stockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangewertzx

Trading and Settlement in stock exchange

Matang Barot 03Rajvi Dedhia 11

Shantanu Kurup 28

Acknowledgement

My deepest thanks to Shruti mam for guiding us through this project and for supporting us through out. Mam’s suggestions and recommendations have been invaluable for this project. Then I would like to thank my teacher, for guiding me and my friends throughout this project. We had some difficulties in doing this task, but she taught us patiently until we knew what to do.

Last but not least, my friends who were doing this project with me and sharing our ideas. They were helpful that when we combined and discussed together, we had this task done.

I would also like to thank the college and Mumbai University for providing me with the opportunity to do this project.

Introduction to Trading

Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Later one side of the barter was the metals, precious metals (poles, coins), bill, and paper money. Modern traders instead generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or earning.

Stock exchange has two elements – Trading and clearing and settlement.

There are basically three tasks performed in process of buying and selling of securities. They are-

Trading Clearing Settlement

Trading basically deals with putting an order and its execution. Clearing deals with determination of obligations, in terms of funds and securities. Settlement means that the trade will be completed and NSCCL acts as a counter party and takes obligation for the same. It has created a faith in the investors that all trades would be settled and in no case any investor will have to face any problem of insufficient funds and securities.

What Do You Need To Trade In Stock Exchange

First step is to open a DEMAT account with any nationalized bank or the bank you already have account in. All the DEMAT accounts function in a same manner. You should also open a trading account with a reputed stock broking firm. The stock broking firm you choose can make a huge difference though. These firms perform extensive research in market and guide their customers to make a secure and intelligent investment.

How to Trade in Stock Exchange India

For trading in the Indian stock exchange you need to open a stock exchange account with an NSE/BSE certified stock broker. And to open your stock exchange trading account, you will require the following documents:

1. PAN Card 2. Proof of residence (Address proof) – You can provide any one of the

following for this:3. Identity Proof 4. Two passport sized photographs

Please Note – Following work as address proof and identity proof

Driving license Voter's ID Passport Photo ration card

 

Settlement Agencies

The NSCCL, along with other agencies like clearing members, custodians, clearing banks and depositories settles trades executed on the exchange.

The National Securities Clearing Corporation Ltd. (NSCCL), a wholly owned subsidiary of NSE, was incorporated in August 1995. It was set up to bring and sustain confidence in clearing and settlement of securities; to promote and maintain, short and consistent settlement cycles; to provide counter-party risk guarantee, and to operate a tight risk containment system. NSCCL commenced clearing operations in April 1996.

NSCCL carries out the clearing and settlement of the trades executed in the Equities and Derivatives segments and operates Subsidiary General Ledger (SGL) for settlement of trades in government securities. It assumes the counter-party risk of each member and guarantees financial settlement. It also undertakes settlement of transactions on other stock exchanges like, the Over the Counter Exchange of India.

Custodians

As the name suggests, the custodians perform the task of keeping the securities in a safe manner/custody. A financial institution that has the legal responsibility for a customer's securities. This implies management as well as safekeeping. They hold the documentary proof of securities, keeping the title of the securities intact in the name of the holder.

Clearing Banks

Clearing banks act as a link between the clearing members and the NSCCL for settlement of funds, i.e. pay-in and pay-out of funds. Every clearing member gets an account opened with the clearing bank for this purpose only. A clearing bank works on the instruction of the clearing member. A clearing member after defining the obligations in terms of funds informs the clearing bank about the obligations to be fulfilled. The clearing bank makes available the funds required on the pay-out day to meet the obligations on time.

Depositories

A depository is an organization created under Companies Act 1956 for the purpose of facilitating electronic transfer of securities in a dematerialized environment/form. The client/investors do not open an account with the depository. Instead the job is performed by the agents of depositories in India, namely NSDL & CDSL.

Depository is an institution or a kind of organization which holds securities with it, in which trading is done among shares, debentures, mutual funds, derivatives, F&O and commodities. The intermediatories perform their actions in variety of securities at Depository on the behalf of their clients. These intermediatories are known as Depositories Participants. Fundamentally, there are two sorts of depositories in India. One is the National Securities Depository Limited (NSDL) and the other is the Central Depository Service (India) Limited (CDSL).

OrdersAn order in a market such as a stock market, bond market, commodity market or financial derivative market is an instruction from customers to brokers to buy or sell on the exchange. These instructions can be simple or complicated. There are some standard instructions for such orders.

