Q : What is the customer's protection fund?
A : This is a fund created to compensate investors for genuine losses suffered against the defaulter members of the exchange.
Q : What is the Trade Guarantee Fund?
A : This system guarantee's settlement of trades and helps to maintain market equilibrium by ensuring payment against defaulting members of the Exchange.
Q : What is an auction?
A : An auction is a mechanism utilised by the exchange to fulfill its obligation to a counter-party member, when a member fails to deliver good securities or make the payment.
Q : What is a bad delivery cell?
A : When a delivery of share turns out to be bad because of company objection, the investor can approach the bad delivery cell of the respective stock exchange where the company is listed through his broker for correction or replacement with good delivery.
Q : What do you mean by bid and offer?
A : Bid is the price of a share a prospective buyer is prepared to pay for a particular scrip, while offer is the price at which a share is offered for sale.
Q : What is brokerage? What is the maximum brokerage charged?
A : Brokerage is the commission charged by a broker for purchase/sale transaction done through him. As per SEBI norms, the maximum brokerage chargeable by brokers for purchase/sale transactions is 2.5% of the total trade value.
Q : What are circuit breakers?
A : Circuit breakers are a mechanism by which exchanges temporarily suspend the trading in a security when its prices get volatile and tend to breach the price band.
Q : What do you mean by clearing?
A : Clearing refers to the process by which transactions between members are settled through multilateral netting.
Q : Describe a cum-bonus share?
A : The share is described as cum-bonus when a purchaser is entitled to receive the current bonus.
Q : What is cum-rights?
A : A share is described as cum-rights when a purchaser is entitled to receive the current rights.
Q : What is ex-bonus?
A : The share is described as ex-bonus when a purchaser is not entitled to receive the current bonus, the right to which remains with the seller.
Q : What is ex-rights?
A : The share is described as ex-rights when a purchaser is not entitled to receive the current rights, the right to which remains with the seller.
Q : Describe forward trading?
A : Forward trading refers to the trading mechanism where the contracts traded today are settled at some future date at prices decided today.
Q : What is insider trading?
A : Trading in a company's shares by a connected person having non-public and price sensitive information such as expansion plans, financial results and takeover bids, by virtue of his association with the company, is called insider trading.
Q : What is market lot?
A : A market lot is the minimum number of shares of a particular security that must be transacted on the exchange. In demat scrips, the market lot is fixed at one single share.
Q : What is the no-delivery period?
A : Whenever a book closure or a record date is announced by a company, the exchange a no-delivery period for that security. During this period, trading is permitted in that security. However, these trades are settled only after the no-delivery period is over. This is done to ensure that investor's entitlement for corporate benefits is clearly determined.
Q : What is an odd lot?
A : The number of shares that are less than the market lot are known as odd-lots. Under the scrip-based delivery system, these shares are normally traded at a discount to the prevailing price for the marketable lot.
Q : How do investors receive bonus shares or other non-cash entitlements?
A : Investors will have their entitlements directly credited by the company to the depository account.
Q : What is order-driven trading?
A : It is a trading initiated by buy/sell orders from investors/brokers.
Q : It is a trading initiated by buy/sell orders from investors/brokers.
A : On the flip side, a trading where broker/market makers give buy/sell quotes for a scrip simultaneously is known as quote-driven trading.
Q : What is the over-the-counter trading?
A : Trading in those stocks which are not listed on a stock exchange.
Q : Describe pay-in and pay-out?
A : Pay-in day is the designated day on which the securities or funds are delivered/paid in by the members to the clearing house of the exchange. On the other hand, pay-out is the designated day on which securities and funds are delivered/paid out to the members by the clearing house of the exchange.
Q : What do you mean by price band?
A : The daily/weekly price limits within which price of a security is allowed to rise or fall is the price band for that particular stock.
Q : Describe price rigging?
A : When a person or persons acting in concert with each other collude to artificially increase or decrease the price of a security, the process is called price rigging.
Q : What do you mean by record date?
