Chapter 14 -E-TRADING

INTRODUCTION

E-trading, also known as electronic trading or online trading, is the process of buying and selling financial instruments, such as stocks, bonds, currencies, and derivatives, through electronic platforms and networks, rather than physical exchanges or over-the-counter markets. E-trading platforms are typically provided by online brokers or financial institutions, and allow traders and investors to access a wide range of markets and instruments, execute trades, and monitor their positions and portfolio performance in real time, from anywhere in the world with an internet connection.

E-trading has become increasingly popular over the past two decades, as technological advancements have made it easier, faster, and more convenient to trade online, and as more individuals and institutions have gained access to the internet and the tools and knowledge necessary to trade electronically. E-trading has also opened up new opportunities for small and retail investors, who can now access the same markets and instruments as large institutional investors, and trade at lower costs and fees.

However, e-trading also has some limitations and risks, including technical glitches, system failures, cyberattacks, market volatility, and regulatory challenges. Therefore, it is important for traders and investors to be aware of these risks and to use e-trading platforms and strategies responsibly and effectively, through proper education, research, risk management, and compliance with laws and regulations.

MEANING S DEFINITION

E-trading, also known as electronic trading or online trading, refers to the buying and selling of financial instruments or assets using electronic platforms, such as the internet, mobile devices, and electronic trading platforms. It allows traders to access global financial markets and execute trades without the need for a physical presence on the trading floor or dealing with a broker directly. E-trading has become increasingly popular in recent years due to its convenience, cost-effectiveness, and accessibility.

PREREQUISITES OF E-TRADING

There are several prerequisites for e-trading, including:

Reliable Internet Connection: E-trading requires a fast and stable internet connection to ensure that trades can be executed in a timely manner without any interruptions.

Trading Platform: A trading platform is an essential tool for e-trading, providing access to financial markets and allowing traders to execute trades online. It is important to choose a reliable trading platform that offers real-time market data and analysis tools.

Trading Account: A trading account is required to participate in e-trading, and it must be opened with a brokerage firm that offers online trading services. The account must be funded with sufficient capital to cover the margin requirements and trading fees.

Knowledge and Skills: E-trading requires knowledge and skills related to financial markets, technical analysis, risk management, and trading psychology. It is important to invest time and effort in learning about the markets and developing a trading plan before engaging in e-trading.

Security Measures: E-trading involves the transfer of sensitive financial information over the internet, so it is important to take security measures to protect against online fraud and identity theft. This includes using strong passwords, two-factor authentication, and secure trading platforms with SSL encryption.

OPERTIONAL ASPECTS OF E-TRADING

The operational aspects of e-trading refer to the processes involved in conducting electronic trading activities. These include:

Trading Platforms: Electronic trading requires a platform through which buyers and sellers can interact. The platform must provide a secure environment for transactions, and it should be easy to use and navigate.

Electronic Communication Networks (ECNs): ECNs are electronic systems that facilitate trading outside of traditional exchanges. They allow traders to access liquidity from multiple sources and offer lower transaction costs than traditional exchanges.

Market Data: E-trading requires access to real-time market data, including price quotes and trading volumes. This data is typically provided by data vendors and is used by traders to make informed trading decisions.

Trading Algorithms: Trading algorithms are used to automate trading strategies based on predefined rules. They can be used to execute trades more efficiently and with less risk.

Risk Management: E-trading involves significant risks, including market volatility, technical failures, and cyber threats. Effective risk management strategies must be in place to mitigate these risks.

Compliance: E-trading activities must comply with regulatory requirements, including reporting and record-keeping obligations. Firms must also implement measures to prevent insider trading, market manipulation, and other forms of misconduct.

Settlement and Clearing: Settlement and clearing processes ensure that trades are executed properly and that funds and securities are transferred between buyers and sellers. Electronic trading platforms typically have automated settlement and clearing processes in place to facilitate these transactions.

HOW ONLINE TRADING WORKS?

Online trading typically involves the use of a trading platform provided by a broker or financial institution. The process usually involves the following steps:

Opening an Account: A trader first needs to open an account with a broker or financial institution that offers online trading services. This involves providing personal information and may also require a minimum deposit.

Placing Orders: Once the trader has opened an account and funded it, they can access the trading platform and place buy or sell orders for securities such as stocks, options, or futures. They can do this either by using a web-based platform or by downloading and installing trading software provided by the broker.

Executing Trades: After placing an order, the broker will attempt to execute it on behalf of the trader. This may involve matching the order with a buyer or seller on the other side of the trade or routing the order to an exchange or electronic communication network (ECN).

Monitoring Positions: Traders can monitor the status of their orders and positions in real-time through the trading platform. They can also track their portfolio's performance and analyze market data to make informed trading decisions.

Withdrawing Funds: If a trader wishes to withdraw funds from their account, they can do so by submitting a request to the broker. The broker will then transfer the funds to the trader's designated bank account or other payment method.

Overall, online trading provides traders with a convenient and efficient way to buy and sell securities from anywhere with an internet connection. However, it also comes with risks such as market volatility and the possibility of technical glitches or cyberattacks. Therefore, traders should always exercise caution and use risk management strategies when trading online.

HOW E-TRADING WORKS? A CONVERSATIONAL ILLUSTRATION

Sure, here's an example of how e-trading works through a conversational illustration:

Tom: Hey Sarah, I've been hearing a lot about e-trading. Can you explain how it works?

Sarah: Sure, Tom. E-trading is basically buying and selling of financial securities like stocks, bonds, and mutual funds through an electronic platform like a website or a mobile application.

Tom: Okay, so how does one start e-trading?

Sarah: First, you need to open an online trading account with a stockbroker or a brokerage firm that offers e-trading services. Then you can access the trading platform through your account and start trading.

Tom: Got it. But how do you decide which stocks to buy or sell?

Sarah: Well, you can do your own research and analysis on the companies you're interested in investing in, or you can also take the help of various tools and resources provided by the trading platform, such as stock charts, news updates, and expert opinions.

Tom: That sounds interesting. And how do you actually place the trade?

Sarah: Once you have decided on which stocks to buy or sell, you can place an order through the trading platform. You can specify the number of shares, the price you're willing to pay or receive, and other details. The platform will then match your order with a suitable buyer or seller.

Tom: That's cool. And what about the payment and settlement process?

Sarah: The payment is usually done through online banking or other electronic modes. And once the trade is executed, the settlement process also happens electronically, where the stocks and the money are transferred to the respective accounts of the buyer and seller.

Tom: Wow, that's really convenient. Thanks for explaining it so well, Sarah.

Sarah: No problem, Tom. E-trading has definitely made the process of buying and selling securities much easier and accessible for everyone.

