Unit 2.

Trading Mechanist In Stock Market.

Trading mechanisms refer to the logistics behind trading assets.

Like all assets, intangible assets and securities. The securities are either
equity or debt-based., regardless of the type of market. ... The mechanisms
are the operations by which buyers of an asset are matched with sellers.

1.Meaning of Share.
Shares are the smallest denomination of a company's
stocks, indicating a portion of ownership of the company
A share is a single unit of ownership in a company or financial
asset.
It is essentially an exchangeable piece of value of a company which can
fluctuate up or down, depending on several different market factors.

Companies divide capital into shares as a means of raising capital.

Shares are also know as stock.

2.Meaning of Share Market.

A market where shares are publicly issued
and traded is known as a share market. ... On a stock exchange, one can
only buy and sell those stocks that are listed on it. Hence, buyers and
sellers meet on a stock market. India's prime stock exchanges are the
National Stock Exchange(NSE) and the Bombay Stock Exchange(BSE).

3.Demat Account.
Demat Account is short for dematerialisation account and makes the
process of holding investments like shares, bonds, government securities, Mutual Funds.
A demat account is an account to hold financial securities in electronic form. In India, demat
accounts are maintained by two depository organisations, National Securities Depository Limited
and Central Depository Services Limited.
4.Brokers.
A stockbroker is a middleman who has the authority to buy and sell
stocks and securities in a stock exchange on the investor's behalf. Stocks are
traded through exchanges. However, an investor cannot directly trade in stock
exchanges.
a stock broker is the one who performs a service for the investor. The main job of a
stockbroker is to buy and sell stocks for a client. Also, stock broker helps their
customers to get a detailed insight into a stock that helps investors to make informed
decisions about the investment.

5.Sub-brokers.
A ‘Sub-Broker’ is any person who is not a Trading Member of a Stock
Exchange but who acts on behalf of a Trading Member as an agent or otherwise for
assisting investors in dealing in securities through such Trading Members
A sub broker carries out the same function a broker carries out, being the
middleman between two parties. However, while a stock broker is the middle
man between an investor and the stock exchange, a sub broker is the middle
man for the stock broker and the investor.

6.Brokerage.
The fee that brokers charge for providing their services is known as brokerage
charges. The brokerage is calculated on the agreed percentage of on the total cost of shares either
purchased or sold. This is not uniform and often varies from one broker to another. It also
depends on the type of transactions you make. Often, the brokerage slabs provided by
stockbrokers are dynamic, and regular clients get benefits of lower brokerage rates.

Delivery charges.
In delivery trading you buy a share, hold it as long as you want and
sell them when you find a profitable opportunity. This duration can be a week or a
month or even a year.
You can hold your stocks in sync with the market movements for as long as you want.
Delivery charges can vary between 0.2% and 0.75% of the trading volume.
The formula for this charge , is to multiply the delivery charges into the number of
shares and their market price.

Intraday charges.
 When a trader buys and sells shares within the same trading day, they are
employing the intraday trading strategy.
Suppose you purchase some amount of shares, and sell it before the end of a day’s
trading session, this will come under the ambit of intraday trading. In a day’s trading
session, your selling position has to be in sync with the exact number of shares that you
have purchased. Depending upon the stockbroker, intraday trading charges can range
from 0.01% to 0.05% of the volume/amount transacted.
The formula for calculating this charge is to multiply the market price of shares
into a number of shares, again multiplied by the agreed percentage of intraday
charges

7.Purchase and sale of shares.

When you purchase a company’s stock, you’re purchasing a small piece
of that company, called a share. When you buy shares, you're buying a share of the company's
assets and its profits.
When owner of share Or any company sale a share on at perspective price that’s
means they share their ownership with the buyer of share. Share sale by a shareholder, when he get
profitable price on that share.
When company need a financial requirement for their business or organization t that time they issue
a shares.

8.Short Sale.
A short sale is the sale of an asset or stock the seller does not own. It is
generally a transaction in which an investor sells borrowed securities in anticipation of a
price decline; the seller is then required to return an equal number of shares at some
point in the future. In contrast, a seller owns the security or stock in a long position.

9.Procedure to Open Demat A/c.

To open a demat account,
1.you first need to choose a depository (CSDL/NSDL).
2.Decide on a Depository Participant (DP), which is any authorized bank, financial
institution or broker, with who you want to open a Demat Account
3.Submit a duly filled account opening form and KYC form and submit it along with
identity and residential proofs
4.An investor will have to sign the term of the agreement with the DP and pay a few
charges.
5.Once a application is processed, you will be provide with the demat Account number
and client ID.
6. An Investor would be required to pay some fees like annual maintaining fees and
transaction fees.
10.Depositories In India.
There are two depositories in india
1.NSDL (National Security Depositories Limited).
2.CSDL (Central Security Deposotories Limited).

