QS Study

Rules of Buying and Selling in Stock Market

To buy or sell financial instruments in a stock exchange, there are some common rules and regulations he/she has to maintain. The rules are almost applicable for all approaches whether it is call-over or automated online approach. The general rules regarding buying and selling in stock exchange are as follows:

  • At first one has to open B/O account for applying in the stock market.
  • Then he has to contact with brokers, because individuals are not permitted to transact rather he has to transact through brokers. Brokers are representatives of both companies and investors
  • Then the brokers communicate with jobber who trade independently in their own names. Brokers are bridges between jobbers and investors.
  • In this stage the brokers on behalf of the buyers or sellers parties, bargain on the price both of buying and selling. At which price the broker and jobber agree, the transaction will be made and the broken get commission on the basis of price quotation. And the jobber enjoy profits even suffer loss.
  • When the jobber and broker agree, they enter into a contract where the names, of parties, address, date, share price, description of shares, date of payment etc are mentioned.

If the transaction is in cash, it can be settled within 24 hours but even four days also can be taken. Four days may take for the acts which are as follows:

  • Day-1: Fixing the payment time.
  • Day-2: The broker inform the jobber with the name and address of real buyer and seller,
  • Day-3: Documentation of requirement for shares or debentures,
  • Day-4: Payment and transfer of shares.

On the other contract may be of forward basis. In this way the transaction is settled within 15 days.