Procedure of buying and selling of securities in the stock market
Investing in Stock Market Notes
Procedure of buying and selling of securities in the stock market
1) Selecting a broker:
First step in buying and selling securities in the stock market is to select a stock broker because transactions in stock market can be done only through SEBI registered stock broker. Some of the popular broking houses are: Zerodha, Sharekhan, Angel Broking, SMC global.
2) Demat account:
Second step in trading in securities is to open a demat account with selected broker. Demat account is an account in which all the securities bought are deposited in digital form. Now a days, demat account can be opened at a convenience of home using various mobile application promoted by broking house. All the demat accounts are opened with depository participants. At present there are two depository participants in India – CDSL and NSDL.
3) Placing order:
After opening demat account, investors can place order to buy or sale securities using mobile application of their stock brokers. Also order can be place through email or phone. Orders placed to buy or sale securities may be market order, limit order or stop loss order.
4) Execution of the order:
After placing order, the order gets executed as per the instructions of account holder. After orders are executed, a contract note is prepared and signed by the stock brokers and emailed to the account holder. The contract note contains the name, quantity, price of the stock bought or sold, and also brokerage charged and STT and other taxes levied.
5) Settlement:
The last stage in the procedure of buying and selling of securities is the transfer of securities from seller’s demat account to the buyer’s demat account which is called settlement. Settlements of securities are done on T+2 basis. Here “T” means Trading day T+2 means 3rd day from the date of trading.