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1. Stock Exchange

2. • Secondary market
• A centralized market for buying and selling stocks
where the price is determined through supply demand
mechanism

3. • Screen based trading – where bid price and offer prices are
displayed on the computer screen
• Bid price: price at which investor is willing to buy the security
• Offer price : price at which an investor is willing to sell the
securities

4. Functions of Stock Exchanges
1) It provides a market place for purchase & sale of securities
2) This helps in mobilizing savings & channels into securities
2) Stock exchange provide liquidity to the investments in
securities

5. 4)The stock exchange help in the valuation of securities
5) Stock exchange is an indicator of health of nations
economy as a whole
6) Safeguard investors through strict enforcement of rules
and regulations
7) Companies enjoy better reputation and their shares are
widely accepted.

6. Listing of securities:
• Listing is the process of including the securities of a company
in the official list of the stock exchange for the purpose of
trading
• primary objective : providing marketability ,liquidity &
transferability to securities
• At the time of issue , the company needs to apply for listing
the securities in stock exchange

7. • To be listed on the stock exchange there should be minimum
issued capital and number of share holders.
• Has to submit the application for listing along with document
memorandum of association , articles of association,
prospectus ,directors report, annual accounts, agreement with
underwriters ,information about the companies activity, its
capital structure etc

8. • If eligible for listing , the company would be required to
execute a listing agreement with the stock exchange.
• Listing agreement : the obligations & restrictions imposed on
the company as a result of listing .
• Pay initial listing fees
• Also required to pay the annual listing fees every year

9. Type of Orders
1.Market Order
• A market order instructs your broker to buy or sell the stock
immediately at the best prevailing price in the market,
whatever that may be.
• Buy order: lowest price obtainable
• Sell order: highest price obtainable

10. • Advantage: certain that the order will be executed
• Disadvantage: uncertain about the price until the order is
executed

11. 2.Limit Order
• An order placed with a brokerage to buy or sell a set number
of shares at a specified price or better.
• Limit Buy Order: investor specifies the maximum price that
he is ready to pay for the share. The order should be executed
only at limit price or at a lower price (100 share for RS 120)
• Limit Sell Order : investor specifies the minimum price that
he will accept for the share. The order should be executed only
at limit price or at a higher price .

12. • Advantage: investors aware about the price limit at which the
order will be executed
• Disadvantage: the order may remain unexecuted

13. 3.Stop Orders
• Used by investors to protect a profit or limit a loss
• Investors specify the Stop Price
• Once the price surpasses the stop price, the stop order
becomes a market order.

14. • sell order: Stop price must be below the market price
prevailing at the time the order is placed
• buy order: Stop price must be above the market price
prevailing at the time the order is placed
• When the market price passes the stop price the stop order will
be executed at the best available price

15. • Example: How it helps in retaining the profit without foregoing
the opportunity of further growth( Stop Sell Order)
• An investor has 100 shares purchased at Rs 35/share
• Current Market Price: Rs 75
• Profit = 75-35= Rs 40/ share
• May or may not grow
• Stop sell order Rs 70
• If price falls to 70 or below 70 , the stop sell order becomes a market
order and will be executed at the best prevailing price
• Hence will get a profit of around Rs 35 / share

16. • Disadvantage of stop order
• The actual price at which the order is executed
is uncertain

17. Based on Time limit
Day Order:
• the order which is valid only for the trading day on which the
order is placed .
• otherwise it is treated as cancel
Week order
• These orders are valid till the end of the week during which
the orders are placed
• They expire at the close of trading session on Friday of the
week unless they are executed

18. Month order
• Orders that are valid till the end of the month during which the
orders are placed.
• Expire at the closing of last working day of the month
Open orders
• Orders that remain valid till they are executed by the brokers
or cancelled by the investors
• Also called Good Till Cancelled (GTC) orders
Fill or Kill orders
• Orders meant to be executed immediately. Otherwise they are
treated as cancelled

19. Online trading
• In order to start share trading in India three types of accounts
are necessary, a trading account with a broker, Demat account
with a Depository Participant and a bank account
• To buy & sell securities the investors has to locate a registered
broker

20. • The account opening form of the broker has four components.
1.The Know Your Client (KYC) Form: your contact details and
your financial worth. This Form is also accompanied with
Proof of your identity, proof of your residence and Permanent
Account Number (PAN) card.
2.separate agreements for share trading on BSE and NSE:

21. 3. certain power of attorneys that are given.
4. Risk Disclosure Document :This document will
explain the different risk involved with your
transaction for which you will be responsible

22. • Open a Demat account with Depositories

23. What is Dematerialisation?
• Dematerialisation (“Demat” in short form) signifies
conversion of a share certificate from its physical form to
electronic form
• This is done by a Depository Participant on a request from the
investor

24. What is Rematerialisation?
• Securities in Demat form or electronic form may again be
converted back to physical form.
• an investor can still hold shares in physical form.
• The investors has to Demat the shares if he / she wishes to sell
the same through the Stock Exchanges.

