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Finance Management | "Investors' Perception on Investment Alternatives and Online Stock Broking Service"

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Investors' Perception on Investment Alternatives and Online Stock Broking Service

- by Dr. V. V. S. K. Prasad *

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NSE adapted National Exchange for Automated Trading (NEAT) system which is an online order driven screen based training system through which a member can execute his transaction using computer mentioning quantities of securities and price at which he will like to transact. Order of the investor is automatically executed when the system finds matching order from the counter parties.
Simply, the investor has to enter his request (securities, quantity, price and buy or sell). In brokers site which is checked electronically to appropriate exchange for execution by the broker. At the same time customers accounts are updated to reflect the transaction.

Online Trading - Indian Experience

There is no denying the fact, internet trading offered investors convenience of trading along with reduced cost. But simultaneously we have solid evidence of the fact that India investors have not yet fully realized the importance of using technology for stock trading. NSE makes extensive use of state-of-the-art technology for providing to its investors for that purpose they are making effective use of satellite network through total 2829 B sat across 245 cities across the nation. Online trading has gained momentum for just 0.5% of total trade volume 5 years back, which now accounts for 5% of the total trading vol of approximately RS. 40,000 crores of NSE. over the past 2 years, the vol of all trades executed through internet on NSE has grown from less than 100 crores in June 2003 to over 700 crores in June 2005. Online trading gained momentum with trading vol of growing by 150% per annum. Now NSE has 108 registered brokers and 1.054 million internet trading subscribers.

However, mainly 5 companies controlled 90% of the market share in internet trading. ICICI direct.com has around 50% market share where as India bulls hold 26% share. Other dominant players are Kotak Securities and Sharekhan, ICICI able to gain its dominant presence in interest trading because they have strong connectivity of stock trading, DMAT A/C, Bank A/C etc., ICICI Direct has recorded 6,75,000 registered customers and has become 10th largest online broker in US whereas, ShareKhan.Com and Five Paisa.com are loosing their way. Over the last first year Kotak securities has shown positive trend number of registered subscribers from 30,000 to 78,000 in 2005.

An investigation of what effect online trading is having on the traditional stock brokerage industry. They have been lots of discussions and article written over the last couple of years debating whether traditional stock brokerage model is about to be up staged by the new online version touted by the online brokerage industry. With so many diverse views being portrayed it is difficult to fully gauge the real impact that online trading is having on the traditional stock brokerage industry. A large scale questionnaire and interview study was conducted to get some answeres.





Dr. V. V. S. K. Prasad holds B.Com. from Andhra University, M.Com. (Accounting & Finance) from Acharya Nagarjuna University and MBA (Finance) from Ambedkar Open University. He also finished his Doctoral Research on "Leadership Styles & Organizational Effectiveness" from Ranchi University in 1992. Since then, he has been in teaching profession. He is currently serving as Professor MBA at The Hindu College, Machilipatnam.

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