Sure, I can provide a conversational illustration of how e-trading works. Let's say that you want to buy shares of a company through e-trading.

You would first need to open an account with an online trading platform, which could be a brokerage firm or a financial institution. This account would allow you to access the platform's trading tools and make transactions.

Once your account is set up, you would need to deposit funds into it. This can be done through a variety of methods, such as bank transfers, credit or debit cards, or digital wallets.

Now, let's say that you want to buy 100 shares of XYZ company at the current market price. You would log into your trading account and search for the company's stock symbol, which is usually a short code consisting of a few letters.

Once you find the stock, you would enter the number of shares you want to buy and the price you are willing to pay. The platform would then try to match your order with a seller who is willing to sell their shares at your desired price.

If a match is found, the platform would execute the trade and deduct the funds from your account. The shares would then be transferred to your account.

Alternatively, if you already own shares of a company and want to sell them, you would follow a similar process but in reverse. You would enter the number of shares you want to sell and the price you want to sell them for, and the platform would try to match your order with a buyer.

It's important to note that e-trading involves risks, such as market volatility and technical glitches. It's also important to do your research and make informed investment decisions.

TRADITIONAL TRADING V/S E-TRADING

Traditional trading and e-trading are two different modes of trading that exist in the financial market. Here is a detailed comparison of traditional trading and e-trading:

Method of Trading:

Traditional trading involves physical buying and selling of financial instruments in a market, while e-trading involves trading through electronic means, usually through an online trading platform.

Accessibility:

Traditional trading requires traders to be physically present in the market to buy or sell financial instruments, while e-trading allows traders to trade from anywhere at any time through the internet.

Time:

Traditional trading is subject to market hours and traders need to be present during market hours to trade, while e-trading provides traders the flexibility to trade round the clock.

Cost:

Traditional trading can be more expensive compared to e-trading as it involves overhead costs like brokerage, exchange fees, and other charges. E-trading, on the other hand, may have lower costs as it eliminates the need for brokers and can be done directly through an online platform.

Speed:

E-trading is faster and more efficient than traditional trading. Orders can be executed within seconds or minutes, while traditional trading can take longer to complete.

Transparency:

E-trading is more transparent than traditional trading as all trading data is recorded and can be accessed by traders at any time. Traditional trading is less transparent as it is done in a physical market, and traders may not have access to all trading data.

Risk:

Both traditional trading and e-trading carry their own risks. However, e-trading may be riskier for inexperienced traders who may not fully understand the complexities of online trading and may be prone to making costly mistakes.

Overall, e-trading has several advantages over traditional trading, including accessibility, flexibility, cost-effectiveness, speed, and transparency. However, traditional trading still has its place in the financial market and may be preferred by some traders who value physical presence and personal interaction.

Advantages of e-trading

There are several advantages of e-trading, including:

Convenience: E-trading provides a high level of convenience as investors can trade from anywhere, at any time, without having to physically visit a stock exchange or brokerage firm.

Lower Costs: E-trading eliminates the need for a middleman, such as a broker, which reduces the transaction costs associated with traditional trading. Additionally, online brokerages often have lower fees and commissions than traditional brokerages.

Faster transactions: E-trading allows for faster and more efficient transactions, as orders can be executed in real-time, and investors can receive immediate trade confirmations and account updates.

Access to information: With e-trading, investors have access to real-time market data, news, and research reports, which can help them make more informed investment decisions.

Control: E-trading gives investors more control over their investment decisions, as they can quickly place and execute trades based on their own research and analysis.

Flexibility: E-trading provides investors with greater flexibility in terms of investment strategies, as they can trade a variety of financial instruments, such as stocks, bonds, options, and futures, from a single platform.

Very convenient :Yes, one of the advantages of e-trading is its convenience. E-trading allows investors to trade from anywhere with an internet connection, whether it's from their homes, offices, or even while traveling. They can access their trading accounts, monitor their investments, and execute trades anytime, anywhere, without having to physically visit a broker or a stock exchange. This convenience also saves time and reduces the need for paperwork, making e-trading more efficient than traditional trading methods.

Affordability: Another advantage of e-trading is its affordability. Traditional trading usually involves hiring a broker, who charges a commission for their services. This can add up to a significant amount over time, especially for frequent traders. On the other hand, e-trading platforms often have lower fees and commissions, making it a more cost-effective option for traders. Additionally, e-trading eliminates the need for physical infrastructure like trading floors or offices, reducing overhead costs for companies and potentially resulting in lower costs for traders.

Greater competition: Yes, greater competition is another advantage of e-trading. With online trading platforms, traders have access to a wider range of investment options and financial products than traditional trading methods. This increased competition among brokers and financial institutions can lead to better pricing and services, ultimately benefiting the traders. Additionally, e-trading allows for global trading, which opens up opportunities for traders to invest in markets around the world, expanding their investment options and potential profits.

Tighter spreads : Yes, tighter spreads is another advantage of e-trading. In traditional trading, the bid-ask spread can be relatively wide, which means that traders may have to pay more to buy or sell a financial instrument. However, with e-trading, the bid-ask spread can be much tighter, which can reduce trading costs for investors. This is because e-trading platforms can connect traders directly to liquidity providers, eliminating the need for intermediaries and reducing transaction costs. As a result, traders can benefit from better pricing and tighter spreads, leading to potentially higher profits.

Disadvantages of e- trading :

Here are some disadvantages of e-trading:

Technical Issues: E-trading platforms are reliant on technology, and technical glitches can happen at any time. This can lead to problems such as trade execution delays, order failures, or system crashes, which can result in significant financial losses.

Risk of Hacking: E-trading involves the use of the internet and electronic devices, making it vulnerable to cyber attacks. If a trader's personal information or trading account is hacked, it can lead to financial losses or identity theft.

Lack of Personal Interaction: E-trading lacks the personal interaction between traders and brokers that is present in traditional trading. This can result in a lack of personalized advice, guidance, and recommendations that can impact a trader's decision-making process.

Information Overload: E-trading platforms provide traders with an abundance of information, including news, charts, and real-time data. However, this can lead to information overload and confusion, making it difficult for traders to make informed decisions.

Dependency on Internet Connection: E-trading is entirely dependent on a stable internet connection. Any disruption or downtime in the connection can impact the trader's ability to place trades, resulting in missed opportunities or financial losses.

STATUS OF E-TRADING IN INDIA

E-trading in India has seen significant growth in recent years. The advent of the internet and increased penetration of mobile phones has made online trading accessible to a large number of people. The Securities and Exchange Board of India (SEBI) has played a crucial role in promoting and regulating e-trading in the country.

