by introduction of BSE National Index (Base: 1983-84 =

100). It comprised 100 stocks listed at five major stock exchangesin India - Mumbai, Calcutta, Delhi, Ahmedabad and Madras. TheBSE National Index was renamed BSE-100 Index from October

14, 1996 and since then, it is being calculated taking intoconsideration only the prices of stocks listed at BSE. BSE

launched the dollar-linked version of BSE-100 index on May 22,2006.

With a view to provide a better representation of the increasingnumber of listed companies, larger market capitalization and thenew industry sectors, BSE launched on 27 May, 1994 two newindex series viz., the 'BSE-200' and the 'DOLLEX-200'. Sincethen, BSE has come a long way in attuning itself to the varied

needs of investors and market participants. In order to fulfill theneed for still broader, segment-specific and sector-specific indices,

BSE has continuously been increasing the range of its indices.BSE-500 Index and 5 sectoral indices were launched in 1999. In

2001, BSE launched BSE-PSU Index, DOLLEX-30 and the


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country's first free-float based index - the BSE TECk Index. Overthe years, BSE shifted all its indices to the free-float methodology

(except BSE-PSU index).BSE disseminates information on the Price-Earnings Ratio, the

Price to Book Value Ratio and the Dividend Yield Percentage onday-to-day basis of all its major indices.The values of all BSE indices are updated on real time basis during

market hours and displayed through the BOLT system, BSEwebsite and news wire agencies.

All BSE Indices are reviewed periodically by the BSE IndexCommittee. This Committee which comprises eminent

independent finance professionals frames the broad policyguidelines for the development and maintenance of all BSE

indices. The BSE Index Cell carries out the day-to-daymaintenance of all indices and conducts research on development

of new indices.

BSE

For the premier stock exchange that pioneered the securitiestransaction business in India,over a century of experience is a

proud achievement. A lot has changed since 1875 when318persons by paying a then princely amount of Re. 1, became

members of what today is called Bombay Stock Exchange Limited(BSE).

Over the decades, the stock market in the country has passedthrough good and bad periods. The journey in the 20th century has

not been an easy one. Till the decade of eighties, there was no

measure or scale that could precisely measure the various ups anddowns in the Indian stock market. BSE, in 1986, came out with aStock Index-SENSEX- that subsequently became the barometer of

the Indian stock market.

The launch of SENSEX in 1986 was later followed up in January1989 by introduction of BSE National Index (Base: 1983-84 =

100). It comprised 100 stocks listed at five major stock exchangesin India - Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The


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BSE National Index was renamed BSE-100 Index from October14, 1996 and since then, it is being calculated taking into

consideration only the prices of stocks listed at BSE.

BSE launched the dollar-linked version of BSE-100 index on May22, 2006.

With a view to provide a better representation of the increasingnumber of listed companies, larger market capitalization and thenew industry sectors, BSE launched on 27th May, 1994 two new

index series viz., the 'BSE-200' and the 'DOLLEX-200'. Sincethen, BSE has come a long way in attuning itself to the varied

needs of investors and market participants. In order to fulfill the

need for still broader, segment-specific and sector-specific indices,BSE has continuously been increasing the range of its indices.

BSE-500 Index and 5 sectoral indices were launched in 1999. In2001, BSE launched BSE-PSU Index, DOLLEX-30 and the

country's first free-float based index - the BSE TECk Index. Overthe years, BSE shifted all its indices to the free-float methodology

(except BSE-PSU index).

BSE disseminates information on the Price-Earnings Ratio, the

Price to Book Value Ratio and the Dividend Yield Percentage onday-to-day basis of all its major indices.

The values of all BSE indices are updated on real time basis duringmarket hours and displayed through the BOLT system, BSE

website and news wire agencies.

All BSE Indices are reviewed periodically by the BSE IndexCommittee. This Committee which comprises eminent

independent finance professionals frames the broad policyguidelines for the development and maintenance of all BSE

indices. The BSE Index Cell carries out the day-to-daymaintenance of all indices and conducts research on development

of new indices


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NSEThe National Stock Exchange (NSE) is a stock exchange located atMumbai, India. It is the largest stock exchange in India in terms of

daily turnover and number of trades, for both equities andderivative trading. NSE has a market capitalization of around

7,262,507 crore (US$ 1,648.59 billion) (October 2010) and was

expected to become the biggest stock exchange in India in terms ofmarket capitalization by 2009 end, although this has not yetoccurred. Though a number of other exchanges exist, NSE and the

Bombay Stock Exchange are the two most significant stockexchanges in India, and between them are responsible for the vastmajority of share transactions. The NSE's key index is the S&P

CNX Nifty, known as the NSE NIFTY (National Stock ExchangeFifty), an index of fifty major stocks weighted by market

capitalisation.

NSE is mutually-owned by a set of leading financial institutions,banks, insurance companies and other financial intermediaries in

India but its ownership and management operate as separateentities. There are at least 2 foreign investors NYSE Euronext andGoldman Sachs who have taken a stake in the NSE. As of 2006,the NSE VSAT terminals, 2799 in total, cover more than 1500

cities across India. In October 2007, the equity marketcapitalization of the companies listed on the NSE was US$ 1.46

trillion, making it the second largest stock exchange in South Asia.NSE is the third largest Stock Exchange in the world in terms ofthe number of trades in equities. It is the second fastest growingstock exchange in the world with a recorded growth of 16.6%.


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National Stock Exchange

A+ A-

National Stock Exchange of India (NSE) is India's largest StockExchange & World's third largest Stock Exchange in terms of

transactions. Located in Mumbai, NSE was promoted by leadingFinancial Institutions at the behest of the Government of India, andwas incorporated in November 1992 as a tax-paying company. InApril 1993, NSE was recognized as a Stock exchange under the

Securities Contracts (Regulation) Act-1956. NSE commencedoperations in the Wholesale Debt Market (WDM) segment in June1994. Capital Market (Equities) segment of the NSE commencedoperations in November 1994, while operations in the Derivativessegment commenced in June 2000. NSE has played a catalytic rolein reforming Indian securities market in terms of microstructure,market practices and trading volumes. NSE has set up its trading

system as a nation-wide, fully automated screen based trading

system. It has written for itself the mandate to create World-classStock Exchange and use it as an instrument of change for theindustry as a whole through competitive pressure. NSE is set up on

a demutualised model wherein the ownership, management andtrading rights are in the hands of three different sets of people. This

has completely eliminated any conflict of interest.

