Unveiling the Backstage of Stock Market Operations: From Trade Execution to Settlement. Lesson 8

Section 1: Start Your Stock Market Journey: Simple Lessons from A to Z.


Lesson 8: Unveiling the Backstage of Stock Market Operations: From Trade Execution to Settlement

Introduction:

Drawing a parallel with the making of a movie, the stock market's front end appears seamless, but a complex backend process underpins its operation.
A look into the intricacies of trading, from placing orders to execution and settlement, reveals the collaboration of various participants.

Trading Timeline Example:
Trade Date (T day): Order placement for buying or selling.
T+1 day: Internal processing of the trade.
T+2 day: Crediting purchased shares to the Demat account or receiving sale proceeds.

Buying a Stock:
Payment deduction on T day.
Broker issues a contract note on T day.
Processing on T+1 day.
Crediting shares to demat account on T+2 day.

Selling a Stock:
Blocking shares in the Demat account before the trade.
Shares moved out before T+2 day.
Receiving sale proceeds on T+2 day.

Phases of Transfer of Shares:
Execution: Trader places order, broker fulfills it on T day.
Clearance: Clearing houses determine money and shares on T+1 day.
Settlement: Shares credited to buyer's Demat, money to seller's account on T+2 day.

Types of Settlement:
Spot Settlement:
Occurs immediately.
Follows rolling settlement (T+2 days).
Forward Settlement:
Agreed settlement at later dates (T+5, T+7 days).

Participants in Clearance and Settlement Process:
Clearing Corporations (e.g., NSCCL, ICCL): Responsible for clearance and settlement.
Clearing Members (Custodians): Identify fund and share transfers.
Clearing Banks: Process fund settlements.
Depositories: Maintain clearing pool account for securities.

Conclusion:

The stock market's backend involves a seamless collaboration of participants to ensure efficient trade execution and settlement.
The complex interplay among clearing corporations, clearing members, banks, and depositories guarantees a smooth process.
The intricate coordination of millions of trades every day underscores the stock market's functionality and reliability.

LESSON 9: COMING SOON.

LEARN: 

Stock Market Success: A Beginner's Guide

Section 1: Start Your Stock Market Journey: Simple Lessons from A to Z.

  1.  Why Should You Think About Investing? Lesson 1
  2.  When and How to Begin Your Financial Journey of Investing? Lesson 2
  3.  Meaning, Evolution, Types, Functions, Advantages and Disadvantages of Financial Market. Lesson 3
  4.  Diverse Dimensions of Financial Markets: Classification and Functions. Lesson 4
  5. Key Players Shaping the Stock Market Ecosystem: Roles and Functions. Lesson 5
  6. Understanding Stock Market Indices: Key Concepts and Benefits. Lesson 6
  7. Navigating the Front End of Stock Markets: Tools and Resources. Lesson 7
  8. Unveiling the Backstage of Stock Market Operations: From Trade Execution to Settlement. Lesson 8






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