20 How Business is Transacted Instock Exchange

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    How Business is transacted in StockExchange

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    Definition Of Business Transaction

    Economic activity and event thatinitiates the accounting process

    recording it in the forms accountingsystem.

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    Definition of stock exchangeA stock exchange is an entity which provides "trading"facilities for stock brokers and traders, to trade stocksand other securities.

    The Stock Exchange (in German: D ie Brse) is a bookwritten by Maximilian Weber, a German economistand sociologist in 1896. Note that the original editionwas in German and the title can be translated as "TheStock Exchange".

    The Securities Contracts ( Regulation )Act, 1956, hasdefined Stock Exchange as on association,organization or body of individuals, heatherincorporated or not, established for the purpose of assisting, regulating and controlling business of buying, selling and dealing in Securities.

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    How business is transacted in stock

    exchangeThere are four stage of typical

    investment transaction

    Placing an order with a brokerExecution of orderReporting the deal to the client

    Settlement of transaction

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    Placing an order with a brokerOrder should be placed according to

    how you are going to trade ie. How

    you intend to enter and exit themarket. Improper order placementcan skew your entry and exist points.

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    Types of orderMarket orderStop order

    Limit order

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    Execution of orderOften investors and traders alike do notfully understand .what happens when youclick the enter button on your onlinetrading account. If you think your order isalways filled immediately after you click thebutton in your account, you are mistaken.In fact, you might be surprised at theVariety of possible ways in which an ordercan be filled and the associate time delay.How and where you order is executed canaffect the cost of your transaction and theprice you pay for the stock

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    Reporting the deal to the client

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    Settlement of transactionSettlement cycle is the period for whichequities are traded in exchange for Indianstock exchange NSE, the cycle start onWednesday and ends on the followingTuesday, and for BSE on Monday and endson Friday. At the end of this sell cycleperiod the obligations of each broker arecalculate and the broker settle theirrespective obligation . According, to theguid , law and regular institutionalized bythe clearing agency. Whole set of moneytransaction is perform by a bank in stockexchange premises.

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    Types of transactions in stock

    exchangeInv estme n t tra n sactio n

    Speculati v e tra n sactio n

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    Sectio n 43(5) Speculati v eTra n sactio n s

    Speculative transaction means atransaction in which a contract forsale and purchase of any commodity,including stocks and shares, isperiodically or ultimately settled

    otherwise by actual delivery ortransfer of the commodity.

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    Types of speculative transactionSpot tra n sactio nR eady deli v ery tra n sactio n

    F orward tra n sactio n

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    D efects in trading in Indian stock

    exchangeLack of i n tegratio n sSpecified a n d n o n- specified

    SharesMargi n sThe system of settleme n t a n d

    carry forwardInv estors i n terest

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    Thank you