According to a report by the National Stock Exchange (NSE), the number of active investors in the Indian equity market increased from 22 million in 2014 to over 40 million in 2019. A significant proportion of these investors use online trading platforms to invest in stocks, mutual funds, and other financial instruments.

The major stock exchanges in India, such as the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), offer online trading facilities to investors. In addition, several online brokers and trading platforms have emerged in recent years, offering a range of services to investors.

The rise of e-trading has also led to the emergence of new trading technologies, such as algorithmic trading and high-frequency trading, which have revolutionized the way trading is done. These technologies use complex algorithms and mathematical models to execute trades in milliseconds, providing traders with a significant advantage over traditional trading methods.

However, the growth of e-trading in India has also raised concerns about cybersecurity and the potential for fraud. The SEBI has introduced several measures to address these concerns, such as mandatory two-factor authentication and periodic audits of online trading platforms.

Overall, the status of e-trading in India is promising, and it is expected to grow further in the coming years, driven by technological advancements and increasing awareness among investors.

Conclusion: As e-trading becomes increasingly popular, it has many advantages that appeal to investors. It offers convenience, affordability, greater competition, tighter spreads, and more. However, there are also some disadvantages to e-trading, such as technical issues, lack of personal interaction, and the potential for security breaches. The status of e-trading in India is currently on the rise, with more investors turning to online platforms for trading. As technology continues to evolve and security measures improve, e-trading is expected to become even more prevalent in the future.

The problems /hindrances to e-trading in lndia

There are several problems and hindrances to e-trading in India, including:

Lack of awareness and education: Many people in India are not familiar with e-trading and lack the necessary knowledge and skills to engage in online trading. This limits the growth and adoption of e-trading platforms in the country.

Infrastructure challenges: The infrastructure for internet connectivity and digital transactions in India is still developing, and this poses challenges for e-trading platforms. Slow internet speeds, power outages, and other infrastructure issues can make online trading difficult.

Regulatory challenges: The Securities and Exchange Board of India (SEBI) regulates e-trading in India, and there are several regulatory challenges that e-trading platforms face. For example, SEBI requires e-trading platforms to adhere to strict rules regarding investor protection and information security.

Security concerns: There are concerns about the security of online trading platforms in India. Cybersecurity threats such as hacking, phishing, and identity theft pose risks to investors' personal information and financial assets.

Limited access to financial services: Despite recent efforts to improve financial inclusion in India, many people still do not have access to basic financial services such as bank accounts and credit. This limits their ability to participate in e-trading.

Overall, while e-trading has seen significant growth in India in recent years, there are still several challenges that need to be addressed in order to fully realize the potential of online trading in the country.

WHAT NEEDS TO BE DONE?

To address the hindrances to e-trading in India, several measures need to be taken:

Improved Infrastructure: The government and private players need to work towards improving the infrastructure in India, particularly in remote areas, to ensure that traders have access to high-speed internet and other necessary technologies.

Increased Awareness: There is a need to increase awareness about e-trading among traders and investors in India, particularly those who are not tech-savvy. Educational initiatives, workshops, and training programs can be conducted to provide guidance and support.

Streamlined Regulations: The regulatory environment for e-trading needs to be streamlined to make it more efficient and user-friendly. This will help to reduce red tape and make it easier for traders and investors to participate in e-trading.

Enhanced Security Measures: To build trust in e-trading, robust security measures need to be put in place to protect the interests of traders and investors. This can include measures such as two-factor authentication, encryption, and other security protocols.

Collaboration: The various stakeholders in the e-trading ecosystem need to collaborate more effectively to address the challenges facing the industry. This can include collaboration between the government, regulators, private players, and other stakeholders.

Answer the following questions in 1-15 words. Each question carries one mark.

Q.1. What is e-Trade?

Ans. E-Trade is a term used to refer to electronic trading or online trading. It involves buying and selling of financial instruments like stocks, bonds, and currencies using electronic platforms and internet-based technologies.

Q.2.HOW Many depositories are there in india?

Ans. There are two depositories in India: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

Q.3. What is the maximum number of depository accounts that can be opened by an investor?

Ans. An investor can open any number of depository accounts in India. There is no limit on the number of accounts that can be opened. However, it is important to note that each account must be linked to a unique Permanent Account Number (PAN) and an investor must comply with the know-your-customer (KYC) requirements of each depository before opening an account.

Q.4. Who can become member of an exchange?

Ans. Any individual or organization that meets the eligibility criteria set by the exchange can become a member. Typically, members include brokerage firms, banks, and financial institutions. They are required to fulfill certain capital, infrastructure, and compliance requirements and are subject to regulatory oversight.

Q.5. of how many recongnised stock Exchanges , a person can become a member?

Ans. A person can become a member of only one recognized stock exchange at a time in India.

Q.6. Enlist the advantages of electronic trading.

Ans. Advantages of electronic trading include:

Increased convenience and accessibility for traders.

Faster transaction speeds.

Lower transaction costs.

Greater transparency in pricing.

The ability to trade outside of traditional market hours.

The ability to access a wider range of financial instruments.

The ability to execute trades from any location with an internet connection.

Improved risk management tools.

Real-time data and analytics to make informed trading decisions.

Q.7. Name the leading stock exchanges of india.

Ans. The leading stock exchanges of India are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Q.8. What is demat?

Ans. Demat is a short form for "dematerialization", which is the process of converting physical share certificates into electronic form. A demat account is a type of account where an investor can hold shares and securities in electronic form instead of physical certificates. This account is maintained by a depository, which acts as a custodian of the investor's securities. With the advent of demat accounts, the need for handling physical share certificates has been eliminated, making the process of buying and selling shares easier and more convenient.

Q.9. What is traditional trading?

Ans. Traditional trading refers to the process of buying and selling financial assets, such as stocks, bonds, and commodities, through a physical marketplace or exchange, where buyers and sellers interact face-to-face or through intermediaries such as brokers or dealers. In traditional trading, transactions are typically settled through physical certificates or other physical forms of documentation. This method of trading has been in practice for many decades and is still prevalent today, although electronic or online trading has gained popularity in recent years.

Q.10. What do you mean by depository services?

Ans. Depository services refer to the services provided by depositories to investors and other market participants to hold, transfer and settle securities in dematerialized (electronic) form. It allows investors to hold and trade securities electronically without the need for physical certificates. The depositories maintain electronic records of securities owned by investors and facilitate transactions by transferring securities from one investor's account to another.

The answer to these questions should be given in 5-10 lines.

Q.1. What is meaning of e-trading?

Ans. E-trading refers to the buying and selling of financial instruments such as stocks, bonds, currencies, and commodities through electronic or online platforms. E-trading platforms use advanced technology and software to provide investors with real-time market data, trading tools, and analytics, enabling them to trade from anywhere, at any time, using a computer or mobile device connected to the internet. E-trading has revolutionized the way financial markets operate by making trading more accessible, efficient, and cost-effective.

