FUNCTIONING OF STOCK EXCHANGE

FUNCTIONING OF STOCK EXCHANGE

LISTING

Listing of shares, on a stock exchange, means, such shares can be bought and sold, in stock exchange.

A Company, which intends to issue shares, through prospectus, shall have to apply to one or more stock exchanges, for getting its shares listed.The detailed and elaborate procedure of getting the shares listed on a stock exchange is monitored by SEBI. The SEBI, issues guidelines and notifications, from time to time, with regard to listing of securities.

Once the shares are listed, the are divided into two categories:

1. GROUP "A" SHARES2. GROUP "B" SHARES

GROUP "A" SHARES: are referred to as " Cleaned Securities " or " specified shares". The facility for carrying forward a transaction from one account period to another is available for these shares. Group "A" shares represent companies, with huge amount of capital, and equally a large scope for investment. These shares are frequently traded and command higher price earning multiples.

GROUP "B" SHARES: are referred to as, Non cleaned securities or non-specified shares. For these groups facility of carrying forward is not available.Whenever a share is moved from Group "B" to Group "A" its market price rises; likewise, when a share is shifted from Group "A" to Group "B", its market price declines. There are some criteria and guide lines, laid down by stock exchange, for shifting stocks from the non-specified list to the specified list.

VARIOUS ORDERS AND TRANSACTIONS: SETTLEMENT CYCLES

There are various types of orders, which can be placed by the buyer or seller. They are:Market OrderA market order is to be executed as soon as possible at the best prevailing price in the market.

Limit orderA limit order is constrained by the price limits specified by the investor. The seller specifies the minimum price that the security must fetch, and the buyer specifies the maximum price that he is willing to pay.

A Day order A day order remains valid only for the day when it is placed. If the order is not executed on that day, it automatically lapses.A Week order A week order is one, which is active for a weekA Month orderA month order is an order, which is valid for one month.An open order An open order is an order, which is valid for one month. An open order remains in effect until it is executed or cancelled.

Similarly there are certain types of transactions, which are allowed on the stock exchanges. They are:Transactions for Spot deliveryThe delivery and payment is effected within the time or on the date stipulated when entering into the transaction or within fourteen days, whichever is shorter.Transaction for Hand deliveryThese transactions also referred to as the transaction for "the account", are cleared and settled through the clearing house.Transactions for special deliveryThe delivery and payment is effected within any time exceeding fourteen days following the date of the contact as may be stipulated when entering into the transaction, provided the same is permitted by the governing board or the president of the exchange.