Trading Procedure in Stock Exchange (7 Essential Steps)

Trading procedure in stock exchange is not as easy as in like general market so we should know some basic trading procedures before starting trading.

Before selling the contracts through a stock exchange, the companies have to get their sponsors listed on the stock exchange.

The name of the organization is included in listed securities only when funds transfer authorities are filled with the financial soundness and other features of the business.

If anyone wants to start his share trading business he should follow certain trading procedures in the stock exchange these are described below:

Trading procedure in stock exchange

1. Selection of a broker: A broker is a member of a stock exchange. A broker is an agent of both the buyer and the seller of securities. If one wants to purchase or sell securities, the first contacts a broker.

2. Placing the order: After selecting a broker the investor places his order and specifies the name and number of the security to be bought to sell. The order may be placed with the broker in various ways.

3. Executing the order: The broker or his authorized clear declared the purchase or sale price of securities at that moment when the ordered price of the broker provides the facilities for making a contract for the transaction.

Trading procedure in stock exchange
Trading procedure in stock exchange

4. Preparing the contract note: The broker prepares a contract not stating the number and price of securities bought or sold the names of the buyers and sellers, brokerage payable by the client, etc. Thereafter, the contract paper is prepared and signed.

5. Final settlement: The buyer deposits the estimated cost and the seller delivers the securities in the same way in case of ready delivery contracts. But in the case of the forward contract, the settlement is made within a fortnight.

6. Executing the Order: As per the Instructions of the investor, the broker executes the order i.e. he buys or sells the securities. The broker prepares a contract note for the order executed. The contract note contains the name and the price of securities, the name of parties, and the brokerage (Commission) charged by him. The contract note is signed by the broker.

7. Settlement: This means the actual transfer of securities. This is the last stage in the trading of securities done by the broker on behalf of their clients. There can be two types of settlement.

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