Q.2. What is traditional trading?

Ans. Traditional trading refers to the practice of buying and selling financial instruments, such as stocks, bonds, and commodities, through physical exchanges, such as stock markets, commodity markets, and currency exchanges. In traditional trading, traders have to physically visit the exchange or trading floor to buy or sell financial instruments. The process involves paper-based transactions, long waiting periods, and high transaction costs. It is also known as floor trading or manual trading.

Q.3. Write is any two differences between traditional trading and e-trading.

Ans. Here are two differences between traditional trading and e-trading:

Execution: In traditional trading, orders are executed through phone calls, emails, or in-person communication with a broker, whereas in e-trading, orders are executed electronically through online platforms.

Speed: E-trading offers faster order execution and settlement times compared to traditional trading, which can be slower due to manual processes and physical document handling. E-trading also provides real-time market data and analysis, which can aid traders in making quick decisions.

Q.4. Write any two benefits of e-trading .

Ans. Two benefits of e-trading are:

Convenience: E-trading allows investors to trade from the comfort of their own home or office at any time of the day. This eliminates the need for physical travel to a traditional broker's office, saving time and money.

Lower transaction costs: E-trading often results in lower transaction costs as it eliminates the need for a traditional broker to physically execute trades. This means that investors can save on brokerage fees and other related charges.

Q.5. What do you mean by depository services?

Ans. Depository services refer to the services provided by depository institutions, which are financial intermediaries that hold and transfer securities on behalf of investors. These institutions act as a safe and convenient way for investors to hold their securities in an electronic form, without the need for physical certificates. The depository services enable investors to buy, sell, and transfer securities without any hassle or risk of loss or theft of physical certificates. They also provide various value-added services like dematerialization, rematerialization, pledge, hypothecation, etc. to make the entire process of buying and selling securities more efficient and streamlined. In India, there are two depositories, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), that offer depository services to investors.

Q.6. Write a note no working of e-trading.

Ans. E-trading, also known as electronic trading, refers to the buying and selling of financial securities through electronic platforms, typically over the internet. E-trading has become increasingly popular in recent years, as advancements in technology have made it faster, more efficient, and more accessible than traditional trading methods.

The process of e-trading typically involves the use of online trading platforms, which allow investors to access market data, execute trades, and monitor their portfolios in real-time. These platforms are typically offered by brokerage firms or online trading companies, and can be accessed through a variety of devices, including computers, smartphones, and tablets.

One of the key benefits of e-trading is its speed and efficiency. Because trades can be executed instantly, investors can take advantage of market fluctuations in real-time, rather than waiting for traditional trading methods to catch up. This can help investors to make quicker, more informed decisions, and can also reduce the risk of losses due to delays or errors.

Another benefit of e-trading is its accessibility. Because it can be done online, e-trading can be accessed from anywhere in the world, at any time of day. This makes it ideal for investors who are unable to physically visit a trading floor, or who need to manage their portfolios while on-the-go.

However, e-trading also has its limitations and risks. One of the key risks is the potential for technical glitches or system failures, which can cause delays, errors, or losses. There is also the risk of cyber attacks, which can compromise sensitive financial data and lead to losses or theft.

In order to mitigate these risks, it is important for investors to use reputable trading platforms, and to employ safe and secure trading practices. This may include using strong passwords, keeping software and security systems up-to-date, and monitoring accounts for signs of unauthorized activity.

Overall, e-trading has revolutionized the way that investors buy and sell financial securities, making it faster, more efficient, and more accessible than ever before. However, it is important for investors to understand the risks and limitations of e-trading, and to use safe and secure trading practices in order to protect their investments.

The answer to these questions should be given in 15-20 lines.

Q.1. What is meaning of e-trading is there any difference between e- trading and on-line trading?

Ans. E-trading and online trading are often used interchangeably, but there can be a slight difference in their meanings depending on the context.

In general, e-trading refers to the use of electronic platforms to buy and sell securities, such as stocks, bonds, and derivatives. It includes the use of electronic trading systems, online brokerage accounts, and other digital tools to facilitate transactions.

On the other hand, online trading typically refers specifically to the use of internet-based platforms to conduct trading activities. This can include e-trading systems, as well as other online tools such as research and analysis platforms, news feeds, and social trading networks.

Both e-trading and online trading offer investors greater convenience, accessibility, and efficiency compared to traditional methods of trading. They allow investors to place trades quickly and easily from anywhere with an internet connection, and offer a wide range of tools and resources to help investors make informed decisions.

However, there can be some differences in the specific features and capabilities of different e-trading and online trading platforms, so it is important for investors to carefully evaluate their options and choose the platform that best meets their needs.

Q.2. Write any four differences between traditional trading and e- trading ?

Ans. Here are four differences between traditional trading and e-trading:

Method of trading: In traditional trading, the investor places an order with the broker who executes the trade on behalf of the investor. In contrast, in e-trading, the investor can place an order directly on the trading platform without the need for a broker.

Time and location: Traditional trading is limited by the working hours of the exchange and the broker's office. On the other hand, e-trading can be conducted 24/7 from anywhere with an internet connection.

Speed of execution: Traditional trading can take longer to execute as the broker needs to communicate the order to the exchange and wait for confirmation before executing the trade. In e-trading, the execution is instant, as the order is directly placed on the trading platform.

Cost: Traditional trading is often more expensive than e-trading as it involves brokerage fees, exchange fees, and other charges. E-trading platforms generally have lower fees and charges as they have lower overhead costs.

Q.3. Write any four benefits of e-trading.

Ans. Here are four benefits of e-trading:

Convenience: One of the most significant benefits of e-trading is its convenience. Investors can access their trading accounts from anywhere, at any time, as long as they have an internet connection. This means they don't have to physically visit a broker or exchange to execute trades.

Lower costs: E-trading has lower costs compared to traditional trading because it eliminates the need for middlemen and physical paperwork. Investors can execute trades online with lower transaction fees, reducing the overall cost of trading.

Increased transparency: E-trading offers increased transparency as investors can track their investments in real-time. This allows them to make informed decisions about buying or selling shares, and they can view all details of their transactions and holdings at any time.

Faster transaction speeds: E-trading offers faster transaction speeds as orders are processed electronically, eliminating the need for manual processing. This means that trades can be executed quickly, reducing the risk of price changes and improving the overall efficiency of trading.

Q.4. What is the present status of e-trading in india?

