Trading Mechanism

The extension of the trade timing is subject to the stock exchanges and its clearing corporation(s) putting in place adequate risk management system, surveillance system, and infrastructure commensurate with the increased trading hours.

Trading holidays

Trading Holidays i. All stock exchanges shall jointly decide upon the common holiday list within the broad framework of the Negotiable Instruments Act, 1881 and also taking into consideration Central/State/Local holidays and notify the same to the market well in advance under prior intimation to SEBI.

• On such trading holidays, stock exchanges may permit trading of internationally referred commodities in evening session i.e. post 5:00 PM, in case corresponding international markets are open.

Important information about trading:

• The stock exchanges collect transaction charges from the members for the trades executed on their trading platform; The condition is that the ratio between highest to lowest transaction charges in the turnover slab of any contract is not more than 2:1. A reasonable demand.

In case stock exchanges want to revise the charges, what are the conditions?

It is also emphasized that, while revising the transaction charges, the stock exchanges shall also comply with the following guidelines:

• Its system is capable of handling additional load.
• It does not affect the existing risk management system.
• It does not favor selective trades or selective categories of investors.
•  It does not encourage the generation of artificial demand. v. It does not result in any market irregularities.

In a simple way, the transaction charges are market-based and demand-supply based.

Mechanism of trading

Now we will be dealing on the trading platforms or the software used for trading. In order to induce more transparency and efficiency in the trading system, NSE and BSE introduced nationwide online fully automated “Screen Based Trading System”. The trading platform used by BSE is called BOLT-Bombay Online Trading. The order of investors is placed on the basis of time and price basis.

Recently BSE has launched new software for trading called BEST (BSE Electronic Smart Trader). It can be downloaded directly from Android play store and an investor can enjoy zero transaction charges for 6 months on cross currency derivatives.

Now we will be moving into the trading Process mechanism of trading

Step 1: Finding a Broker

A broker acts as an intermediary or a mediator between the investor and the stock exchange. The work of a broker is transfer of order electronically from the investor to the exchange. Any transaction that occurs in stock market is taken care by the stock exchange. Normally in India the stock exchange for trading is active from 9:15 AM to 3:30 PM. However, from 1st October, 2018 SEBI has decided to extend the trading hours till 11:55 pm in a move to attract the investors dealing in Indian products on overseas exchanges. The brokers should be selected on the following basis:

• Watching out for fees taken for opening an online trading account
• Having a proper look at ratings and customer service.
• Brokerage charge for intraday trading
• Brokerage charge on selling a long-held share
• Margin provided by the broker on intraday trading
• The broker must provide information regarding investment opportunities on a regular basis.

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Step 2: Opening Account with the Broker

Having selected a broker, it is time to open an online trading account with the broker. A broker always opens a trading account in the name of the investor/ client only if he/she is satisfied about the credit worthiness of the client. If the broker feels satisfied with the client, he/she will open the account by writing the client’s name in the broker’s book. The minimum requirement for opening a trading account is PAN card, and bank account failing to which the account cannot be opened.

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Step 3: Placing the Order

After the account is opened successfully a notification will be provided via email or message. Then the investor can begin the trading as per his/her wish. The trading or investment is done by purchasing a specified number of shares of a particular company. The order when placed is incomplete until the order status shows complete. Different online trading platforms follow different symbols to mark the order placing. Order can also be placed via a telephonic call with the broker. There are different types of orders:

Buy Orders

Buy orders are placed when the price of the share is expected to rise. This can be understood by simple Demand-Supply curve. As the demand increases people buy more and the price gradually rises. The same logic applies in the share market. As the price of the share rises, the investors feel the price will further rise and they buy the shares. However, the amount of quantity is fully dependent on the availability of funds and risk associated with the particular share.