There are various steps involved in stock market transactions. They are as follows:
Steps involved in stock market transactions:
Step 1: The initial step in a stock market transaction is when a customer gives the order to the broker, the latter notes down the same in his order book and enters the floor of the market. The market has different pits. They indicate different industries and a broker may deal in different securities simultaneously. Only stocks or shares of companies listed in the stock exchange will be transacted.
Step 2: The broker who wants to buy or sell securities at a specific price will indicate his preference in the stock market and when two brokers have settled their transactions they enter into an agreement for settling transactions.
Step 3: The particular transaction is given a number and a sale order, or a buying order will be placed. The order will denote the quantity of shares, the name of the company and the price, including commission.
Step 4: This sale or buying note will be delivered to the respective clients.
Step 5: In the case of buying note, the buyer will be informed and accordingly he has to make payments.
Step 6: In the case of seller, the broker after selling the security at the prescribed rate will deliver the cheque after receiving it from the buyer.
Step 7: After coming back to the office, the broker will hand over to the buyer three documents, namely the security, transfer document from and buying note.
Step 8: In the case of buying, the broker will hand over the documents to the buyer along with the buying notes.
Step 9: In the case of selling, the seller will sell the securities according to instruction of seller and hand over the sale note.
Step 10: The broker will collect the cheque later from the buyer and hand over the same to his customer. For both buying and selling, commission will be charged by the broker as per the rules prevailing in the stock market.
Step 11: While buying securities, the broker will deliver along with the shares, transfer documents of the stock market which contain the seal of the market with the specific indication. The transfer document will contain the signature of the seller along with the witness in the place of transferor.
Step 12: The buyer will sign the document in the place of transferee along with a witness and send the shares to the company for registration. Depending upon the value of shares, stamps have to be affixed. Thus, at every stage of the stock market transaction made in the market brings revenue to the government.
Step 13: But when shares are purchased not for registration but for resale within a short period, then the buyer will hand over the share to the broker within a short period for sale. This is called blank transfer. More precautions are taken to prevent blank transfer of securities at present.