Ans. The present status of e-trading in India is quite significant as it has seen significant growth in recent years. With the advancement of technology and increasing internet penetration, more and more people are turning to e-trading for their investment needs. The Indian government has also taken several initiatives to promote e-trading and make it more accessible to investors.

As of 2021, there are two major depositories in India, namely National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), which provide demat account services to investors. These depositories have made it easier for investors to hold and trade securities in an electronic form.

The leading stock exchanges in India, such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), have also introduced advanced trading platforms and technologies to facilitate e-trading. Moreover, the Securities and Exchange Board of India (SEBI) has introduced several regulatory measures to protect the interests of investors and promote transparency in e-trading.

Overall, the present status of e-trading in India is quite positive, and it is expected to grow further in the coming years as more people become aware of its benefits and more technological advancements are made in the field.

Q.5. Write the lmportant advantages of e-trading ?

Ans. Some important advantages of e-trading are:

Convenience: E-trading allows investors to trade in financial securities from anywhere, anytime using a computer or smartphone with an internet connection. This eliminates the need for physical visits to brokers or stock exchanges.

Affordability: E-trading platforms typically have lower fees and commissions compared to traditional brokers, making it more affordable for small investors to participate in the financial markets.

Greater competition: E-trading platforms have increased the number of brokers and service providers, resulting in greater competition, which often leads to better prices, services and products for investors.

Real-time access to information: E-trading platforms provide real-time access to financial news, market data, and analysis, enabling investors to make informed decisions quickly and easily. This is especially important for day traders who need to make quick decisions based on changing market conditions.

Faster and efficient execution of trades: E-trading platforms provide faster and more efficient execution of trades compared to traditional trading methods. This is because orders can be executed electronically in a matter of seconds, reducing the time lag between the order placement and execution.

Tighter spreads: Electronic trading platforms often offer tighter bid-ask spreads, which means that investors can buy securities at lower prices and sell them at higher prices, resulting in higher profits.

Overall, e-trading provides investors with greater convenience, affordability, access to information, and efficiency, making it an attractive option for many investors.

Q.6. What is the meaning of e- trading ?give any four advantages of e-trading.

Ans. E-trading, also known as electronic trading, refers to the buying and selling of financial instruments through electronic platforms, such as the internet. It involves the use of computer networks and electronic communication to execute trades, and eliminates the need for physical contact between traders.

Some of the advantages of e-trading include:

Convenience: E-trading allows traders to buy and sell securities from the comfort of their own homes or offices, without the need to physically visit a broker or exchange.

Lower costs: E-trading platforms are typically less expensive than traditional brokerage firms, with lower transaction fees and no need for physical infrastructure.

Greater competition: E-trading platforms allow for increased competition between brokers and exchanges, which can lead to tighter spreads and better pricing for traders.

Faster execution: E-trading allows trades to be executed much more quickly than traditional trading methods, as there is no need for physical communication or paperwork.

Q.7. Write a note on the operational status of e-trading.

Ans. E-trading, also known as online trading, is the buying and selling of financial instruments through an electronic platform. It has revolutionized the way individuals and institutions trade in the financial markets. The operational status of e-trading can be understood by examining its key components.

The first component is the trading platform, which provides investors with access to the market. These platforms are usually provided by brokers, who act as intermediaries between investors and the exchange. They offer various features such as real-time quotes, charts, news feeds, and research reports, which help investors make informed decisions.

The second component is the order management system, which allows investors to place orders on the trading platform. These orders can be for buying or selling securities, and can be executed in real-time. The order management system also allows investors to set price limits and stop-loss orders, which help minimize their risks.

The third component is the clearing and settlement process, which involves the transfer of securities and funds between the buyer and seller. This process is facilitated by clearing houses and depositories, which ensure that transactions are settled in a timely and secure manner.

Overall, the operational status of e-trading is highly efficient and streamlined. It allows investors to trade from anywhere at any time, and provides them with access to a wealth of information and resources. However, investors should also be aware of the risks associated with e-trading, such as market volatility, technological glitches, and security breaches.

Q.8. Though e-trading is fast, inexpensive and provides the convenience to trade from your home without into a live agent but there are also certain problems and demerits of e- trading .any four disadvantages of e-trading?

Ans. Sure, here are four disadvantages of e-trading:

Technical issues: E-trading heavily relies on computer systems and internet connectivity. If the systems or the connectivity fail, it can lead to loss of opportunities, financial losses, and even security breaches.

Lack of personal interaction: E-trading eliminates the need for personal interaction with brokers or traders. While it may save time, it also deprives traders of the opportunity to gain insights from professionals.

Risk of fraud: E-trading requires sharing of sensitive financial information and passwords, making traders vulnerable to fraud and cyber-attacks.

Over-reliance on technology: E-trading has a high dependence on technology, which can lead to over-reliance on algorithms and automated trading systems. This can lead to trading errors or losses in case of system malfunctions or market volatility.

Q.9.What are the limitations of e-trading?

Write any four features of e-trading.

Ans. Here are four limitations/features of e-trading:

Dependence on technology: E-trading relies heavily on technology, which can sometimes malfunction or be vulnerable to cyber-attacks, leading to financial losses or compromised security.

Lack of personal interaction: Unlike traditional trading, e-trading is entirely digital, and there is no personal interaction with brokers or other traders. This can lead to a lack of guidance or support, especially for novice traders.

Risk of misinformation: E-trading platforms offer a vast amount of information, but not all of it may be reliable or up-to-date. Traders need to be discerning and have a good understanding of the market to make informed decisions.

Potential for market volatility: The speed and efficiency of e-trading can sometimes exacerbate market volatility, leading to sudden price swings and losses for traders. This can be particularly challenging for those who engage in high-frequency trading.

LONG ANSWER QUESTIONS

Q.1. What is meaning of e-trading ? what are the major services available in the arena of e-trading?

Ans. E-trading, also known as electronic trading, refers to the buying and selling of financial instruments, such as stocks, bonds, and currencies, through an electronic platform, typically over the internet. It is a convenient and efficient way of trading that allows investors to execute trades quickly and easily without the need for physical interaction with a broker or exchange.

In the arena of e-trading, there are several major services available, including:

Online trading platforms: Online trading platforms are web-based portals that allow investors to buy and sell securities through their computer or mobile device. These platforms provide real-time access to market data, trading tools, and research reports, making it easier for investors to make informed decisions.

Demat accounts: A demat account, short for dematerialized account, is a type of electronic account that holds securities in an electronic format. It eliminates the need for physical share certificates and makes it easier for investors to buy, sell, and transfer securities.

Electronic payment gateways: Electronic payment gateways enable investors to transfer funds electronically to their trading account from their bank account. This makes it easier for investors to deposit and withdraw funds and execute trades in a timely manner.