1.NSDL and CSDL.

CDSL and NSDL are national share depositories incorporated by the
markets regulator Securities and Exchange Board of India (Sebi). They hold your shares,
debentures, mutual funds etc.
NSDL is the oldest and largest depository in the country. It commenced operations in 1996
in Mumbai. It was the first depository to provide trading services in the electronic format.
This central depository started operations in Mumbai in 1999. This is the second- largest
depository in the country after NSDL.
Both the depositories transformed trading in stock markets by providing the facility to hold
stocks, securities etc. in the electronic format. They paved the way for safe, secure and
convenient trading transactions by adopting digital technology.
Once you start trading in securities, these are accordingly debited or credited from the
depository, and reflected in your demat account.
Depositories provide information to listed companies about shareholders, while facilitating
trading transactions. For instance, investors can receive delivery instructions etc. from the
depositories. On the other hand,the listed companies usually approach the depositories to get
information about the shareholders to send notifications such as dividend rights, stock splits etc.

11.Large cap, Mid cap and Small cap

A. Large cap. According to SEBI’s rules, all companies that are listed on the stock
exchanges are ranked based on their market cap. And the top 100 companies are
categorised as large cap companies. Large cap companies generally have an excellent
track record. The market cap of these companies is generally significantly high,
coming in at around Rs. 20,000 crores or more.

B. Mid Cap. As per SEBI’s classification, the companies ranked from 101 to 250 in
terms of market capitalization are known as mid-cap companies. Their market cap
generally tends to range from Rs. 5,000 to Rs. 20,000 crores

C. Small cap. SEBI’s rules state that all the companies that are ranked from the 251st
position onwards in terms of market cap are automatically categorised as small-cap
companies. Small-cap companies generally don’t have a long track record. In terms of
market cap, these companies generally come in below Rs. 5,000 crores
12.Contract Note.
The contract note is the legal record of any trade made by a stockbroker
on a stock exchange. It confirms the trade conducted on a specific day, on the client's
behalf, performed on a stock exchange (BSE / NSE).
 A Contract Note is a document provided by the stock broker to its customer on the
day when the customer traded with them

13.Securities Transaction Tax.

Securities Transaction Tax, also referred to as STT, is a tax that is
levied on the purchase or sale of shares and other trade-able securities of the
companies listed on the stock exchange. Securities Transaction Tax is a tax payable in
India on the value of securities transacted through a recognized stock exchange. As of
2016, it is 0.1% for delivery based equity trading. STT does not apply to off-market
transactions or on commodity or currency transactions

14.T+2 Trading Settlement.

This settlement cycle is known as “T+2,” shorthand for “trade date plus two
days.” T+2 means that when you buy a security, your payment must be received by your
brokerage firm no later than two business days after the trade is executed.
For example, if an investor buys Microsoft's stocks on Monday with a T+2 settlement
date, it means that the transaction will be completed in two business days. If there is
no public holiday within the week, the trade will be completed on Wednesday. It is the
date when the buyer becomes a shareholder of the company

.15.Bolt (BSE online Trading).

Bombay Stock Exchange's trading system is popularly known as BOLT (BSE's
Online Trading System). The BSE has deployed an Online Trading system (BOLT) on
March 14, 1995.
 BSE (Bombay Stock Exchange) offer fully computerized screen-based trading
facilities to investors. The on-line trading system of BSE is known as BOLT (BSE's On-
line Trading System),

16.NEAT (National Exchange for Automated Trading

The National Exchange for Automated Trading (NEAT) is the NSE’s trading
system. The fully automated screen-based trading system provides trading, clearing
and settlement functionality. Orders in NEAT are executed on a price/time priority basis.
… NSCCL was the first clearing corporation established in India.

17.Insider Trading and Punishment in SEBI act, 1992.

Insider trading is the trading of a public company's stock or other
securities (such as bonds or stock options) based on material, nonpublic information
about the company. ... A person who becomes aware of non-public information and
trades on that basis may be guilty of a crime.
Section 12A(d) of the SEBI Act. 1992 expressly prohibits insider trading
while section 15G imposes a penalty of a sum ranging between ten lakhs to twenty-five
crore rupees or a penalty of a sum which is three times the amount of profit made,
whichever is higher. Further, he may be punishable with imprisonment for a term, which
may extend to ten years, or with fine or both.