NSE was set up with the objectives of:


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reducing operational costs, compliance, operational transparencyetc for the customers, investors and to the entire Indian Securities

Industry. Some of the projects taken by NSE last year are asfollows:-

Trading System Capacity enhancementRe-engineering of Online Position Monitoring (OPMS)

Augmentation of Data Warehouse (DWH)STP Central Hub

What was the objective, business benefits that the companyderived and beneficiaries of the implementation of Trading System

Capacity enhancement?

Project Objective

NSE's Capital Market Trading system was operational on twomachine split architecture using Fault Tolerant mainframes and

geared to handle 3 million trades. However, the CM segment hadstarted to experience trades nearing 3 Million trades which form a

threshold. Based on the trends & expected volumes, growth in themedium term is more than thrice the current trading volume, i.e.

about 10 Million transactions per day. However with the thenexisting 2-machine split architecture, it was required to improvethe trading system transaction handling capacity. The 3-machinesplit architecture project was thus taken up to enhance the loadhandling capacity of the system by introducing a 3-way split

Hardware, Application optimisation and improving the processes

for achieving market volume of around 6 million transactions perday.

Project was completed as per schedule & is currently operationalsince last 1 year.

Business Benefits

System scaled on 3 machines with distribution of users and


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securities with complete transparency to market participants.System witnessed 3 million trades with faster response time to

members at significantly lower system resource utilisation level.Scalability to handle higher volumes (3 million to 6 million

transactions per day).BeneficiariesTrading Members have experienced a faster response time. Thetrading system is able to handle higher volume of transactions

which translates into higher turnover. It therefore directlytranslates into more opportunities and growth for the Entire Indian

Securities market.

What was the objective, business benefits that the companyderived and beneficiaries of the implementation of re-engineering

of Online Position Monitoring (OPMS)?

Project Objective

OPMS is On-line Position Monitoring and Risk Managementsystem for the Capital Market segment of the National Stock

Exchange of India Limited. It tracks positions of trading membersfrom Turnover and Exposure limits with a view of identifying andpreventing potential settlement related issues. The positions aremonitored on an on-line basis and the system provides for auto

disablement of the violating member on the trading system. Basedon the volumes, it is expected that the current trading levels of

about 3 million trades per day may rise to the new heights of 10million trades per day in the near future. It was therefore necessary

to initiate was to reengineer OPMS system without imposing anymajor cost associated with architectural overhauling. Another keyobjective was to scale the violation detection mechanism by a

mammoth factor from around 300 violation checks per second tohandle more than 4000 violations per second.

Other major objectives and the goals include:

Real-time position computation and violation detection


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Ability to handle high load of over one million client positionsManagement of information for positions & risk values about each

trading memberInformation structure based on a tree of security, settlement,

trading memberHandle on-line collateral and securities early pay-inTotal fault tolerance with minimum downtime

Achieve 4000 violation checks per secondBusiness Benefits

Effective and efficient Risk Management- Violation turnoverreduced from few seconds to few milliseconds & 99.96% tradesprocessed for Risk Management within a second of occurrence.Better utilisation of Resources- Peak capacity of trades handling

capacity enhanced to 10 million trades & Average CPU utilisationreduced from 70% to 20%.

Linearly scalableBeneficiaries

Trading Members risk management has significantly improved.Trading members have benefited due to this initiative.

What was the objective, business benefits that the companyderived and beneficiaries of the implementation Augmentation of

Data Warehouse (DWH)?

Project ObjectiveNSE has a matured data warehouse application extensively usedfor analysis, reporting and investigative purposes. The project wasto enhance and upgrade existing data warehouse infrastructure in

terms of:-

Migrating to a higher capacity server and storage hardwareMigrating database from Oracle 8 to Oracle 9i

Upgrade existing ETL solution consisting of a separate extractionsolution and transformation cum loading solution into a complete

and unified ETL toolBusiness Benefits


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Response time & query performance improved dramatically byabout 100%.

Extraction and loading time has reduced by almost 8-9 times.Timely, efficient reporting. Reduced lead time in providing data to

Regulator.New features of Oracle 9i like Ranking, enhanced analyticfunctions have contributed enormously to efficiency aspect of the

data warehouse usage.Beneficiaries

Benefit accrued to NSE as an organisation due to the extensiveusage of DWH.

What was the objective, business benefits that the companyderived and beneficiaries of the implementation STP Central Hub?

Project ObjectiveDuring a typical day at an institutional fund house, details of tradeconfirmations executed in the day are sent out to the Custodian foreffecting trade settlements. The Custodian also receives details ofthe executed trade from the broker of the fund house, for cross-

verification of the trade data. Upon verification, if it is found that

the trade details do not match the instruction documents sent acrossby the fund house and the broker there is a delay in effecting suchsettlements. This is a global phenomenon that is a concern for allthe major financial institutions. Studies have shown that around15% of global trade failures result from unmatched trade data,

which in monetary terms is upwards of Billions of Dollars, a steepprice pay for the lack of an efficient processing framework.

Straight Through Processing (STP) framework seeks to provide

seamless data flow both within the enterprise as well as across themarket without any manual intervention using ISO 15022messaging standards.

In India, inspite of SEBI making STP mandatory, marketparticipants were not able to fully adapt the STP framework intotheir operations as the STP services provided by various providers

were not interoperable. This meant that messages destined formarket participants registered across the service providers could


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not be achieved. One of the options was to ensure that each of theSTP provider "talked" to other STP providers, but this meant amathematical explosion in terms of number of interconnects in

case of increasing number of service providers.