Mobile trading apps: Mobile trading apps are software applications that allow investors to trade on-the-go using their mobile devices. These apps provide access to real-time market data, trading tools, and research reports, making it easier for investors to monitor their investments and execute trades from anywhere, at any time.

Robo-advisory services: Robo-advisory services use algorithms and data analysis to provide automated investment advice to investors. These services typically offer low-cost investment options and can be accessed through an online platform or mobile app.

Overall, e-trading has revolutionized the way investors trade securities, making it more convenient, efficient, and accessible than ever before.

Q.2. Why do you think e- trading is more beneficial than traditional trading both to the customers as well as to banks themselves?

Ans. E-trading, or electronic trading, is a modern method of buying and selling financial instruments such as stocks, bonds, currencies, and derivatives using an electronic platform. E-trading has several advantages over traditional trading, both for customers and for banks.

One major advantage of e-trading for customers is convenience. With e-trading, customers can access the markets from anywhere with an internet connection, without needing to visit a physical location such as a stock exchange or a bank branch. This allows customers to make trades more quickly and efficiently, and also enables them to monitor their investments in real-time.

Another advantage of e-trading is affordability. E-trading platforms typically charge lower fees and commissions compared to traditional brokers and dealers, making it more accessible for retail investors who want to trade in smaller amounts.

E-trading also benefits banks and financial institutions by increasing the efficiency of their operations. Electronic platforms allow banks to process trades more quickly, reduce errors and improve risk management, while also reducing costs associated with physical paperwork and manual processes.

Overall, e-trading has revolutionized the way in which financial instruments are traded and has provided a more efficient, cost-effective, and convenient way for customers to invest and for banks to operate.

Q.3. What are the limitations of e-trading in india ? how much success has e-trading gained?

Ans. There are several limitations of e-trading in India, which have impacted its success to some extent. Here are some of the limitations:

Limited internet penetration: Although internet usage has increased in India, a significant portion of the population still lacks access to the internet, especially in rural areas. This limits the reach of e-trading to a certain section of the population.

Lack of financial literacy: E-trading requires a certain level of financial literacy and knowledge of the market, which many investors lack. This can lead to uninformed investment decisions and losses.

Security concerns: E-trading involves the transfer of sensitive financial information, which makes it vulnerable to cyber attacks and fraud. This can deter some investors from using e-trading platforms.

Regulatory challenges: The regulations around e-trading are still evolving in India, which can create uncertainty and limit the growth of the industry. For example, there have been instances of regulatory issues with online payment gateways, which have affected e-trading transactions.

Despite these limitations, e-trading has gained significant success in India in recent years. With the growth of the internet and advancements in technology, e-trading has become more accessible and user-friendly. Additionally, many e-trading platforms have taken steps to address security concerns and provide educational resources to users. As a result, e-trading has become an increasingly popular way for investors to buy and sell securities in India.

Q.4. What is the meaning of e-trade? Give any four differences between e-trading and traditional trading. Explain the advantages of e-trading?

Ans. E-trade refers to the buying and selling of financial instruments such as stocks, bonds, options, and futures electronically over the internet. Here are four differences between e-trading and traditional trading:

Convenience: E-trading can be done from anywhere with an internet connection, whereas traditional trading involves physically visiting a broker or exchange to place orders.

Speed: E-trading is faster than traditional trading as orders can be executed in real-time, whereas traditional trading involves delays due to the time taken for communication and processing.

Cost: E-trading is often cheaper than traditional trading as it eliminates the need for middlemen such as brokers, who charge fees for their services.

Transparency: E-trading provides greater transparency as investors can see real-time prices and trading volumes, whereas traditional trading can involve opaque pricing and hidden fees.

The advantages of e-trading include:

Convenience: E-trading allows investors to access financial markets from anywhere at any time, making it more convenient than traditional trading.

Lower costs: E-trading often has lower transaction costs as it eliminates the need for middlemen such as brokers, and can also reduce other costs such as travel expenses.

Faster execution: E-trading allows investors to place trades in real-time, which can result in faster order execution and better pricing.

Transparency: E-trading provides greater transparency as investors can access real-time market data, including prices and trading volumes. This transparency can lead to more informed investment decisions.

Q.5. What is online trading? What are the safety and payment issues involved with regard to on-line trading?

Ans. Online trading refers to the process of buying and selling financial securities over the internet, usually through an online brokerage platform. This type of trading allows investors to access real-time market information, execute trades quickly, and manage their investment portfolios from anywhere with an internet connection.

However, there are certain safety and payment issues that investors need to be aware of when engaging in online trading. Some of these include:

Security: Online trading involves the transmission of sensitive personal and financial information over the internet, which can be vulnerable to cyber attacks and other security breaches. Investors need to ensure that the online brokerage platform they are using has proper security measures in place to protect their data and prevent unauthorized access.

Identity theft: Online trading accounts can be targeted by fraudsters who attempt to steal personal information and use it for identity theft. Investors need to be careful about sharing their personal information and passwords, and should take steps to safeguard their accounts against unauthorized access.

Payment methods: Online trading platforms typically offer a range of payment methods, including bank transfers, credit/debit cards, and e-wallets. Investors should be aware of the fees associated with each payment method and choose the one that is most cost-effective and secure.

Trading risks: Online trading involves significant risks, including market volatility, liquidity risk, and operational risk. Investors need to be aware of these risks and have a sound trading strategy in place to mitigate them.

In order to ensure safe and secure online trading, investors should choose a reputable and reliable online brokerage platform, use strong passwords and two-factor authentication, and regularly monitor their trading accounts for suspicious activity.

Q.6. Explain advantages of e-trading. Explain status of e-trading in india?

Ans. Advantages of e-trading:

Convenience: E-trading allows investors to trade from the comfort of their own homes or offices, eliminating the need to physically visit a stock exchange or broker. This also allows for greater flexibility in trading, as investors can trade at any time of the day or night.

Lower costs: E-trading can be less expensive than traditional trading, as it eliminates the need for brokers and other intermediaries. This can lead to lower transaction costs and fees.

Faster transactions: E-trading is often faster than traditional trading, as transactions can be completed almost instantly, eliminating the need for manual processing.

Access to information: E-trading platforms often provide investors with a wealth of information, such as real-time quotes, market analysis, and research reports, which can help them make informed investment decisions.

Status of e-trading in India:

E-trading has gained significant traction in India in recent years, with the growth of the internet and the increasing use of smartphones. According to a report by the National Stock Exchange (NSE), the share of e-trading in overall trading volumes on the exchange increased from 47.35% in FY 2018-19 to 54.17% in FY 2019-20.