25. Depositories
• A Depository is an organisation where the securities
of a shareholder are held in the electronic form at
the request of the shareholder through the medium
of a Depository Participant.

26. Depositories in India
• There are two depositories in India:
1. National Securities Depository Limited (NSDL)
2. Central Depositories Services Limited (CDSL)
• NSDL : India’s 1st depository ,started functioning on
November 6, 1996.
• CDSL: July 15, 1999

27. Services provided by Depository
• Dematerialisation
• Rematerialisation
• Transfer of securities and Settlement of trades done on
exchange connected to the Depository

28. How do Depository operate
• Depository interacts with its clients / investors through its
agents, called Depository Participants normally known as DPs.
• A Depository Participant (DP) is described as an agent of the
depository.
• The relationship between the DPs and the depository is
governed by an agreement made between the two under the
Depositories Act.

29. Demat Account Opening
• Prescribed Account opening forms are available with the
DP, needs to be filled in.
• Standard Agreements are to be signed by the Client and
the DP, which details the rights and obligations of both
parties.
• the client requires to attach Photographs of Account
holder, Attested copies of proof of residence and proof of
identity

30. Benefits of Depository System
1. Shares are held in electronic form
2. No need to safe keep share certificates
3. Elimination of all risks associated with physical
certificates-
4. No stamp duty on transfer of securities
5. Immediate transfer and registration of securities
6. Faster settlement cycle

31. 7. Reduction in brokerage
8. Reduction in handling of huge volumes of paper
9. periodic status reports to investors on their holdings and
transactions, leading to better controls.
10. Elimination of problems related to change of address of
investor: needs to inform their DP
11. Automatic credit of Dividend / bonus shares

32. How the system works?
• Each depository has several depository
participants affiliated to it
• Registered members of stock exchange open
pool account with the depositories
• Investors open a Demat account called
beneficiary account with the depository
participants

33. Eg:Investor 1 selling his securities to investor 2 through
respective brokers
beneficiary account pool account beneficiary
of investor 1 account of investor 2
beneficiary account of investor 1 to pool account of broker 1
to pool account of clearing house to pool account of broker
2 to beneficiary account of investor 2

34. Allotting client code
• On submitting the completed set of document the broker will
scrutinize and if found everything in order will allot a code
normally referred to as client code to you. You may need to
furnish this code every time you want to transact.

35. Clearing house
• A clearing house is a financial institution that provides
clearing and settlement services for securities transactions.
• responsible for settling trading accounts, clearing trades ,
collecting and maintaining money, regulating delivery and
reporting trading data.

36. • All members are required to clear their trades through the
clearing house at the end of each trading session

37. • Trading in stock exchange carried out in 2 phases:
• 1st phase: the order is placed with the broker & the execution of
the order by the broker on behalf of the clients in his terminal.
once the matching order is found, the order is executed.
• 2nd phase: settlement of trade.
• buyer now has to handover the money & receive the security
• Seller has to hand over the security & receive money. This is
known as the settlement of trade.
• The settlement process is carried out through clearing house

38. • The member broker who sells securities have to deliver the
securities to the clearing house & will receive cash from the
clearing house
securities
• member broker of investor 1 Clearing house
Cash

39. • The member broker who buy securities have to pay cash to
the clearing house & will receive securities from the clearing
house
Cash
member broker of investor 2 Clearing house
securities

40. compulsory Rolling system
• Stock exchange follows the settlement process called
compulsory Rolling system (CRS)
• Trades executed on a particular day are settled after a specified
number of business or working days
• T+2 cycle is adopted by stock exchange
• Means that the settlement of transactions done on trade day
( T) has to be done on the second business day after the trade day

41. • T+1 day:
• the exchange generates the information regarding the
securities to be delivered / received by the member brokers
through the clearing house
• Also a money statement showing the details of payments/
receipts of money by the member broker is also prepared by
the exchange.
• The delivery or receive order and the money statement can be
downloaded by the member brokers.

42. • T+2 day:
• pay in and pay out
• In this CRS pay in and payout of both funds and securities are
completed on the same day
• The member brokers then make payments to clients for
securities sold & deliver securities purchased by clients within
one working day