Recognising that the success of the STP is crucial to make a movetowards T+1 settlement cycle, NSE took up the challenge ofsetting up a Central Hub to resolve inter-operability amongst

various STP Service Providers. After developing the applicationsoftware, the STP Central Hub was put for operational testing from

end of March 2004 to route the messages between ServiceProviders. STP Central Hub has ensured seamless operations of

message processing. After the initial testing and stabilizationperiod, SEBI has mandated use of STP system for all institutionaltrades. SEBI endeavoured to shorten the settlement cycle and has

been successful in reducing the same from T+5 to T+2. It has nowset a target for achieving T+1 settlement in Indian Securities

Market. T+1 settlement cycle has not been achieved anywhere inthe world and India is the first country to successfully implement

STP effectively for all the market intermediaries.

NSE through its strength in technology innovations has made itpossible for the integration of all STP service providers using

heterogeneous protocols within their own system so as to providethe necessary impetus to the process

Business Benefits

Improved efficiency, reduction of manual activities leading to

higher accuracy of trade execution and settlement.Reduced operational risk by automating the process fromexecution through to settlement.

Reduction in operational cost by sending data electronically.Transparency & improved customer service with detailed reports

about delivery and failure of messages are availableinstantaneously, on an on-line basis.

Reduced settlement cycle to facilitate T+1 settlement.Beneficiaries


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Entire Indian Securities Industry has been the beneficiary of theSTP Central Hub initiative. It is the only STP Central Hub

operational since the last few years. This move has helped forfaster clearing and settlement in Indian Securities Industry and

help achieve 'T+1' environment in India. India's profile inInternational markets was enhanced which will help in attractingfurther foreign investments.

National Stock Exchange of India (NSE)NSE about | NSE profile | NSE history

About the National Stock Exchange of India :

In the fast growing Indian financial market, there are 23 stockexchanges trading securities. The National Stock Exchange of

India (NSE) situated in Mumbai - is the largest and most advancedexchange with 1016 companies listed and 726 trading members.

The NSE is owned by the group of leading financial institutionssuch as Indian Bank or Life Insurance Corporation of India.

However, in the totally de-mutualised Exchange, the ownership as

well as the management does not have a right to trade on theExchange. Only qualified traders can be involved in the securities

trading.

The NSE is one of the few exchanges in the world trading all typesof securities on a single platform, which is divided into three

segments: Wholesale Debt Market (WDM), Capital Market (CM),

and Futures & Options (F&O) Market. Each segment hasexperienced a significant growth throughout a few years of theirlaunch. While the WDM segment has accumulated the annual

growth of over 36% since its opening in 1994, the CM segment hasincreased by even 61% during the same period.

The National Stock Exchange of India has stringent requirementsand criteria for the companies listed on the Exchange. Minimum

capital requirements, project appraisal, and company's track record


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are just a few of the criteria. In addition, listed companies payvariable listing fees based on their corporate capital size.

The National Stock Exchange of India Ltd. provides its clients

with a single, fully electronic trading platform that is operatedthrough a VSAT network. Unlike most world exchanges, the NSEuses the satellite communication system that connects traders from

345 Indian cities. The advanced technologies enable up to 6million trades to be operated daily on the NSE trading platform.

WHAT IS THE NATIONAL STOCK EXCHANGE (NSE) OFINDIA

The National Stock Exchange of India (NSE) is the largestfinancial market in India in terms of daily turnover and number oftrades for equities and derivative trading. There are thousands ofsecurities listed on the NSE, with a market capitalization of over$1.46 trillion dollars. The NSE is owned jointly by a number of

banking institutions and insurance companies with the mission of

providing a fast, electronic routing of orders throughout India.Lastly, the NSE was the first financial system in India providing

electronic limit orders for securities.

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Day Trading BasicsCandlesticks GaloreDay Trading Morning GapsTechnical Analysis VideosDay Trading Psychology

HISTORY OF THE NATIONAL STOCK EXCHANGE OFINDIA

The NSE was incorporated in 1992 as a tax-paying entity.However, the origins of the NSE can be traced back to the


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Securities Contracts Regulation Act of 1956. In this act, the Indiangovernment sought to create a financial market where investors

can invest safely and securely in order to build wealth.

MARKETS TRADING ON THE NSEThe NSE is responsible for a number of trading markets. Below isa list of these markets

Equity MarketsFutures and Options Markets

Wholesale Debt MarketMutual Funds

NSEThe National Stock Exchange (NSE) is a stock exchange locatedat Mumbai, India. It is the largest stock exchange in India in terms

of daily turnover and number of trades, for both equities andderivative trading. NSE has a market capitalization of around Rs47,01,923 crore (7 August 2009) and is expected to become the

biggest stock exchange in India in terms of market capitalizationby 2009 end. Though a number of other exchanges exist, NSE and

the Bombay Stock Exchange are the two most significant stockexchanges in India, and between them are responsible for the vastmajority of share transactions. The NSE's key index is the S&P

CNX Nifty, known as the NSE NIFTY (National Stock ExchangeFifty), an index of fifty major stocks weighted by market

capitalisation.

NSE is mutually-owned by a set of leading financial institutions,banks, insurance companies and other financial intermediaries in

India but its ownership and management operate as separateentities. There are at least 2 foreign investors NYSE Euronext andGoldman Sachs who have taken a stake in the NSE. As of 2006,the NSE VSAT terminals, 2799 in total, cover more than 1500

cities across India. In October 2007, the equity marketcapitalization of the companies listed on the NSE was US $ 1.46

trillion, making it the second largest stock exchange in South Asia.
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NSE is the third largest Stock Exchange in the world in terms ofthe number of trades in equities. It is the second fastest growingstock exchange in the world with a recorded growth of 16.6%.

SEBISecurities and Exchange Board of India

In 1988 the Securities and Exchange Board of India (SEBI) wasestablished by the Government of India through an executive

resolution, and was subsequently upgraded as a fully autonomousbody (a statutory Board) in the year 1992 with the passing of theSecurities and Exchange Board of India Act (SEBI Act) on 30thJanuary 1992. In place of Government Control, a statutory and

autonomous regulatory board with defined responsibilities, tocover both development & regulation of the market, and

independent powers have been set up. Paradoxically this is apositive outcome of the Securities Scam of 1990-91.

