Stock market
has been in the news for quite a long time now. Almost everyone is interested
in the buying and selling of the stock and earning profit out of it. The
trading procedure, although, is a lengthy one. On top of that, investing in
this market needs a lot of knowledge and skills. One must be experienced enough
to anticipate the future of each company in the market and invest their money
accordingly. Those who are not very well educated about the market may hire
brokers for their investment.
These days,
the trading process has been digitalized to minimize the risk of unhealthy
trade practices and keep everyone’s money safe and secure. Let’s have a look at
the whole procedure of trading and settlement in detail.
1.SELECTION
OF BROKER
The first
and foremost step is to select a broker who will buy and sell the securities on
your behalf because according to the rules, only those who are registered under
the Securities and Exchange Board of India (SEBI) can trade securities. These
brokers can be anyone from an individual to a corporate body. There is a broker
– client agreement and a client registration form that has to be signed to
start the process. Also, the investor must submit the following details and documents:-
1. PAN number
2. Date of birth
3. Address
4. Educational qualification and
occupation
5. Residential status
6. Bank account details
7. Depository account details
8. Client code number available in the
client registration form
2.OPENING A
DEMAT ACCOUNT
The investor
is then required to open a demat account or a Beneficial Owner (BO) account
with a Depository participant (DO) for holding and transferring the securities
in the demat form. The depository is the organization or institution that holds
the securities in an electronic form. In India, there are two depositories –
National Securities Depositories Limited (NSDL) and Central Depository Services
Limited (CDSL). Also, the investor is supposed to open a bank account for the
cash transactions in the securities market.
3.PLACE THE
ORDER
Then the
investor places an order with his broker to buy or sell the securities. It
should be clearly mentioned by the investor how much shares he wants to buy or
sell so that there would be no confusion. Thereafter, an order confirmation
slip is issued by the broker to the investor.
4.EXECUTING
THE ORDER
The broker,
after the placement of the order, will then connect to the main stock exchange
online and he will match the shares and the best prices available for them.
When the shares are available to be bough or someone is available to buy those
from you, the broker is informed about it and the execution takes place
electronically. The broker then issues a trade confirmation slip to the
investor. After this, a contract note has been issued by the broker within 24
hours which is an important legal document as it helps to settle any disputes
between the broker and the investor.
5.SETTLEMENT
Now the
investor is supposed to deliver the shares he sold or pay the cash in case he
bought. This should be done immediately after the contract note has been
received or before the day when the broker will make the payment or deliver the
shares.
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