Page 5 - Lesson Note 3

T+2 bases, meaning thereby that transactions in securities are settled within 2 days after

the trade date. Since rolling settlement implies fast movement of shares, it requires

effective implementation of electronic fund transfer and dematerialization of shares.

The following steps are involved in the screen-based trading for buying and selling of

securities:

1. If an investor wishes to buy or sell any security he has to first approach a registered
broker or sub-broker and enters into an agreement with him. The investor has to sign a

broker-client agreement and a client registration form before placing an order to buy or

sell securities. He has also to provide certain other details and information.

These include: • PAN number (This is mandatory) • Date of birth and address. • Educational
qualification and occupation. • Residential status (Indian/NRI). • Bank account details. •

Depository account details. • Name of any other broker with whom registered. • Client

code number in the client registration form. The broker then opens a trading account in the

name of the investor.

2. The investor has to open a ‘demat’ account or ‘beneficial owner’ (BO) account with a

depository participant (DP) for holding and transferring securities in the demat form. He will
also have to open a bank account for cash transactions in the securities market.

3. The investor then places an order with the broker to buy or sell shares. Clear instructions

have to be given about the number of shares and the price at which the shares should be

bought or sold. The broker will then go ahead with the deal at the above mentioned price or
the best price available. An order confirmation slip is issued to the investor by the broker.

4. The broker then will go on-line and connect to the main stock exchange and match the

share and best price available.

5. When the shares can be bought or sold at the price mentioned, it will be communicated

to the broker’s terminal and the order will be executed electronically. The broker will issue

a trade confirmation slip to the investor.