The basic objectives of the Board were identified as:

to protect the interests of investors in securities; to promote the development of Securities Market;

to regulate the securities market and for matters connected therewith or incidental thereto.

Since its inception SEBI has been working targetting the securitiesand is attending to the fulfillment of its objectives with

commendable zeal and dexterity. The improvements in the

securities markets like capitalization requirements, margining,
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establishment of clearing corporations etc. reduced the risk ofcredit and also reduced the market.

SEBI has introduced the comprehensive regulatory measures,

prescribed registration norms, the eligibility criteria, the code ofobligations and the code of conduct for different intermediarieslike, bankers to issue, merchant bankers, brokers and sub-brokers,registrars, portfolio managers, credit rating agencies, underwriters

and others. It has framed bye-laws, risk identification and riskmanagement systems for Clearing houses of stock exchanges,

surveillance system etc. which has made dealing in securities bothsafe and transparent to the end investor.

Another significant event is the approval of trading in stock indices(like S&P CNX Nifty & Sensex) in 2000. A market Index is a

convenient and effective product because of the following reasons:

It acts as a barometer for market behavior; It is used to benchmark portfolio performance;

It is used in derivative instruments like index futures andindex options;

It can be used for passive fund management as in case ofIndex Funds.

Two broad approaches of SEBI is to integrate the securities marketat the national level, and also to diversify the trading products, so

that there is an increase in number of traders including banks,financial institutions, insurance companies, mutual funds, primarydealers etc. to transact through the Exchanges. In this context the

introduction of derivatives trading through Indian Stock Exchangespermitted by SEBI in 2000 AD is a real landmark.

SEBI appointed the L. C. Gupta Committee in 1998 torecommend the regulatory framework for derivatives trading and

suggest bye-laws for Regulation and Control of Trading andSettlement of Derivatives Contracts. The Board of SEBI in its

meeting held on May 11, 1998 accepted the recommendations of

the committee and approved the phased introduction of derivatives
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trading in India beginning with Stock Index Futures. The Boardalso approved the "Suggestive Bye-laws" as recommended by theDr LC Gupta Committee for Regulation and Control of Trading

and Settlement of Derivatives Contracts.

SEBI then appointed the J. R. Verma Committee to recommendRisk Containment Measures (RCM) in the Indian Stock IndexFutures Market. The report was submitted in november 1998.

However the Securities Contracts (Regulation) Act, 1956 (SCRA)required amendment to include "derivatives" in the definition ofsecurities to enable SEBI to introduce trading in derivatives. The

necessary amendment was then carried out by the Government in1999. The Securities Laws (Amendment) Bill, 1999 was

introduced. In December 1999 the new framework was approved.Derivatives have been accorded the status of `Securities'. The ban

imposed on trading in derivatives in 1969 under a notificationissued by the Central Government was revoked. Thereafter SEBIformulated the necessary regulations/bye-laws and intimated the

Stock Exchanges in the year 2000. The derivative trading started in

India at NSE in 2000 and BSE started trading in the year 2001.

Introduction and Objectives of Sebi

In 1988 the Securities and Exchange Board of India (SEBI) wasestablished by the Government of India through an executive

resolution, and was subsequently upgraded as a fully autonomousbody (a statutory Board) in the year 1992 with the passing of theSecurities and Exchange Board of India Act (SEBI Act) on 30thJanuary 1992. In place of Government Control, a statutory andautonomous regulatory board with defined responsibilities, to

cover both development & regulation of the market, andindependent powers have been set up. Paradoxically this is a

positive outcome of the Securities Scam of 1990-91.
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The basic objectives of the Board were identified as:

* to protect the interests of investors in securities;* to promote the development of Securities Market;

* to regulate the securities market and* for matters connected therewith or incidental thereto.

SEBI

Securities and Exchange Board of India (SEBI), Functions of

Securities and Exchange Board of India (SEBI) was firstestablished in the year 1988 as a non-statutory body for regulatingthe securities market. It became an autonomous body in 1992 and

more powers were given through an ordinance. Since then itregulates the market through its independent powers.

Objectives of SEBI:

As an important entity in the market it works with followingobjectives:

1. It tries to develop the securities market.2. Promotes Investors Interest.

3. Makes rules and regulations for the securities market.

Functions Of SEBI:

Find below SEBI's important functions:

1. Regulates Capital Market2. Checks Trading of securities.

3. Checks the malpractices in securities market.


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4. It enhances investor's knowledge on market by providingeducation.

5. It regulates the stockbrokers and sub-brokers.

STOCK BROKER

A stock broker is a regulated professionalbrokerwho buys and sells shares and othersecurities

through market makers or agency only firms onbehalf ofinvestors. A broker may be employed by a

brokerage firm.

Stockbroker

An execution only stockbroker offers a 'dealing only' service whereno advice is given. This means that the investor bears all

responsibility regarding investment decisions. The instructions todeal are usually made online or by telephone. The service is

commission based and usually very low cost to the investor. This isnow the mainstay of most stockbroking firms.

Not offering advice means that you, the investor, need to know inadvance, what company stock is to be purchased (or sold), in whatamount and any and all analysis will have been completed without

the broker being involved.

This change in responsibility is very important. In the age ofinternet stockbrokers , investors are much more responsible for

their financial actions than has ever been the case previously. This

shift in responsibility may be beneficial for some investors, but for
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those that do not fully understand the markets, this may be aproblem.

However, it should be noted that both advisory and discretionarymanagement stockbrokers are unlikely to be willing to advise

smaller scale investors. In other words, they are in the 'relationship'business and the relationships that they encourage and build are

with wealthier investors with money, assets or a portfolio tomanage.

However, online brokerages have enabled many millions ofsmaller investors to be able to participate more easily. This

additional number of investors and their money provides extra

upward price pressure (more demand for shares creates reducedsupply and rising prices). This may be one of many reasons for theincredible increase in global stock market prices in the early years

of this century.

How much?

Commission rates vary (as noted above) depending upon what sortof security is being bought or sold. The largest fees generally relate

to foreign stocks and convertibles. Government securities (gilts, T-Bills etc), loan stocks (a type of bond or debt instrument) are

usually the cheapest.