Market orderA market order is a buy or sell order to be executed immediately at current market prices. As long as there are willing sellers and buyers, market orders are filled. Market orders are therefore used when certainty of execution is a priority over price of execution.

A market order is the simplest of the order types. This order type does not allow any control over the price received. The order is filled at the best price available at the relevant time. In fast-moving markets, the price paid or received may be quite different from the last price quoted before the order was entered.

A market order may be split across multiple participants on the other side of the transaction, resulting in different prices for some of the shares.

Limit orderA limit order is an order to buy a security at not more, or sell at not less, than a specific price. This gives the trader control over the price at which the trade is executed; however, the order may never be executed ("filled"). Limit orders are used when the trader wishes to control price rather than certainty of execution.

A buy limit order can only be executed at the limit price or lower. For example, if an investor wants to buy a stock, but doesn't want to pay more than $20 for it, the investor can place a limit order to buy the stock at $20 "or better". By entering a limit order rather than a market order, the investor will not buy the stock at a higher price, but, may get fewer shares than he wants or not get the stock at all.

A sell limit order is analogous; it can only be executed at the limit price or higher.

Both buy and sell orders can be additionally constrained. Two of the most common additional constraints are Fill or Kill (FOK) and all or None (AON). FOK orders are either filled completely on the first attempt or canceled outright, while AON orders stipulate that the order must be filled with the entire number of shares specified, or not filled at all. If it is not filled, it is still held on the order book for later execution.

Time in forceA day order or good for day order (GFD) (the most common) is a market or limit order that is in force from the time the order is submitted to the end of the day's trading session. For equity markets, the closing time is defined by the exchange. For the foreign exchange market, this is until 5pm EST/EDT for all currencies.

A good-till-cancelled (GTC) order requires a specific cancelling order. It can persist indefinitely (although brokers may set some limits, for example, 90 days).

An immediate-or-cancel order (IOC) will be immediately executed or cancelled by the exchange. Unlike a fill-or-kill order, IOC orders allow for partial fills.

Fill-or-kill orders

(FOK) are usually limit orders that must be executed or cancelled immediately. Unlike IOC orders, FOK orders require the full quantity to be executed.

Most markets have single-price auctions at the beginning ("open") and the end ("close") of regular trading. An order may be specified on the close or on the open, and then it is entered in an auction but has no effect otherwise. There is often some deadline; for example, orders must be in 20 minutes before the auction. They are single-price because all orders, if they transact at all, transact at the same price, the open price and the close price respectively.

Combined with price instructions, this gives market on close (MOC), market on open (MOO), limit on close (LOC), and limit on open (LOO). For example, a market-on-open order is guaranteed to get the open price, whatever that may be. A buy limit-on-open order is filled if the open price is lower, not filled if the open price is higher, and may or may not be filled if the open price is the same.

Conditional ordersA conditional order is any order other than a limit order which is executed only when a specific condition is satisfied.

Stop orders

A stop order (also stop loss order) is an order to buy (or sell) a security once the price of the security has climbed above (or dropped below) a specified stop price. (Note that both bid and ask prices can trigger a stop order.) When the specified stop price is reached, the stop order is entered as a market order (no limit). This means the trade will definitely be executed, but not necessarily at or near the stop price, particularly when the order is placed into a fast-moving market, or if there is insufficient liquidity available relative to the size of the order.

The use of stop orders is much more frequent for stocks and futures that trade on an exchange than those that trade in the over-the-counter (OTC) market.

[Broker Dependent] Charles Schwab definition: Stop orders and stop-limit orders are very similar, the primary difference being what happens once the stop price is triggered. A standard sell-stop order is triggered when the bid price is equal to or less than the stop price specified or when an execution occurs at the stop price.[Editorial point] Key point is "bid/ask" which are cues and do not represent the stock’s value. The broker above moves the stop order to the market queue based on a BID queue not on a completed transaction. For instance, on a stock XYZ closing at $20 the day before with a stop-loss order at $19 and which trades on low volume, the bid/ask at the open can be skewed in that at the open all the

market interest is not represented. The bid queue shows $18.5, the market opens, being the highest bid the broker triggers the stop-loss and moves the order to the market, for which there has not even been a trade, an agreed value. The stock trades for $20.50, never even trading at or below the stop-loss order. Brokers who use the BID queue as a trigger violate the stop-loss definition as per the SEC who defines it as a trade. The impetus for the broker definition is commissions.

