An investor cannot directly purchase or sell any shares in the Stock Market. He/She can only purchase and sell shares & securities through members of recognised Stock Exchanges. In respect of buying & selling of securities in the Stock Markets, the following steps are to be adopted by the investors.
- The first step is to select a broker who will buy or sell on behalf of the client.
- If you do not have any broker of your own, you can visit the stock exchange office and they will give you a list of brokers and you may select one.
- An investor has to pace the order with the broker by telephone, telegram or personal visit.
- The following are the methods of placing the order :-
The Broker enters the client’s order into the CSTAR System and a slip comes out which is also included in the CSTAR System.
On the day the broker buys or sells shares for you, he will give you a Contract Note by hand or by post under certificate of posting. Once it is posted under COP it is a proof that the client has received the document. It is a legal document and the best evidence of the transaction. Both the parties are bound to accept the terms included in it. It includes the number of shares, name of the company, prices, brokerage and the transaction whether purchase or sale.
The broker will buy or sell shares on client’s behalf against a nominal fee which is called brokerage. It is fixed by the stock exchange authorities.
If the client is a buyer, he must pay the broker in time as per stock exchange rules.
The seller must put his signature on the transfer deed and it must be authenticated by a witness. He will hand over the share or debenture certificate along with the transfer deed to his broker before the delivery day. The buyer’s broker will hand over the cheque to the seller’s broker.
- Fixed price or at Limit order, when the client instructs the broker to buy or sell certain shares at a fixed price mentioned in the order, it is called a Fixed Price. For example,
Buy 100 Tisco shares at Rs. 250
Sell 100 Tisco shares at Rs. 252 or more.
- At the best prevailing price in the market. It is an order which does not specify any price and should be executed immediately at the best prevailing price in the market. For example sell 100 ITC shares at best.