Online Share Trading

Stock trading Terminologies

  1. Margin Amount

    Margin amount is the amount that an investor deposits when opening a trading accounts with a broker.

  2. Margin funding

    An investor borr ows money from a broker in order to buy securities. This is known as "buying from margin". This allows investors to increase their exposure and amplify gains and losses.

  3. Note on Contract

    For all transactions made in the format specified by the stock exchange, a broker must issue a contract notice to clients. Only brokers can issue contract notes.

These are the requirements for the contract note and all other entries.

  • Name, address, and SEBI Registration number for the Member broker
  • Name of the Partner/Proprietor/Authorized Signatory
  • Dealing Office Address/Tel/Fax No, Code Number of the Exchange member
  • Unique Identification Number
  • Date of settlement, contract number, and settlement number are all included in the contract number.
  • Name/Code number of the Constituent (Client).
  • Trades: Order number and time
  • Trade number and trade time
  • The client can bring/sell security in a variety of quantities and types.
  • Brokerage and purchase / sale rate are separate services.
  • Brokerage service tax rates and other charges
  • Securities Transaction Tax (STT), as applicable
  • The original contract note must be attached with the appropriate stamps or the mention that the consolidated stamp duty has been paid.
  • Signature of the Stock Broker/Authorized signatory

Settlement Types In a Rolling Settlement trades that are executed during the day will be settled according to the net obligations of the day. If an investor buys 100 shares in morning and then sells 50 in afternoon, he will be obligated to pay 50 shares net.
An account settlement, on the other hand, is where trades that span more than one day are settled. Trades that cover the Monday through Friday period are, for example, settled together. All obligations for the account period will be settled net. According to SEBI directives, account period settlement was stopped on January 1, 2002.
The current rolling settlement trades are settled on a T+2-day basis. "T" stands for Trade Day. Trades that are executed on Mondays are usually settled the next Wednesday, taking into account 2 working days. T+2 days are used to pay-in and out securities and funds.

Corporate Actions
A company can initiate a corporate action if it causes a material alteration and has an impact on the securities (equity or debt) of that company. The board of directors approves corporate actions and authorizes shareholders. Examples include dividends, stock splits and bonus issues, mergers or acquisitions, rights issues, and so forth.

Dividend refers to the percentage of equity that is paid directly to shareholders. The company will provide the amount, frequency, record date and payable date. The exchange that the issue is listed on sets the ex-dividend/distribution (ex-d) date for entitlement. The company does not have to pay dividends.

  • Date of declaration: The date of the announcement of the dividend by company
  • Record Date: This is the date that a stock must have been in an investor's account in order to receive a dividend
  • Payable Date: When a company pays out a dividend, or shares are split.
  • Ex-Date: The date that the buyer of a stock is not entitled to the upcoming declared dividend/distribution, because the buyer will not be a holder of record. Based on the settlement cycle, the ex-d date is set by the exchange on which the company is listed.

Bonus Issue
It's basically a stock dividend, where the company gives away shares of its stock to existing shareholders.
If an investor has 200 shares in a company that declares a bonus of 2:1, he will receive 400 shares for free. He will receive 400 shares free if he holds 200 shares of a company that declares a bonus of 2 shares per share.
To encourage retail participation and to increase the equity base, companies issue bonus shares. New investors may find it difficult to purchase shares of a company if the price per share is too high. The price per share drops with an increase in shares. The overall capital is the same regardless of whether bonus shares are issued.

Stock Divides
Stock splits increase the number and value of shares outstanding by reducing the stock's face value. The stock split is used to increase liquidity and make shares more affordable for investors who were unable to buy shares at high prices.
A 2:1 stock split, for example, means shareholders will get 2 shares for each share they own. The share split will increase the number of shares available and decrease the face value per share by half. A shareholder who owned 2,000 shares of 100,000 shares before the stock split would now own 4,000 shares of the 200,000 shares after the stock split.

Rights Issue
Existing shareholders can purchase additional shares from the company by way of a rights issue. They are able to buy more shares at a discount relative to current market prices and for a set time.


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