A sell stop order is an instruction to sell at the best available price after the price goes below the stop price. A sell stop price is always below the current market price. For example, if an investor holds a stock currently valued at $50 and is worried that the value may drop, he/she can place a sell stop order at $40. If the share price drops to $40, the broker sells the stock at the next available price. This can limit the investor's losses (if the stop price is at or above the purchase price) or lock in some of the investor's profits.

A buy stop order is typically used to limit a loss (or to protect an existing profit) on a short sale. A buy stop price is always above the current market price. For example, if an investor sells a stock short—hoping for the stock price to go down so they can return the borrowed shares at a lower price (Covering)—the investor may use a buy stop order to protect against losses if the price goes too high. It can also be used to advantage in a declining market when you want to enter a long position close to the bottom after turn-around.

A stop limit order combines the features of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or to sell) at no more (or less) than another, pre-specified limit price. As with all limit orders, a stop-limit order doesn't get filled if the security's price never reaches the specified limit price.

A trailing stop order is entered with a stop parameter that creates a moving or trailing activation price, hence the name. This parameter is entered as a percentage change or actual specific amount of rise (or fall) in the security price. Trailing stop sell orders are used to maximize and protect profit as a stock's price rises and limit losses when its price falls. Trailing stop buy orders are used to maximize profit when a stock's price is falling and limit losses when it is rising.

For example, a trader has bought stock ABC at $10.00 and immediately places a trailing stop sell order to sell ABC with a $1.00 trailing stop. This sets the stop price to $9.00. After placing the order, ABC doesn't exceed $10.00 and falls to a low of $9.01. The trailing stop order is not executed because ABC has not fallen $1.00 from $10.00. Later, the stock rises to a high of $15.00 which resets the stop price to $14.00. It then falls to $14.00 ($1.00 from its high of $15.00) and the trailing stop sell order is entered as a market order.

A trailing stop limit order is similar to a trailing stop order. Instead of selling at market price when triggered, the order becomes a limit order.

A trailing stop trailing limit order is the most flexible possible order.

Timing

Trading on the BOLT System is conducted from Monday to Friday between 9:15 a.m. and 3:30 p.m. normally. Refer Notice No. 20101014-8 for call auction. 

Groups

The scripts traded on BSE have been classified into various groups.

BSE has, for the guidance and benefit of the investors, classified the scripts in the Equity Segment into 'A', 'B', 'T' and 'Z' groups on certain qualitative and quantitative parameters. Criteria for "A" Group   Companies

The "F" Group represents the Fixed Income Securities.

The "T" Group represents scripts which are settled on a trade-to-trade basis as a surveillance measure.

Trading in Government Securities by the retail investors is done under the "G" group.

The 'Z' group was introduced by BSE in July 1999 and includes companies which have failed to comply with its listing requirements and/or have failed to resolve investor complaints and/or have not made the required arrangements with both the depositories, viz., Central Depository Services (I) Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) for dematerialization of their securities.

BSE also provides a facility to the market participants for on-line trading of odd-lot securities in physical form in 'A', 'B', 'T' and 'Z' groups and in rights renunciations in all groups of scripts in the Equity Segment.

With effect from December 31, 2001, trading in all securities listed in the Equity segment takes place in one market segment, viz., Compulsory Rolling Settlement Segment (CRS).

The scripts of companies which are in demat can be traded in market lot of 1. However, the securities of companies which are still in the physical form are traded in the market lot of generally either 50 or

100. Investors having quantities of securities less than the market lot are required to sell them as "Odd Lots". This facility offers an exit route to investors to dispose of their odd lots of securities, and also provides them an opportunity to consolidate their securities into market lots.

This facility of selling physical shares in compulsory demat scripts is called an Exit Route Scheme. This facility can also be used by small investors for selling up to 500 shares in physical form in respect of scripts of companies where trades are required to be compulsorily settled by all investors in demat mode.

Listed Securities

The securities of companies, which have signed the Listing Agreement with BSE, are traded as "Listed Securities". Almost all scripts traded in the Equity segment fall in this category.

Permitted Securities

To facilitate the market participants to trade in securities of such companies, which are actively traded at other stock exchanges but are not listed on BSE, trading in such securities is facilitated as " Permitted Securities" provided they meet the relevant norms specified by BSE

Tick Size:

Tick size is the minimum difference in rates between two orders on the same side i.e., buys or sells, entered in the system for particular scrip. Trading in scripts listed on BSE is done with the tick size of 5 paisa.

