Trading Procedure of Stock Exchange

The Trading procedure of stock Exchange tells about the sequence of steps which are used for trading. In trading the securities can be purchased or sold by the companies. So, lets start with the points of its procedure and come to know, that how it works.

Definition of Stock Exchange:

An organization or body of individuals, whether incorporated or not established for the purpose of assisting regulating and controlling of business in buying, selling, and dealing in securities.

-The Indian Securities Contracts (Regulation) Act of 1956

Trading Procedure of Stock Exchange:

The name of the company involved in listed securities then only stock exchange authorities are satisfied with the financial strength and objectives of the company. The Trading procedure involves:

1. Selection of a broker:

The broker/agent can be an individual, partnership firms or corporate bodies. Firstly, it includes the selection of a broker who will buy/sell securities on behalf of the investor. The buying and selling of securities only done by SEBI registered brokers who are members of the Stock Exchange. 

2. Opening De mat Account:

DE mat refers to Dematerialized account. It is the Second step in trading procedure. The depository is an institution which holds securities (e.g. Shares, Debentures, Bonds, Mutual (Funds, etc.) In India there are two depositories: National Securities Depository Ltd. Central Depository Services Ltd.

3. Placing the Order:

 The investor can place the order after opening the De mat Account. And the order is placed to the broker either personally, telephonically or through email, etc.

 4. Executing the Order:

According to the Instructions of the investor, the broker place the order i.e. he buys or sells the securities. Broker make a contract note for the order placed by the investor. It includes the contract note which is concerned with the name and the price of securities, name of parties and brokerage (commission) charged by him. And the contract note is signed by the broker.

5. Settlement:

In this stage the trading of securities done by the broker on behalf of their clients. There can be of  two types:

(a) On the spot settlement:

Settlement is done immediately and on spot settlement. T + 2 rolling settlement. It means that any trade taking place on Monday will be settled by Wednesday.

(b) Forward settlement:

It refers to that settlement that will be take place on some future date. All trading in stock exchanges takes place Monday to Friday (between 9.55 am and 3.30 pm.)

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