Trading & Settlement Process

3196 WordsApr 26, 201213 Pages
UNDERSTANDING THE TRADING AND SETTLEMENT PROCESS AND OTHER DOCUMENTORY REQUIREMENTS AT BROKERS’ OFFICE TO OPEN THE TRADING ACCOUNT Understanding Trading and Settlement of Equities Stock market is a trading platform which provides an opportunity to buyers and sellers of securities to do transactions. As of now there are 23 recognised stock exchanges in India and 24th is likely to get functional soon. However the majority of transactions in securities happen only on the National Stock Exchange. The Bombay stock Exchange is the second largest contributor in the overall pie of total transactions. However it 's contribution is…show more content…
Trading of securities happen on the first day while settlement of the same happens two days after. This means that a security bought on Monday will be received by the client earliest on Wednesday which is called pay out day by the exchange. However there is provision which allows a broker to transfer securities till 24 hours after pay out receipt. Hence the broker may transfer shares latest by Thursday for a security bought on Monday. Any transfer after Thursday would invite penalty for the broker. If a person has bought security then he is supposed to pay money to the broker before pay in deadline which is two days after trading day but the second day is considered till 10:30 a.m. Only.Hence the client must pay money to the broker before 10:30 a.m. On T+2 day. Settlement of securities is done by the clearing corporation of the exchange. Settlement of funds is done by a panel of banks registered with the exchange. Clearing corporation identifies payable/ receivable position of brokers based on which obligation report for brokers are created. On T+2 days all the brokers who has transacted two days before receive shares or give shares to the clearing corporation of exchange. This all is done through automated set up Depository which involves NSDL and CDSL. One of the most noticeable achievements of Indian securities market have been reduction in the settlement cycle which has brought it at par with
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