Describe the method of trading on a stock exchange. State the procedure to be followed if you decide to sell 500 shares of a company which you hold.
On a recognized stock exchange, all the securities are not allowed to be quoted. Listed securities are allowed to be traded. Stock exchange members and agents are allowed to buy or sell the securities on a stock exchange. The first step is to contact a stock broker, if you wish to buy or sell the securities. He is a member of the stock exchange.
If you wish to buy some shares, it is your duty to place an order with the broker in order to purchase those shares. Broker then selects the type’of securities for you to buy on your behalf. After you decide the securities that you are ready to buy, you have to pay an estimated cost of the securities to the broker.
The rest of the task is then handed over to the authorized clerk of the buyer in the stock exchange hall who announces his requirements by shouting in the hall during the time allotted for dealings in the particular class of securities. The clerk will announce the quantity, price and other particulars of the securities. There could be some other brokers who shall respond to your broker’s call. The deal or bargain is struck if he accepts the offer that your broker made or may make a counter call or offer.
Sauda bahi is a notebook that each broker carry in order to get the signature of the broker from whom he has bought the securities. The signature is taken as a proof or confirmation that the transaction has takes place by the other party. Each broker has to hand over his copy of transactions that he recorded in his book, at the end of the day to the stock exchange.
This is basically done to check and reconcile all purchase transactions with those of sales. Broker takes the delivery of securities on the day of settlement and makes the necessary payment. For all the work performed by the broiler, it is essential to pay him the cost of securities purchased and the commission.
According to the schedule that is fixed by stock exchange, the commission to be paid to the broker is a fixed percentage. The duty of the broker is to make a contract note in favour of the client and forward it to him. The note contains the quantity and description of securities bought and price including commission at which .they are bought The procedure for selling securities is similar to the one mentioned above.
In order to sell the shares of a company, the seller hands ‘over the securities to a broker. Then the broker further consults the authorized clerk and ask him to sell the securities. With the help of clerk, inside the stock exchange, the transaction takes place. Then the clerk finds a suitable person to whom he can sell, he obtains his signature as a confirmation that transaction has taken place.
At the time of settlement of the transaction, broker gives the securities to the clerk and clerk provides him with cash. After receiving the cash, he gives it to the seller of securities. It is the duty of the seller to pay his broker the cost of securities sold and the commission. Commission is a fixed percentage and the seller has no other choice but to pay it to the broker. After that, the broker prepares a contract note in favor of the client and forwards it to him. In order to sell the securities, the seller has to follow such a procedure.