However, in order to increase the liquidity and enable the market participants to put orders at finer rates, BSE has reduced the tick size from 5 paisa to 1 paisa in case of units of mutual funds, securities traded in "F" group and equity shares having closing price up to Rs. 15 on the last trading day of the calendar month. Accordingly, the tick size in various scripts quoting up to Rs.15 is revised to 1 paisa on the first trading day of month. The tick size so revised on the first trading day of month remains unchanged during the month even if the price of scripts undergoes a change.

Computation of Closing Price of Scripts

The closing price of scripts is computed by BSE on the basis of weighted average price of all trades executed during the last 30 minutes of a continuous trading session. However, if there is no trade recorded during the last 30 minutes, then the last traded price of scrip in the continuous trading session is taken as the official closing price.

Settlement

Compulsory Rolling Settlement

All transactions in all groups of securities in the Equity segment and Fixed Income securities listed on BSE are required to be settled on T+2 basis (w.e.f. from April 1, 2003). The settlement calendar, which indicates the dates of the various settlement related activities, is drawn by BSE in advance and is circulated among the market participants.

Under rolling settlements, the trades done on a particular day are settled after a given number of business days. A T+2 settlement cycle means that the final settlement of transactions done on T, i.e., trade day by exchange of monies and securities between the buyers and sellers respectively takes place on second business day (excluding Saturdays, Sundays, bank and Exchange trading holidays) after the trade day.

The transactions in securities of companies which have made arrangements for dematerialization of their securities are settled only in demat mode on T+2 on net basis, i.e., buy and sell positions of a member-broker in the same scrip are netted and the net quantity and value is required to be settled. However, transactions in securities of companies, which are in "Z" group or have been placed under "trade-to-trade" by BSE as a surveillance measure ("T" group) , are settled only on a gross basis and the facility of netting of buy and sell transactions in such scripts is not available.

The transactions in 'F' group securities representing "Fixed Income Securities" and " G" group representing Government Securities for retail investors are also settled at BSE on T+2 basis.

In case of Rolling Settlements, pay-in and pay-out of both funds and securities is completed on the same day.

Members are required to make payment for securities sold and/ or

deliver securities purchased to their clients within one working day (excluding Saturday, Sunday, bank & BSE trading holidays) after the pay-out of the funds and securities for the concerned settlement is completed by BSE. This is the timeframe permitted to the Members to settle their funds/ securities obligations with their clients as per the Byelaws of BSE.

The following table summarizes the steps in the trading and settlement cycle for scripts under CRS :

 

DAY ACTIVITY

T o   Trading on BOLT and daily downloading of statements showing details of transactions and margins at the end of each trading day.

o   Downloading of provisional securities and funds obligation statements by member-brokers.

o   6A/7A* entry by the member-brokers/ confirmation by the custodians.

T+1 o   Confirmation of 6A/7A data by the Custodians upto 1:00 p.m. Downloading of final securities and funds

obligation statements by members

T+2 o   Pay-in of funds and securities by 11:00 a.m. and pay-out of funds and securities by 1:30 p.m. The member-brokers are required to submit the pay-in instructions for funds and securities to banks and depositories respectively by 10:40 a.m.

T+2 o   Auction on BOLT at 2.00 p.m.

T+3 o   Auction pay-in and pay-out of funds and securities by 09:30 a.m. and 10:15 a.m. respectively.

The pay-in and payout of funds and securities takes places on the second business day (i.e., excluding Saturday, Sundays and bank and BSE trading holidays) of the day of the execution of the trade.

The settlement of the trades (money and securities) done by a Member on his own account or on behalf of his individual, corporate or institutional clients may be either through the Member himself or through a SEBI registered custodian appointed by him/client. In case the delivery/payment in respect of a transaction executed by a Member is to be given or taken by a registered custodian, the latter has to confirm the trade done by a Member on the BOLT System through 6A-7A entries. For this purpose, the custodians have been

given connectivity to the BOLT System and have also been admitted as clearing member of the Clearing House. In case a registered custodian does not confirm a transaction done by a Member within the time permitted, the liability for pay-in of funds or securities in respect of the same devolves on the concerned Member.

The following statements can be downloaded by the Members in their back offices on a daily basis.

 

h. Statements giving details of the daily transactions entered into by the Member.

i. Statements giving details of margins payable by the Member in respect of the trades executed by him.

j. Statements of securities and fund obligation.

k. Delivery/Receive orders for delivery /receipt of securities.

BSE generates Delivery and Receive Orders for transactions done by the Members in A, B1, B2 and F and G group scripts after netting purchase and sale transactions in each scrip whereas Delivery and Receive Orders for "T", "C" & "Z" group scripts and scripts which are traded on BSE on "trade-to-trade" basis are generated on a gross basis, i.e., without netting of purchase and sell transactions in a scrip. However, the funds obligations for the Members are netted for transactions across all groups of securities.

