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trading process

Uploaded by

batwalpari
Copyright
© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
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Trading Procedure on a Stock Exchange (SOPES- trick)

Earlier, trading was done on the trading floor of stock exchange through auction system. This method of
has now been replaced by an online screen based electronic trading.

Sale and purchase of securities through stock Exchange generally involves the following trading
procedure:

1. Selection of Broker: The first step is to select a broker who will buy/sell securities on behalf of
the investors
 This is necessary because trading of securities is possible only through SEBI registered
brokers, who are the members of a stock exchange.
 Brokers may be individuals, partnership firms or corporate bodies.
 The broker charges brokerage or commission for his services.
2. Opening Demat Account:
The securities are held in the electronic form by a depository. So, the next step is to open a demat
account.
 Demat (Dematerialized) account refers to an account which an Indian citizen must open
with the depository participant (banks, stock, brokers), to trade in listed securities in
electronic form.
 Depository interacts with the investors through depository participants.
 The depository participant maintains the securities accounts and intimates the account
status to the investor from time to time.
3. Placing the Order:
The next step is to place the order with broker.
 The order can be communicated to the broke through telephone, cell phone, e-mail, etc.
 The instructions should specify the securities to be bought or sold and the price range
within which the order is to be executed.
 Only the securities of listed companies can be traded on the stock exchange.
4. Executing the Order:
According to instructions of client, the broker executes the order, i.e., buys or sells the security so
chosen.
 The broker then issues a contract note, which contains the name and the price of the
securities, names of the parties, brokerage charged.
 The contract note is signed by the broker and one copy is sent to the client.
5. Settlement:
This is the last stage in the trading of securities, done by the brokers on behalf of their clients.
 The mode of settlement depends upon the nature of the contract.
 Equity spot market follows a T+2 rolling settlement. It means, if a trade has taken place
on Monday, then it must be settled by Wednesday.
 All trading on stock exchanges takes place from Monday to Friday, between 9:55 am and
3:30 pm (Indian Standard Time).
 Delivery of shares has to be made in dematerialized form. • Each exchange has its own
clearing house, which assumes all settlement risk.

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