Explain the steps in trading procedure on stock exchange.


The steps in trading procedure on stock exchange are as follows :

(i) Selection of a broker: The first step is to select a registered broker prior to purchase /sale of securities that assist investors to execute trade transactions in secondary markets. These brokers can be an individual, corporate body or a partnership firm.

(ii) Opening a DEMAT account with depository: Individual investors need to open a DEMAT or Dematerialised account provided by Depository Participants (DP) who act as agents or intermediaries between depositors and investors. DPs include SEBI, banks, sub-brokers, etc.

(iii) Placing the order: Post-opening a demat account, investors can place an order by, specifying the number of securities and the company /script name at an expected price either through a DP or personally through an email, phone, etc.

(iv) Executing the order: The order is placed by a broker for buying or selling the securities. Broker prepares a contract note that contains the name and price of securities, name of parties and brokerage or commission charged by them and duly signed by the broker.

(v) Settlement: Settlement is carried out either through cash or carry forward basis under either two or both types of settlements :

(a) On the spot settlement, which occurs in T+2 basis where T stands for transaction date and '2' are the number of days.

(b) Forward settlement, that can take place on some future date, which can be T4-5 or T + 7.

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