Generally, dealing in shares online is likely to be the lowest costoption. Traditionally, stockbroking was a relationship business in

which a client would deal with a company based locally (to theclient, not to the market). This meant that many large brokerageswould have hundreds of offices located across the company.

Needless to say, this would create large overheads. There would belots of offices to rent, staff to pay, bills and marketing expenses.These have all been slashed by online services. They need only a

few offices, one marketing team, far less staff and very fewexpense account lunches! By reducing the operating costs so
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significantly, the cost of the service to the client can be reducedmarkedly as well.

It is these changes that has made 'day trading' possible. Withoutlow cost dealing (mainly online), and vastly increased informationsources (also online) day traders could not buy and sell quickly to

take advantage of very low margin opportunities. In the past, underthe old - pre-internet - system of buying and selling, this would

have been impossible. (By the way - all day traders use executiononly terms).

For obvious reasons, it is difficult to give an exact guide as to the

execution only stockbroker charges likely to be paid, as eachtransaction on any stock exchange is different, but I hope that thisinformation will at least offer useful guidance as to what they are

and how they work.

If this type of service is not for you, perhaps you might like to readabout:

Role of a stock broker

Stock broker knows how to the trends of the Indian stock market.He keeps up to date knowledge of the stock market. He also keepsinformation on all the financial developments made by the

brokerage firm. So, it is very important that you always seek theadvice of a good professional stock broker so that you can keep

yourself safe.


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pass the General Securities Representative Examination or theSeries 7 exam for working as a stock broker. Brokers provide

different types of services to their clients.

Execution only - In this service the broker only carries out thetrading according to the direction of the investor. This is the basic

and the most commonly used service of the brokers.

Advisory dealing - In this service the broker not only performs thebuying and selling instructions of the client but also advises the

investor about which stock to buy and which stock to sell.

Discretionary dealing - This is the most comprehensive service that

a broker provides. In this case the broker has the discretionarypower to take the investment decisions on behalf of the investor.

These are the basic services provided by the stock market brokersand it completely depends on you which service you will subscribeto. For example, if you are quite apt at stock market analysis andcan regularly watch on the happenings of stock market and thestocks in which you invest, it is better to have a stockbroker to

execute your buying and selling instructions. It will not only save

the service charges but also give you full confidence in stockmarket trading.

If you are relatively new to stock investment or if you do not haveadequate knowledge of stock analysis or if you do not have the

time or resource to do thorough research on the stock market theadvisory service is effective for you. It will not only execute your

trading directions but also provide you with effective tips andguidance for stock market investment. Though it will be a bit more

expensive but then you can significantly gain from the technicalknowledge and experience of the broker and its research and

analysis team.

The full service broker is the preferred solution for those who donot have the time or knowledge to maintain their portfolio. In this

case the broker takes all the decisions for investing in the stockmarket. This is the most costly broking service but then it will not

require you to spend any time for your stock market investment.


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Just like the different types of stock broking services there aredifferent categories of brokers as well. While choosing your stockexchange broker, it is wise to select from the reputed stock trading

companies as that will make sure you gain from their robust

infrastructure from analysis and experience in stock market. Thatalso applies to selecting youronline trading company who willcarry out the online trading on your behalf

You have always heard about stock brokers, right? What is the roleof stock broker? Well, they are professionals who buy and sell

stocks as well as other securities in the stock market. If you wish tobe a stock broker then you need to pass the General SecuritiesRepresentative Examination which is rather a very difficult test.

Stock brokers offer different types of services to different clients.

Stockbroker

A Day in the life of a Stockbroker

A stockbroker invests in the stock market for individuals orcorporations. Only members of the stock exchange can conduct

transactions, so whenever individuals or corporations want to buyor sell stocks they must go through a brokerage house.

Stockbrokers often advise and counsel their clients on appropriateinvestments. Brokers explain the workings of the stock exchange

to their clients and gather information from them about their needs

and financial ability, and then determine the best investments forthem. The broker then sends the order out to the floor of thesecurities exchange by computer or by phone. When the

transaction has been made, the broker supplies the client with theprice. The buyer pays for the stock and the broker transfers the title

of the stock to the client and performs clearing and settlementprocedures. The beginning stockbrokers first priority is learningthe market. One broker said, First you have to decide whether youhave an interest in the stock market. This will determine how well
http://www.sogotrade.com/http://www.sogotrade.com/


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youll do. If youre just interested in making money you wont getvery far. Stockbrokers spend their time in a fast-paced office,

usually working from nine to five, unless they are just starting outor have to meet with clients. The new broker spends many hours

on the phone building up a client base. Sometimes brokers teachfinancial education classes to expose themselves to potentialinvestors who may then become their clients.

What Does StockbrokerMean?1. An agent that charges a fee or commission for executing buy

and sell orders submitted by an investor.

2. The firm that acts as an agent for a customer, charging thecustomer a commission for its services.

Investopedia explains Stockbroker

It used to be that only the wealthy could afford a broker and haveaccess to the stock market. With the internet came the explosion of

discount brokers that let you trade at a smaller fee, but don'tprovide personalized advice. Because of discount brokers, nearly

anybody can afford to invest in the market now.

Definition of Stock Broker:

A stock broker is a qualified, registered and regulated professionalwho buys and sells stocks and derivatives in the secondary market

on behalf of their clients (investors, institutions etc.). Alltransactions carried out in the stock exchanges are done throughbrokers only. They maintain the basic information about their

clients like names, contact information, PAN number, demat andbank account details etc. A broker may allow a client to place

orders depending upon the funds which are available in the clientstrading account. The brokers issue contract notes when trades are

done. They also send periodical reports about the transaction


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history to their clients. The online brokers may also have thesedetails on their web site which can be accessible only by the client.

SERVICES PROVIDED

A transaction on a stock exchange must be made between twomembers of the exchangean ordinary person may not walk into

theNew York Stock Exchange (for example), and ask to tradestock. Such an exchange must be done through a broker.

There are three types of stockbroking service.

Execution-only, which means that the broker will only carryout the client's instructions to buy or sell.

