What does the term “Internet Trading” mean?
Trading in financial markets that takes place through the internet is referred to as online trading. For years, trading was done in person or over the phone, but nowadays, almost everything is done through an electronic terminal.
What is the Procedure For Trading Online?
When it comes to trading, the internet is fantastic since it immediately allows you to interact with the financial market. However, there was one constant in pre-internet times: the economic divide between urban and rural communities. As a result, private traders will need brokers to act as go-betweens for their trading activities, which brokers accomplish by supplying traders with remote trading terminals (essentially software that the trader uses to do his business).
Here’s How It Works:
- A trader decides to carry out a transaction (for example, to purchase 200 shares of Microsoft).
- He locates these shares in his trading platform, selects the quantity, and places a buy order.
- When a trader submits a request, the broker initiates the transaction’s execution. However, he must first locate a counterparty or another trader willing to purchase the same asset at the same price.
- The broker looks for a counterparty or another trader willing to acquire these shares or assets at the same price on the stock market. After a successful search for the parties, he finally comes to an arrangement.
- All of this work is now done through an internet trading platform to select a counterparty and close a transaction. It takes less time because everything is automated.
But it wasn’t always like this. For example, even though the beginning chain of “trader – broker – stock exchange – broker – trader” was the same, the complete procedure took a long time. To begin, the trader would call his broker and request that the deal is opened, and the broker would personally search the stock exchange for a counterparty.
Online Trading in Pakistan:
Before you begin, there are several points you should be aware of:
The Pakistan Stock Exchange (PSX) and other financial institutions, and stockbrokers, are monitored by the Securities and Exchange Commission of Pakistan (SECP). In addition, the insurance industry, credit rating agencies, stockbrokers, surveyors, non-banking financial companies, and private pension schemes in Pakistan and the corporate sector and capital markets are all regulated by this organization.
Assume you are a Pakistani national living in Pakistan who wishes to participate in the stock market. In that situation, you’ll need a funded Pakistani bank account and the appropriate federal identification documents to establish your identity. Non-resident foreign nationals (NRFs) and non-resident Pakistani nationals (NRPs) can invest alongside foreign institutional investors (FIIs) in Pakistan if they fulfill specific criteria. However, if you are not a Pakistani national and live outside the country and wish to participate in the Pakistan stock market, you must fulfill additional requirements.
You must first complete the below-given steps before engaging in internet trading in Pakistan:
To Open A Brokerage Account In Your Name, Follow These Instructions:
The first step is to open an account with a brokerage business. A Client Identification Number or Account Number will be assigned to this account. Next, check the terms and conditions on the Account Opening Form to see if they match those on the PSX website’s Standard Account Opening Form. You’ll also open a CDC sub-account, which is where you’ll do your actual stock market trading.
It would be excellent if you opened a CDC Investor Account as well. The CDC opens this account for you, ensuring that your shares are safe and secure.
You must have a UNIQUE IDENTIFICATION NUMBER assigned to you (UIN). This is the account and transaction number that will be used to track all of your brokerage accounts.
Receive Confirmation After Submitting Your Order:
You’ll make orders with your stock broker or through an internet application after deciding which companies’ shares you want to buy. Following the placement and execution of your transaction, you should receive a Trade Confirmation.
The Stock Market Ecosystem And Transaction Settlement:
NCCPL settles the shares purchased or sold (payments paid or received) (National Clearing Company of Pakistan Limited). The CDC makes it easier to trade stocks (Central Depository Company Limited). As a result, NCCPL and CDC are two TREC holders that contribute significantly to PSX.
For Their Customers, Many Brokerage Companies Provide An Online Trading Facility:
This allows you to trade on the Stock Exchange utilizing an online application or software on your own time.
Primary Taxes And Fees:
Shares traded on the PSX are subject to several taxes and fees.