The Delivery Order/Receive Order provides information like the scrip and quantity of securities to be delivered/received by the Members through the Clearing House. The Money Statement provides scrip wise/item wise details of payments/receipts of monies by the Members in the settlement. The Delivery/Receive Orders and Money Statement can be downloaded by the Members in their back office

Pay-in and Pay-out for 'A', 'B', 'T', 'C', "F", "G" & 'Z' Group of Securities

The trades done on BOLT by the Members in all securities in CRS are now settled on BSE by payment of monies and delivery of securities on T+2 basis. All deliveries of securities are required to be routed through the Clearing House,

The Pay-in /Pay-out of funds based on the money statement and that of securities based on Delivery Order/ Receive Order issued by BSE are settled on T+2 day.

Demat pay-in:

The Members can effect pay-in of demat securities to the Clearing House through either of the Depositories i.e. the National Securities Depository Ltd. (NSDL) or Central Depository Services (I) Ltd. (CDSL). The Members are required to give instructions to their respective Depository Participants (DPs) specifying details such as settlement no., effective pay-in date, quantity, etc.

Members may also affect pay-in directly from the clients' beneficiary accounts through CDSL. For this, the clients are required to mention the settlement details and clearing member ID through whom they have sold the securities. Thus, in such cases the Clearing Members are not required to give any delivery instructions from their accounts.

In case a Member fails to deliver the securities, the value of shares delivered short is recovered from him at the standard/closing rate of the scripts on the trading day. 

Auto delivery facility:

Instead of issuing delivery instructions for their securities delivery obligations in demat mode in various scripts in a settlement /auction, a facility has been made available to the Members of automatically generating delivery instructions on their behalf from their CM Pool accounts maintained with NSDL and CM Principal Accounts maintained with CDSL. This auto delivery facility is available for CRS (Normal & Auction) and for trade-to-trade settlements. This facility is, however, not available for delivery of non-pari passu shares and shares having multiple ISINs. Members wishing to avail of this facility have to submit an authority letter to the Clearing House. This auto delivery facility is currently available for Clearing Member (CM) Pool accounts and Principal accounts maintained by the Members with the respective depositories.

 

Pay-in of Securities in Physical Form

In case of delivery of securities in physical form, the Members are required to deliver the securities to the Clearing House in special closed pouches along with the relevant details like distinctive numbers, scrip code, quantity, etc., on a floppy. The data submitted by the Members on floppies is matched against the master file data on the Clearing House. If there is no discrepancy, the securities are accepted.

Funds Pay-in

The bank accounts of Members maintained with the clearing banks, viz.,  Axis Bank Ltd.,Bank of India,  Bank of Baroda, Canara Bank, Citi Bank, Corporation Bank, Dhanalaxmi Bank, HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd.,  ICICI Bank Ltd, Indusind Bank Ltd., IDBI Bank, Kotak Mahindra Bank, Oriental Bank of Commerce., Punjab National Bank, State Bank of India, Standard Chartered Bank, Union Bank of India, Yes Bank  are directly debited through computerized posting for their funds settlement obligations.

In case of Members whose funds pay-in obligations are not cleared at the scheduled time, action such as levy of penalty and/or deactivation of BOLT TWSs , is initiated as per the prescribed penalty norms.

Securities Pay-out

Demat securities are credited by the Clearing House in the Pool/Principal Accounts of the Members. BSE has also provided a facility to the Members for transfer of pay-out securities directly to the clients' beneficiary owner accounts without routing the same through their Pool/Principal accounts in NSDL/ CDSL. For this, the concerned Members are required to give a client wise break up file which is uploaded by the Members from their offices to the Clearing House. Based on the break up given by the Members, the Clearing House instructs the depositories, viz., CDSL & NSDL to credit the securities to the Beneficiary Owners (BO) Accounts of the clients. In case delivery of securities received from one depository is to be credited to an account in the other depository, the Clearing House does an inter-depository transfer to give effect to such transfers.

In case of physical securities, the Receiving Members are required to collect the same from the Clearing House on the pay-out day.

Funds Payout

The bank accounts of the Members having pay-out of funds are credited by the Clearing House with the Clearing Banks on the pay-in day itself

In case a Member fails to deliver the securities, the value of shares delivered short is recovered from him at the standard/closing rate of the scripts on the trading day.

