Online share trading_benefits_and_pitfalls

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Online Share Trading Benefits and Pitfalls

J. KarthikeyanDirector, Finerva Financial Solutions Pvt Ltd


Agenda

• History – Your Sharing• Entities Involved• Benefits for Each Entity• Pitfalls for Each Entity• Discussions


History

• Stock Exchanges• BSE• NSE• Volume Online


Entities Involved

• Individual Investors• Intermediaries• The Government & The Regulator• Excluded: Large & Institutional Investors,

Mutual funds and Financial Institutions


Benefits & Pitfalls for the Government and the Regulator

Benefits– Settlement Period is reduced and monitored easily –

Events like Harshad Metha Scam cannot happen– Better control on the traders – through Demat Accounts –

PAN linked– Better control on Intermediaries – Easy & More Collection of Tax – STT & Volumes– Environment friendly– IPO processing easier faster and more economical –

promotes development


Benefits & Pitfalls for the Government and the Regulator

• Pitfalls– Effort required for Implementation• Education – Investor Education Fund • Infrastructure – processing, verifying documents

– Errors in Processing – Trade / Settlement Guarantee Fund

– Scams like multiple demat accounts - Roopalben Panchal (14,807) 45,000 in all


Benefits & Pitfalls for the Intermediaries

• Benefits• Higher income – Higher transactions• Better Management of Portfolios – Easier and

Faster• Transparent Operation – Clear

Communication, Processing, Accounting• More Products – Futures, Options, Debt


Benefits & Pitfalls for the Intermediaries

• Pitfalls• More investment required – margin money

and client leverage• More risky if client is highly leveraged – Mark-

to-Market• More research required• Higher regulator visibility and intervention• Lesser Investment sin Mutual funds


Benefits and Pitfalls for Individual Investors

• Benefits• Easier to maintain• Cost per transaction is reduced• Easier and Faster to Trade - Buying or Selling• Transparent Transactions• Accounting is automatic


Benefits and Pitfalls for Individual Investors

• Pitfalls• More Transactions – More cost• Day-Trading Addiction - Brad Barber and

Terrance Odean in the US market shows that 82% of the day traders lose money.

• Higher Visibility to the Taxman• Lack of Research and Knowledge• No Verification on Decision

Online share trading_benefits_and_pitfalls

Economy & Finance

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