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STOCK EXCHANGE TRADING MECHANISM

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There are many recognized stock exchanges in India but only few stock exchanges are functional like National Stock Exchange & Bombay Stock Exchange. Most of the trading in Indian stock market takes place in two stock exchanges. Both exchanges follow the same trading mechanism, settlement process, trading hours etc. The stock exchanges are managed by Board of Directors or Council of Management consisting of elected brokers and representatives of Government and Public appointed by SEBI.

This market provides facilities of trading after listing of any securities. The Boards of stock exchanges are empowered to make and enforced rules, bye – laws and regulations with jurisdiction over all its members. 

The stock exchange is a key institution which facilitates the issue & sale of various types of securities. It is a pivot around which every activity of capital market revolves. In the absence of the stock exchange, the people with savings would hardly invest in corporate securities for which there would be no liquidity. 

Before understanding the entire concept of Stock Market, we have to understand the meaning of the following terms:

■ Stock Exchanges: A Market (a place of buying/selling) where any person can buy or sale any securities of  a listed company. 

■ Listed Company: A company whose securities (i. e. shares, debentures & bonds etc.) are registered (listed) for purpose of trading with any recognized stock exchange. 

■ Listing Agreement: It is an agreement between a proposed listed company and the stock exchange before giving permission to company with regard to trading of securities. After execution of this agreement, the company shall be treated as listed company and under obligation to comply with requirement of the listing agreement.
Stock Exchange is a market place for buying and selling of listed securities. Securities are traded in three different ways in stock exchanges, namely

(a) Settlement Basis

(b) Spot Basis

(c) Cash Basis  

TYPES OF SECURITIES: Securities traded in the stock exchanges can be classified as under:-
 
■ Listed cleared Securities: The securities of Companies are admitted for trading on a stock exchange after fulfillment of all listing requirements and are traded as "Listed Securities" and almost all types of listed securities are under this. 

■ Permitted Securities: These securities are listed on some of the recognized stock exchanges and when permitted to be traded by those stock exchanges where they are not listed is called permitted securities. In other words, to facilitate the market participants to trade in securities of such companies, which are actively traded at other stock exchanges but are not listed on another stock exchange, trading in such securities is facilitated as “Permitted Securities”.

TYPES OF DELIVERY: Types of delivery in the stock exchanges are: 

■ Spot Delivery: The delivery is said to be spot delivery, if the delivery and payment are to be made on the same day or next day. 

■ Hand Delivery: The delivery is said to be hand delivery, if the delivery and payment are to be made on the delivery date fixed by the stock exchange authorities. 

■ Special Delivery: A special delivery is one where the delivery is to be made after the delivery period fixed by the stock exchange authorities.

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