Shortages

The Clearing House arrives at the shortages in delivery of various scripts by the Members on the basis of their delivery obligations and actual delivery.

The Members can download the statement of shortages in delivery of scripts in A, B1, B2, T, Z, F; Odd-lot & G group scripts on T+2 day, i.e., Pay-in day. After downloading the shortage details, the Members are expected to verify the same and report discrepancy, if any, to the Clearing House immediately. If no discrepancy is reported within the stipulated time, the Clearing House assumes that the shortage of a Member is in order and proceeds to auction/ close-out the same. Moreover, the value of shares delivered short is recovered from the Member at the standard/closing rate of the scripts on the trading day.

Auctions

An Auction Tender Notice is issued by BSE to the Members informing them about the names of the scripts short or not delivered, quantity slated for auction and the date and time of the auction session on the BOLT. The auction for the undelivered quantities is conducted on T+2 day between 2:00 p.m. and 2.45 p.m. for all the scripts under Compulsory Rolling Settlements except those in "Z" group and scripts on "trade to trade" basis which are directly closed-out. A Member who has failed to deliver the securities of a particular company on the pay-in day is not allowed to offer the same in auction. The Members, who participate in the auction session, can download the Delivery Orders in respect of the auction obligations on the same day, if their offers are accepted. The Members are required to deliver the shares in the Clearing House on the auction Pay-in day, i.e., T+3. Pay-out of auction shares and funds is also done on the same day, i.e., T+3. 

Self-Auction

The Delivery and Receive Orders are issued by BSE to the Members after netting off their purchase and sell transactions in scripts where netting of purchase and sell positions is permitted. It is likely in some cases, a selling client has failed to deliver the shares sold in a settlement to a Member. However, this may not result in failure of the Member to deliver the shares to the Clearing House as there was a purchase transaction of his some other buying client in the same scrip and the same was netted off for the purpose of settlement. In such a case, the Member would require shares so that he can deliver the same to his buying client, which otherwise would have taken place from the delivery of shares by his selling client. To provide shares to the Members in such cases, they have been given an option to submit the details of such internal shortages on floppies on pay-in day for conducting self-auction (i.e., as if they have defaulted in delivery of shares to the Clearing House). These shortages are clubbed with the normal shortages in a settlement arrived at by the Clearing House and the auction is conducted by the Clearing House for the combined shortages.

Close-out

Close-out is affected for cases when no offer for particular scrip is received in an auction or when Members who offer the scripts in auction, fail to deliver the same or shortages pertaining to those groups of securities for which auctions are not conducted. The close-out rates for different segments are as under

o 'A', 'B' and 'F' group

The close-out rate is higher of the following rates :a) The highest rate of the scrip from the trading day to the day on which the auction is conducted for the respective settlement.b) 20% above the closing rate as on the day of auction/close out of the respective settlement.

 

o "Odd Lot", "T" and "Z" group and Patawat objections

The closeout rate is higher of the following rates:a) The highest rate of the scrip from the day of trading to the day of auction of the respective settlements;b) 10% above the closing rate as on the day of auction/ close

out of the respective settlement.

 

o "G" group

In case of shortages in "G" group, the shortages are closed out at Zero Coupon Yield Curve (ZCYC) plus a 5% penalty.

The closeout amounts are debited to the bank accounts of those Members who have failed to deliver the securities against their sale obligations and credited to the bank accounts of those Members who had bought the securities but did not receive the same.

Rectification of Bad Deliveries

One of the biggest problems faced by the investors in the secondary market while dealing in physical securities is that of bad delivery arising out of various reasons. Based on the reasons, these bad deliveries are classified into two categories, namely;

 

o Patawat (Settlement) Objections o Company Objections

Stock Exchange Trading in India Made Easier

Stock exchange trading in India is carried out in 23 stock exchanges out of which there are 2 major stock exchanges, namely National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Stock exchanges here are engaged in offering services for the stock traders and brokers to carry out trading of bonds, stocks, and other securities.

Benefit from Stock Exchange Trading

Better returns from stock exchange market compared to interest on fixed deposits, savings bank account etc.

Open to even the small investors. Start trading with small amount of money as no minimum investment threshold is present.

Best way to earn easy money fast, over and above your regular income.

No prior experience required for NSE trading and BSE trading

Stock Exchange Trading has got better because of:

Presence of transparency due to tighter regulation by SEBI Many instruments available to suit trader’s financial needs Access to your returns on an immediate basis

Utility Bill (Telephone, Electricity etc)