A : Record date is the date on which the beneficial ownership of an investor is entered into the register of members. Such a member is entitled to get all the corporate benefits of the stock.
Q : What is rematerialisation of shares?
A : Rematerialisation is the process through which shares held in electronic form in a depository are converted back into physical form.
Q : Describe screen-based trading?
A : When buying/selling of securities is done using computers and matching of trades is done by the computer, the process is called screen-based trading.
Q : What is settlement?
A : It refers to the scrip-wise netting of trades by a broker after the trading period is over.
Q : What is a settlement guarantee?
A : Settlement guarantee is the guarantee provided by the clearing corporation for settlement of all trades, even if a party defaults to deliver securities or pay cash.
Q : What do you mean by splitting/consolidation of shares?
A : The process of splitting shares that have a high face value into shares of a lower face value is known as share splitting. The reverse process of combining shares with a low face value into one share of higher value is known as consolidation.
Q : What is spot trading?
A : Trading by delivery of shares and payment for the same on the date of purchase or on the next day.
Q : What is a spot transfer of shares?
A : The instruction given by a registered holder of shares to the company to stop the transfer of shares as a result of theft or loss is known as spot transfer.
Q : What is trade and settlement guarantee in trading?
A : Trade guarantee is the guarantee provided by the clearing corporation for all trades that are executed on the exchange. In contrast, the settlement guarantee guarantees the settlement of trade after multilateral netting.
Q : What is trading for delivery?
A : Trading for delivery is the trading conducted with an intention to deliver shares as opposed to a position that is squared off within the settlement.
Q : What is transfer deed?
A : A transfer deed is a form that is used for effecting transfer of shares or debentures and is valid for a specified period. It should be sent to the company along with the share certificate for registering the transfer. The transfer deed must be duly stamped and signed by or on behalf of the transferor and transferee and complete in all respects.
Q : What is a book building issue?
A : In a book building issue, the issuer appoints lead managers who collect bids within an indicated fixed band from prospective investors. A common price is then arrived at for offloading shares, enabling better pricing with a wide institutional investor base.
Q : What is partial and 100% book building?
A : In partial book building, 75% of the issue is the book-built portion and the remaining 25% is to be offloaded in the general market. In 100% book building, the entire issue is reserved for the book-building portion and nothing is kept for the general market.
Q : Describe margin trading?
A : Margin trading allows investors to buy a stock by paying a part of the transaction value with the rest being financed by the broker.
Q : Securities Lending and Borrowing?
A : In Securities Lending, an investor who has sold shares without holding the securities (short-selling) is allowed to borrow securities from clearing corporations to be able to deliver them to the buyer. Borrowing of securities implies that investors can lend their securities, which they do not intend to sell for some time, to clearing corporations and earn return on it for the period.
Q : What is a green-shoe option?
A : A Green-shoe Option or an over-allotment offer is an option which is sometimes a part of an underwriting agreement which allows the underwriter to purchase and sell additional shares if the market's demand for the shares is greater than originally expected.
Q : What is rolling Settlement?
A : In rolling Settlement, a settlement cycle starts and ends on the same day and is done on a continuous basis.
Q : What is share buyback?
A : When a company repurchases its own shares from the market, it is called a share buyback.
Q : What is an open offer?
A : A company offering a set number of new shares at a specified price to the investing public is known as an open offer.
Q : What is preferential allotment of shares?
A : A fresh allotment of shares to promoters, their friends and relatives on a preferential basis is called preferential allotment.
Q : What is stock split?
A : A proportionate increase in the number of outstanding shares by splitting the face value in a desired ratio is called stock split. For example, a share of face value Rs 100 may be split into 10 shares of Rs 10 each.
Q : What is a bonus issue?
A : Shares issued to existing holders by capitalising the company's free reserves, like share premium, is called a bonus share.
Q : What is a rights issue?
A : Rights issue is defined as an issue of a new equity in which the existing shareholders are given a right to subscribe to the issue.