Advisory dealing, where the broker advises the client onwhich shares to buy and sell, but leaves the final decision to

the investor. Discretionary dealing, where the stockbroker ascertains the

client's investment objectives and then makes all dealingdecisions on the client's behalf.

Acting as a principal

Stockbrokers also sometimes or exclusively trade on their ownbehalf, as aprincipal, speculating that a share or otherfinancial

instrument will increase or decline in price. In such cases the termbroker makes little sense and the individuals or firms trading in

principal capacity sometimes call themselves dealers, stock tradersor simply traders. There are of many other types of traders withincapital markets, for example trading within the Foreign exchange

market.
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Responsibility of brokers:

Brokers are expected to act based on the best interests of theirclients. They may inform the clients promptly about margin calls,additional documentation if required etc. They are also required to

send the contract notes as and when trades are carried out by/onbehalf of the clients.

Brokerage

This is the commission charged by the broker for the transaction. Itcould be a percentage of the trade value or flat amount per trade

depending upon the agreement between the client and the broker.In India, brokers need to pay a service tax of 12.36% for the

brokerage collected from their clients. This is passed on to theinvestors ultimately.


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Who can become a broker in India?

An individual, a firm or a corporate can become a tradingmember(broker) of a stock exchange

Minimum age shall be 21 for individuals andpartners/directors of firms/corporates

Individual/Partners/Directors must be at least graduates

Should have a minimum of 2 years experience in an activityrelated to dealing in securities or as portfolio manager or asinvestment consultant or as a merchant banker or in financialservices

treasury, broker, sub broker, dealer, authorised agent orauthorised clerk or authorised representative of a recognisedstock exchange

For membership at the National Stock Exchange, a minimumpaid up equity capital of Rs.30 lakhs is required forcorporates.

Application form for membership at NSE is available from thislink. Instructions for filling are also available at the web site.

It is to be noted here that those who want to become brokers

Should not have defaulted in a stock exchange Should not have become bankrupt Should not have been involved in fraud, dishonesty, etc.

The applicant shall also pay an interest free security deposit forcash, futures & options and wholesale debt market segmentsseparately. For Cash/F & O segment trading the deposit is Rs.125lakhs. Visit this linkfor other segments.
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Functions of Stockbrokers and Financial Advisors

An investor who loses his money due to careless mistakes or onporpoise fraud of his stockers or financial advisors can recover his

money through an arbitration; that is a process in which adisagreement between two or more parties is resolved by impartial

individuals (arbitrators) to avoid expensive lawsuits.

Stockbrokers are in charge of providing correct and complete

information to investors; this kind of fraud occurs when an advisor,stockbroker or brokerage firm provides incorrect, incomplete orpartial information in an endeavor to have power over the marketor draw business. The Securities Exchange Commission (SEC) has

determined

procedures for stockbrokers and financial advisors; they guaranteethat the investor is being reasonable and constant.

Stockbrokers frauds include unfair investment advice which iswhen an agent has predilection toward or beside a special company

for reasons like: high lucrative investment banking fees formcertain issuers and suggests customers according to that bias

instead of current results; contradictory investment advice is whena broker gives contradicting advice to different customersand acquires or sells securities in his/her account before

completing the same deals for clients; among others.

Many companies have been punished for stockbroker fraud(Merrill Lynch, for example); and others like: Bear Stearns, CreditSuisse Group, Goldman Sachs, Lehman Brothers, Deutsche Bank,

UBS Warburg and others are

under investigation by the New York Attorney General, SecuritiesExchange Commission, NASD, New York Stock Exchange and

the North American Securities Administrators Association.


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Once the application is received by the exchange, the membershipis granted after due scrutiny and the process is given below.

1. Interactive session with Membership RecommendationCommittee

2. Approval by Membership Approval Committee / Board3. Offer letter of provisional membership of Exchange

4. Submission of documents for SEBI registration by applicant5. Receipt of SEBI certificate

6. Enablement on the Exchange

Please note that this is the procedure for NSE. For otherexchanges, respective web sites may be visited.

Once the membership is given, the broker must comply with therules and regulations of the exchange by providing documents like

audited accounts, insurance policies, networth certificates,shareholding pattern details etc.

The membership could be transferred to another person or a firmsubject to the rules of the exchange. Members could besuspended/penalized/warned/expelled for misconduct,

unprofessionalism, failure to pay margin money, etc.

The following institutes in India offer educational programmes oncapital markets:

Bombay Stock Exchange Training Institute, Mumbai National Stock Exchange of India, Mumbai

Institute of Financial and Investment Planning, Mumbai All India Centre for Capital Market Studies, Nasik

Institute of Chartered Financial Analysts of India, Hyderabad Institute of Cpital Market Development, New Delhi

Institute of Company Secretaries of India, New Delhi


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Conclusion

It requires a lot of understanding about companies, managements,businesses, fundamentals, technicals, procedures etc. to be familiarwith activities of stock market. Those who are ambitious of

becoming brokers need to have plenty of investment and tradingexperience.

Sundaramurthy Vadivelu

a)What are the functions of a stock broker?

A stock broker is an individual or an organization, who is licensedby the government to trade in stocks/shares and has the right toaccess the share market. On payment of a small fee, he acts onyour behalf in the stock market and carries out your transactions of

buying and selling of shares. Besides these, he also providesprofessional advice in debentures sale/purchase of governmentbonds, and listed property trusts etc.

b)Full Service Broker (Advisory):

Stock brokers are generally divided in two categories:

Full Service Brokers Discount Brokers

As the name would indicate comprehensive services from tradingto financial planning of the clients are provided by a full service

broker. Based on your financial aims and objectives, he providesadvice on the client's investment portfolio and additions/alterationsrequired in the some from time to time. Since he provides


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comprehensive services, his charges are a little higher thandiscount brokers.

c)Selection of a full service broker:

As full service broker will be your vital link for making financialdeals, the selection of the same has to be undertaken with greatcaution and circumspection. You need to assess some of hiscapabilities in the following fields:

How much he charges for the services he provides and howthey compare with others in the market?

Is his advice and data backed by adequate equity research? Does he have access to floats? What is the style and pattern of his investment? Is his communication system reliable? Does he communicate

with his clients on a monthly, weekly or daily basis? Is heprinting any newsletter etc?

