13.9 Important checklist for online trading

1. Check your client-broker agreement carefully for hidden clauses that may be detrimental.
2. If your current offline broker offers you internet trading facility then you have to sign a fresh client-broker agreement with him. This agreement lists the rights and obligations of both parties in respect of trades routed through the internet. If you sign up with another broker, you will still have to sign two sets of client broker agreements: one for trades routed through the internet and the other for trades carried out through the broker’s trading terminals.
3. Assess the reliability, speed and robustness of your broker’s system.
4. Determine if the stock quotes and account updates you receive are real time or delayed. Check the response time on the trading screen. The lag between the price on the market watch screen and on the exchange should be less than 20 seconds.
5. Confirmation of the execution of your order should reach you in less than 30 seconds.
6. Ensure that the site is accessible through trading hours.
7. Check the security features. If the security features are very poor, it would be risky to trade online.
8. Check for the mechanism of transfer, the margin to be maintained, the minimum order value.
9. Check procedure for online settlement and time for settlement, penalties for lag in payment.
10. Receive clear information about sales’ commissions, transaction fees and conditions that apply to any advertised discount on commissions.
11. Get information from the firm about significant website outages, delays and other interruptions that may affect your ability to execute trades. Make sure that the firm has an alternative way to execute trades. In case you cannot access the internet, can the transactions be done through phone or fax? Make sure that such alternate arrangements are made.