Several factors have contributed to the growth of e-trading in India, including the increasing penetration of the internet and mobile devices, the availability of low-cost trading platforms, and the growing demand for faster and more convenient trading options. However, there are still challenges to be overcome, such as the need for greater financial literacy among investors and the need for better cybersecurity measures to protect against fraud and cyber attacks.

Q.7. What is meant by e-trading? Differentiate between e-trading and traditional trading. Explain the advantage of e-trading.

Ans. E-trading refers to the buying and selling of financial instruments such as stocks, bonds, and derivatives over electronic platforms. It is an online platform that enables traders and investors to conduct transactions and monitor their investments from anywhere at any time.

Here are some key differences between e-trading and traditional trading:

Accessibility: Traditional trading requires physical presence at a stock exchange, while e-trading can be done from anywhere with an internet connection.

Cost-effectiveness: E-trading is generally more cost-effective than traditional trading, as it eliminates the need for brokers and reduces transaction costs.

Speed: E-trading is faster than traditional trading, as transactions can be executed in real-time without delay.

Transparency: E-trading provides greater transparency as investors can access real-time market data and make informed decisions based on the latest information.

The advantages of e-trading include:

Convenience: E-trading offers the convenience of trading from anywhere, anytime, without the need to physically visit a trading floor.

Cost-effectiveness: E-trading reduces transaction costs, eliminates the need for intermediaries, and provides access to a wider range of financial instruments, making it more cost-effective for investors.

Speed: E-trading is faster and more efficient than traditional trading, as transactions can be executed in real-time, reducing the time it takes to complete a trade.

Transparency: E-trading provides greater transparency by enabling investors to access real-time market data, track their investments, and make informed decisions based on the latest information.

The status of e-trading in India has grown significantly in recent years, driven by increasing internet penetration and the government's push for a digital economy. The National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are the two leading stock exchanges in India, with a significant portion of their trading volume being conducted through e-trading platforms. However, there are still challenges to be addressed, such as concerns around cyber security, lack of digital infrastructure in rural areas, and the need for investor education on e-trading platforms.

MCQ

1. E-Trading is :

(a) Trade of stocks/bonds (b) Trade of Foreign currency

(c) Both of the above (c) None of the above.

E-Trading refers to the buying and selling of securities and other financial instruments through electronic means such as the internet, mobile apps or other online platforms. It can include both B2B (business-to-business) and B2C (business-to-consumer) trading, and it can be beneficial in many ways, such as providing research support, comparison shopping, and greater liquidity. However, it is not correct to say that e-trading does not help in research support or that it is off-line trading.

2. Online trading is a service offered on the internet for the purchase and sale of:

(a) goods (b) services

(c) securities (d) None of these.

E-trading, or online trading, refers to the buying and selling of securities, such as stocks and bonds, through electronic platforms, typically provided by brokerage firms. It allows investors to access financial markets and make trades without the need for physical presence at a stock exchange or a broker's office. This can include both B2B and B2C trading, as well as research support, price comparisons and other tools.

3. In E-Trading, Sale and purchase of securities happens on :

(a) Internet (b) The building of stock exchange

E-Trading, also known as online trading, is the process of buying and selling securities such as stocks, bonds, and options through an online platform or brokerage. This process is done through the internet, rather than in-person or over the phone.

4. Which is not required in E-Trading :

(a) Internet enabled computer

(b) A demat account with a depository

(d) Direct interaction of investor and e-broker.

Physical presence of the investor and the e-broker.

5. Who can deal in E-securities ?

(a) A firm (b) An individual

E-Trading allows for the electronic buying and selling of securities such as stocks, bonds and other financial instruments. In E-Trading, the sale and purchase of securities happens over the internet, and it eliminates the need for physical interaction between the investor and the e-broker. E-Trading is accessible to a wide range of individuals and organizations, including retail investors, institutional investors, and traders, and it provides various benefits such as convenience, speed, and cost-effectiveness. However, E-Trading does not eliminate the need for research support or the need for investor to be knowledgeable about the securities they are trading.

6. For E-Trading, securities should be in :

(a) Electronic form (b) Paper Form

(c) Both of the above (d) None of the above

Dematerialized form for E-Trading to take place.

7. As a result of on-line trading, the liquidity :

(a) Increases (b) Decreases

Both

E-trading increases liquidity as it allows for faster and more efficient buying and selling of securities, and also allows for a larger pool of potential buyers and sellers to participate in the market.

8. E-Trading makes use of following safety parameters :

(a) ID & Passwords (b) SSL Encryption standard

(c) Both of these (d) None of these.

E-Trading makes use of both technical and physical safety parameters to ensure the secure transfer of sensitive information and transactions. Technical safety parameters include the use of encryption, firewalls, and secure servers, while physical safety parameters include measures such as secure data centers, restricted access to sensitive information, and regular backups.

9. You can obtain information about stock exchange happenings using :

(a) On-line terminals (b) T.V. channels

methods in E-Trading.

10. The note in which all trades are stated is called :

(a) Contact note (b) Contract Note

a contract note is a document that states the details of a trade that has been executed on a stock exchange, including the security traded, the price, the quantity, and the date and time of the trade. It is issued by the broker to the client as a record of the transaction.

11. On-line trading has :

(a) Global coverage (b) National coverage

on-line trading has global coverage as it allows for buying and selling of securities over the internet, which can be accessed from anywhere in the world.

Q.1. What is e-trading?

A. Buying and selling financial instruments through physical exchanges

B. Buying and selling financial instruments through electronic platforms

C. Buying and selling physical goods through online platforms

D. Buying and selling financial instruments through over-the-counter markets

Q.2. What are the prerequisites of e-trading?

A. Reliable internet connection, physical presence on the trading floor, and a trading platform

B. Reliable internet connection, trading platform, trading account, knowledge and skills, and security measures

C. Reliable internet connection, trading account, and knowledge and skills

D. Trading platform, trading account, and security measures

Q.3. What are the processes involved in conducting electronic trading activities?

a) Trading platforms, market data, and trading algorithms

b) Trading platforms, electronic communication networks, and market data

c) Trading algorithms, risk management, and settlement and clearing processes

d) Compliance, electronic communication networks, and market data

Q.4. Which of the following is not a risk involved in e-trading?

a) Market volatility

b) Technical failures

c) Cyber threats

d) Lack of access to market data

Q.5. What is the major disadvantage of e-trading according to the given paragraph?

a. Lack of personal interaction.

b. Dependency on internet connection.

c. Technical issues.

d. Risk of hacking.

Q.6. What is the status of e-trading in India?

a. It has seen a significant decline in recent years.

b. It is regulated by the Reserve Bank of India.

c. It has seen significant growth in recent years.

d. It is not accessible to a large number of people.