What is the frequency of review of your investmentportfolio? Will he review it often though, to increase yourreturns?

d)Discount brokers (Non Advisory):

Discount brokers generally provide limited services of buying andselling your stocks/shares; based on the orders given by you, viatelephone and/or internet. Since their services are of a non-

advisory nature, their fee is also less vis--vis full service brokers.

e)Selecting a good discount broker:

You need to review the following guidelines before selecting agood discount broker.

Is he offering any value added services? What is the mode of contacting him - phone or net?


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An advisory management stockbroker offers a service where anadviser discusses or reviews the investments of a client on aregular basis or as required. This could relate to formal portfoliomanagement or trading in individual shares.

The client will make the final decision to buy or sell. The adviserwill normally supply research materials relating to markets, sectorsand individual firms. The stockbroker will also make a specificrecommendation for action.

As might be imagined, if the client makes the final decision andthe portfolio is invested directly in the market (as opposed to viacollective investment funds), many problems can occur. If the

situation changes suddenly against a company being held, and theadviser cannot sell without agreement from the client, any delaycan prove very costly.

Click here to see some of the bestonline stockbrokers

Equally, good opportunities can be missed because a client has notbeen able to fully appraise him or herself of the facts quickly

enough.The broker / client relationship will grow close over time. It is vitalthat both sides have clear guidelines as to how to work, and layingthese principles down should be the role of the advisorymanagement stockbroker. The client will almost certainly need areasonable understanding ofstrategic asset allocation andportfoliomanagement techniques. Therefore, this is a service which requiresskills and cooperation from both parties.

From the perspective of a finance professional, services such asthese can be highly frustrating to work in. As investment researchservices have advanced with the use of powerful computer analysissoftware, the level of knowledge required to understand the resultshas increased massively.

It is also worth mentioning that if an advisory managementstockbroker or investment manager makes a recommendation, it is
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up to the client to say yes on the majority of occassions! Clearly,any client paying for advice but always refusing it is going to bevery difficult to deal with and as such will not be able to retaingood help for long...

Such services used to be the norm but now are, happily, rare. As amethod for direct money management, this needs a relativelyactive investor as the client. And yet, the client will still need to

pay fees that are in line with a full management service. This hasmade the service less popular in recent years.

One problem is that very few investors have the time or relevantexpertise to appraise investment decisions and even less are willing

to pay the required amount for the service!

If this type of service is not for you, perhaps you might like to readabout:

A Discretionary Management Stockbroker

A discretionary management stockbroker is the name given for toan advisor who manages a clients money under pre-arrangedcriteria. These criteria would include the clients thoughts and

requirements relating to risk levels, tax position and income orgrowth requirements.


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In terms of service levels for private investors, this is the top of thepile - direct management of an individual portfolio by a

professional. In theory, such a service should be tailored to theclient and priced as such.

Clients will not be involved in the day to day running of theirinvestments but will be kept informed with regular portfolio

valuations.

As one might imagine, this style of service is reserved for thoseclients with significant assets to manage. Depending upon your

location and the company involved, these services can be aimed at

clients with a minimum to invest of anywhere from 50,000 to250,000.

Essentially, this would mean that if you had a 'liquid' lump sum toinvest of perhaps, 80,000, many firms would not offer such a

service to you.

Of course, in such circumstances it might be advisable that a clientuses a traditional wealth manager who will invest in collective

funds rather than increasing risks with direct investments into themarket.

Services like those of a discretionary management stockbroker canbe fee or commission based. It is quite common for the manager to

charge a fee based on the value of funds being managed. This feewill often be a percentage (eg. 1% pa). Commissions may also then

be charged on each transaction.

Such a 'full' service does still require some efforts from a client if itis to be successful. Some understanding ofstrategic assetallocation , the nature of markets and the business cycle isnecessary. This willen able broker and client to construct a

meaningful long-term plan for investment. This may or may notlead to better annual returns, but it should lead to greater client

satisfaction and a much clearer working relationship.
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As you may imagine, clear guidance from a client to an investmentmanager or discretionary management stockbroker is invaluable tothe manager. Without clear, well thought out and logical guidanceto investment policy, it will be almost impossible to provide the

level of service expected. The client will be taking more or lessrisk than they really want and therefore will probably receive moreor less of an annual return than they would like (though has there

ever been a client that wants a lower return?).

For an indepth discussion of this subject, we recommend readingthe excellent investment book, Winning The Loser's Game by

Charles D. Ellis. The role of the investor in investmentmanagement is the main subject of the book and it will help almost

every investor significantly.

If this does not look like the right level of service for you, perhapsyou might like to read these:

Low Cost Stock Trades Are Thanks ToInternet Stock Broker Companies

The investment world has been turned on it's head by the internet.

The emergence of internet stock broker companies has transformed


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the services, charges and profits of the stockbroking industry.

Essentially, stockbrokers used to have a position of privilege withregards to the flow of information. In truth, they still do have this,but the information gap between amateur and professional has

been narrowed significantly. This information advantage enabledstockbrokers to make substantial incomes for many decades.

Indeed, in England a stockbroker was one of 'the professions' witha similar status to solicitors and accountants.

At the turn of the century, investment information firms used to

enable investors to track their portfolios online, for free. Theavailability of this technology meant that many of the high priced

tracking and monitoring software systems started to becomeobsolete.

Why pay twenty or thirty dollars each month to track yourholdings when a website will let you do it for free? Even worse,

the free website might use technology that does a better job!

As time passed, these sites started offering what they called 'Level2' information. This, they charged for. However, the difference in

information quality is astounding.

The private investor now can have real time access to the marketand watch trades, including their own be actioned. Not only do

they have this access, but costs are so low that it is available to the

private investor for almost every major world stock exchange forone monthly payment. There is even price competition in this areanow.

The advances of both computer memory and internet capabilitiesmeans that this information can be distributed at very low cost. Italso means that huge quantities of information can be stored andtherefore available to all. Simply, the emergence of the internet


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stock broker has turned what was once a profitable and elite tradeinto a low cost commodity.

This trend will almost certainly continue.

This process is also making it far easier for an investor to buy andsell in different world markets and assets. This by very definition is

lowering the costs of international trades and forcing localstockbrokers to compete with internet stock broker firms that spanthe globe virtually. Almost anything that was once considered tobe an 'exotic' investment is now purchasable at very low cost

online.

Once upon a time, being a stockbroker was one of the most highlypaid professions available. The emergence of the internet stock

broker means that this will never be the same again. Who knows,in twenty or thirty years time, stockbrokers may not even exist!

An 'Execution Only' Service

A feature of online share dealing is that a customer selects theinvestment to be made himself or herself. No advice is offered or

given by the company. This means that the individual is fullyresponsible for the outcome of the trade, good or bad. The massiverise in the numbers of investors and selecting 'no advice' suggests

that this is a popular move.

It is easy to see why. In the past, a client would pay for advice inthe form of a fixed percentage fee of the sum under managementand then pay an additional fee per deal (buying and selling). But

incidents ofstockbroker fraud , churning and dirty tricks getenough publicity to make most investors frightened of handing
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over complete control of their portfolio - whether this fear isjustified rationally or not.

Under such circumstances, the client takes the risk for anyproblems - deliberate or not - with a large portion of their net

worth. Many are now simply unwilling to provide such a level oftrust.

With such a backdrop, carrying out a stock purchase online with norequirement to deal with - or abdicate responsibility to - a

stockbroker is the preference of many millions of investors.

How High Is A Normal StockbrokerCommission?


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Most stockbroker commission is made by being in the middle of atrade. They charge a 'bid offer spread' which is a technical way of

saying that they make their money in the middle.

'The spread' can vary in size. Generally speaking, the more sharestraded every day in a company, the more brokers there will be thatdeal in them. As more stockbrokers deal in an issue, competition is

raised and therefore prices fall.

The firms with the highest liquidity are those at the top of an index.In the UK for example, firms like BP, Vodafone, Lloyds TSB,

Barclays Bank and Shell will have many brokers dealing in their

stock and literally milions of shares will change ownership onevery trading day.

For an individual to deal in these companies, the costs, the bidoffer spread, will be very low and generally in the region of only

perhaps two percent.

At the other end of the scale, there are very small companies whichhave a listing, but have a small market capitalisation. These

companies may not necessarily trade on the main exchange and assuch, there is very little action and few trades. Therefore, not many

stockbrokers will be dealing in their shares.

Reduced liquidity and minimal competition from other brokersmeans that the spread in these smaller firms will be much higher. It

is usually advised that spreads can be up to seven percent, but Ihave heard of one unlucky friend who once traded with a spread ofnine percentage points. This is an expensive way to do business!Most stockbrokers cannot reasonably expect their commission to

be this high.

The 'offer price' is quoted to people who wish to purchase whilstthe 'bid price' is quoted to those planning to sell. I have always

remembered which is which by using the little rhyme: bid to getrid. In other words, the bid price to sell.


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Whilst most investors do all they can to reduce the level ofstockbroker commission that they pay, it is worth remembering

that without stockbrokers, we simply could not trade the major (or

minor) markets of the world.

It is also worth noting that the role just described may partly becarried out by 'market makers', though this depends on the

particular stock exchange.

Stockbroker Fraud?

In the USA, the SEC has laid down guidelines to define what isand what is not stockbroker fraud. These rules also offer guidelinesfor investment advisers to follow that ensure investment advice is


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Much of the book describes the working environment at hisbrokerage as a little like a zoo - where only the lions get to survive!

The film Boiler Room shows quite graphically just what thisenvironment was like for the brokers and how they treated clients -

which is ultimately their profession and responsibility.

He also goes on to describe other issues such as trying to hidedeals profits and money from regulators by using accounts locatedin Switzerland, using transfer pricing techniques to repatriate hisfunds tax free and the life of mass excess that huge (ultimately

illegal) profits can produce. This lifestyle included drugs,supercars, travel by private jet, prostitutes and eventually rehab

and prison.

Needless to say, it is an eye opening read for anyone wonderingwhat might be possible for a stochbroker to 'get away with'. Themajority of his actions were illegal - or are now - but it still tookmany years forthe FBI to finally gather enough evidence to shut

down his operations - something that he had largely done himselfby then anyway.

Could A Discount Stockbroker BeGood For You?
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Could you save money on your trades by using a discount

stockbroker?

The idea of a discount stockbroker is now very much a reality. Tosurvive, most brokerages have to as a minimum have a low cost,execution only arm. Without this part of the business, they are

missing out on a large number of trades and commissions.

Of course, to be able to offer very low prices, they have to makeeconomies wherever possible. This means that they offer no advice

at all (advice needs to be researched first and research costsmoney), no face to face service (telephone or internet only) and

work from a call centre type of operation (less buildings to rent and

heat).

As discussed on the internet stockbrokerpage, the flow ofinformation has levelled the playing field to a great extent. This

means that many more investors than ever before are able to makeinformed decisions to buy or sell stocks.

As the information now costs so much less than in the past, evenan investor with a reatively small portfolio can justify the expense.

Just one winning trade can pay for the annual subscription!

This means that the brokerage world is now dominated by clientslooking for a discount stockbroker. Investors can compare costsvery clearly and move from one firm to another for what wouldhave seemed a few years ago as a minor saving on each trade.

As if all this news was not bad enough for brokers, they areexpected to maintain high standards of service and ethics. The

regulatory climate has, if anything, become firmer and more costlyat the sametime as commission levels have been falling. In short,the glory days have long passed. But, from the perspective of a

client, a private investor, there has never been such a good time tobe involved. Information is more widely and freely available than

ever before and the cost per transaction has never been under somuch competition.
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For the investor with skills, these are great times! If you enjoy theresearch and analysis of the stock market, then you really should

find a discount stockbroker if you have not done this already.

And if you are a stock market beginnerthen being able to find theright information with ease (and at low cost) has never been easier.

It has also never been cheaper to buy and sell which means thatinvestors can get started with ever lower amounts of money.

What Is Stockbroker Misconduct?
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Assignment Stock Broker

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