Q.7. What is the potential disadvantage of too much information in e-trading?

a. It can lead to confusion and information overload.

b. It can result in significant financial losses.

c. It can expose personal information to cyber attacks.

d. It can cause technical glitches.

Q.8. What is e-Trade?

a. Trading in physical market

b. Online trading

c. Trading with intermediaries

d. None of the above

Q.9. How many depositories are there in India?

a. One

b. Two

c. Three

d. Four

Q.10. What is demat?

a. A type of investment

b. The process of converting electronic shares into physical form

c. The process of converting physical share certificates into electronic form

d. None of the above

True or False

1. E-trading involve B2B trading and B2C trading. True

e-trading involves both B2B (business-to-business) trading and B2C (business-to-consumer) trading, as it allows companies and individuals to buy and sell products and services over the internet.

2. E-trading is basically off-line trading. False

E-trading is an online method of trading securities such as stocks and shares, whereas traditional trading is done through in-person transactions or over the phone.

3. BSE has its own on-line Trading System called BOLT. True

BOLT stands for BSE On-Line Trading system, it's an electronic trading platform developed by Bombay Stock Exchange (BSE) for buying and selling of securities on the exchange. BOLT is one of the oldest electronic trading platforms in India, it was launched in 1995.

4. E-trading does not help in Research support. False

E-trading can provide research support by providing access to financial data, market analysis, and news updates. This can assist traders in making informed decisions about their trades

1. E-trading refers to buying and selling physical goods through online platforms. (False)

2. E-trading has become increasingly popular due to its convenience, cost-effectiveness, and accessibility. (True)

3. A reliable internet connection is not necessary for e-trading. (False)

4. A trading account must be opened with a brokerage firm that offers online trading services. (True)

5. E-trading does not involve the transfer of sensitive financial information over the internet. (False)

6. Electronic communication networks (ECNs) are electronic systems that facilitate trading outside of traditional exchanges. True/False

7. E-trading involves significant risks, including market volatility, technical failures, and cyber threats. True/False

8. E-trading activities do not have to comply with regulatory requirements, including reporting and record-keeping obligations. True/False

9. Electronic trading platforms typically have automated settlement and clearing processes in place to facilitate transactions True/False

10. E-trading is not vulnerable to cyber attacks. (False)

11. Lack of infrastructure and awareness are hindrances to e-trading in India. (True)

12. E-trading is expected to become less prevalent in the future. (False)

13. An investor can open only one depository account in India.

True/False

14. Demat accounts make the process of buying and selling shares easier and more convenient. True/False

15. Traditional trading is no longer prevalent in today's financial markets. True/False

A. One Word or one line questions

Q. 1. What is meant by E-Trading ?

Ans. E-trading is the process of trading using Internet and of course computers to place

orders for buying and selling with on-line brokerage firms.

E-Trading, also known as electronic trading or online trading, refers to the buying and selling of financial securities, commodities, and other instruments through the use of electronic platforms, such as computer networks and the internet. This allows traders to execute trades and manage their portfolios in real-time, and also enables them to access a wider range of financial products and markets than traditional methods. E-Trading also includes the use of Automated trading systems, Algorithmic trading, High-frequency trading

Q. 2. How many depositories are there in India ?

Ans. There are two depositories in India.

As of my knowledge cutoff in 2021, there are two depositories in India, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

Q. 3. What is BOLT ?

Ans. BSE’s on-line trading system is called BOLT.

BOLT stands for Bombay Online Trading System, it is an online trading platform for securities trading in India. It was launched by the Bombay Stock Exchange (BSE) in 1995. BOLT is a fully automated trading system that facilitates the buying and selling of securities in the BSE. It uses a screen-based trading system and allows traders to place their orders electronically through a network of authorized brokers. BOLT also provides real-time information on prices, trading volumes, and other market data.

Q. 4. What is Dematerialisation ?

Ans. It is the process of conversion of physical form of shares into electronic form.

Dematerialization refers to the process of converting physical certificates of ownership of a security, such as stocks or bonds, into an electronic form that is stored in a computerized database. This process eliminates the need for physical certificates to be stored and transported, making the process of buying and selling securities more efficient and secure. It also helps to reduce the potential for fraud and errors that can occur with paper-based systems.

Q. 5. Do you think that securities move physically in E-Trading ?

Ans. No, securities do not move physically in E-Trading.

in E-Trading, securities do not move physically. They are traded electronically through the use of computer systems and networks, such as the Internet and electronic depositories. This process is called dematerialization, where physical shares are converted into electronic form, making the trading process more efficient and secure.

Q. 6. How E-Trading results in greater liquidity ?

Ans. Liquidity is greater in E-Trading, because deal finalisation is quick, give and take

happens electronically, so liquidity increases

E-Trading results in greater liquidity because it allows for faster and more efficient buying and selling of securities. Transactions can be completed quickly and at a lower cost due to the automation and elimination of physical paperwork. This allows for more frequent trades and greater market depth, leading to increased liquidity. Additionally, e-trading platforms provide real-time market data and analytics, allowing traders to make more informed decisions, which can also contribute to greater liquidity..

Q. 7. What is Traditional Trading ?

Ans. Buying and Selling of shares and securities on the floor of the exchange.

Traditional trading refers to the buying and selling of securities, commodities, or other financial instruments through traditional means such as face-to-face transactions, phone calls, or paper-based orders. This type of trading typically involves intermediaries such as brokers, dealers, or market makers who facilitate the buying and selling process and may charge commissions or fees for their services. Traditional trading is also known as "over-the-counter" (OTC) trading as it is not conducted on a centralized exchange.

B. Fill in the blanks

1. E-Trading is the service offered on Internet for the sale and purchase of shares, stocks etc.

E-Trading, also known as online trading or electronic trading, is the process of buying and selling securities through an electronic platform, such as a stock market website or a brokerage's trading software. This allows investors to make trades and manage their investments online, rather than having to go through a traditional stockbroker or financial institution.

2.E-brokers provide comparison shopping.

3. SSL stands for Secure Socket Layer

SSL (Secure Socket Layer) is a security protocol that provides communication security over the internet. It is used to establish an encrypted link between a web server and a browser, ensuring that all data passed between them remains private and secure.

4. BSE developed Online Trading System in 1995

BSE (Bombay Stock Exchange) developed the Online Trading System (BOLT) in 1995 to facilitate online trading of shares and other securities.

5. Encryption is used through SSL

Secure Socket Layer (SSL) is a protocol that uses encryption to secure communication over the internet. It encrypts the data being transmitted between a web server and a web browser to prevent unauthorized access or tampering of the information.

Plus Two

Friday 22 January 2021

Chapter 14 -E-TRADING

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