Bombay Stock Exchange Limited

The Edge is Efficiency

 INTRODUCTION

The stock exchange, Mumbai popularly known, as Bombay

Stock Exchange Limited is the oldest stock exchange in Asia with a
rich heritage. It was established as "The Native Share & Stock
Brokers Association" in 1875. It is the first stock exchange in the
country to obtain permanent recognition in 1956 from the Govt. of
India under the Securities Contracts (Regulation) Act, 1956. The
Exchange's pivotal and pre-eminent role in the development of the
Indian capital market is widely recognized and its index, SENSEX, is
tracked worldwide. Earlier an Association of Persons (AOP), the
Exchange is now a demutualised and corporatised entity
incorporated under the provisions of the Companies Act, 1956,
pursuant to BES (Corporatisation and Demutualisation) Scheme,
2005 notified by the Securities and Exchange Board of India (SEBI)
With demutualisation, the trading rights and ownership rights
have been delinked effectively addressing concerns regarding
perceived and real conflicts of interest. The Exchange is
professionally managed under the overall direction of the Board of
Directors. The Board comprises eminent professionals,
representatives of Trading members and the managing Director of
the Exchange. The Board is inclusive and is designed to benefit from
the participation of market intermediaries.
In terms of organization structure, the Board formulates larger
policy issues and exercises over-all control. The committees
constituted by the Board are board based. The Day-to-Day
operations of the Exchange are managed by the Managing Director
and a management team of professionals.
The Exchange has a Nation wide reach with a presence in 417

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cities and towns of India. The systems and processes of the
Exchange are designed to safeguard the market integrity and
enhance transparency in operations. During the year 2005-2006, the
trading volumes on the Exchange showed robust growth. The
Exchange provides an efficient and transparent market for trading in
equity, debt instruments and derivatives. The BSE's Online Trading
System (BOLT) is a proprietary system of Exchange and is BS 7799-
2-2002 certified. The surveillance and clearing & settlement functions
of the Exchange are ISO 9001:2000 certified.
The Stock Exchange, Mumbai is not in any manner
answerable, responsible or liable to any person or persons for any
acts of omission or commission, errors, mistakes and or violation
actual or perceived, by us or our partners, agents, associates, etc., of
any of the rules, regulations, Bye-Laws of the Stock Exchange,
Mumbai, SEBI Act or any other laws in force from time to time. The
Stock exchange, Mumbai is not answerable, responsible or liable for
any information on this website or for any services rendered by us,
our employees and our servants.

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 THE ORGANIZATION

The national stock exchange of India Limited has genesis in

the report of the High Powered Study Group on establishment of new
stock exchanges, which recommended promotion of a national stock
exchange by financial institutions (FIS) to provide access to investors
from all across the country on an equal footing. Based on the
recommendations, NSE was promoted by leading financial
institutions at the behest of the Government of India and was
incorporated in November 1992 as a tax paying company, unlike
other stock exchanges in the country.
On its recognition as a stock exchange under the securities
contracts (regulations) Act, 1956 in April 1993, NSE commenced
operations in the wholesale debt market (WDM) segment in June
1994. The capital market (Equities) segment commenced operations
in November 1994 and operations in derivatives segment
commenced in June 2000.

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 DEFINITIONS AND EXPLANATIONS

1. Shares:-

In every day language, when we talk of shares we

normally refer to equity shares or ordinary shares of a company. The
terms shares and stock essentially means the same things, the letter
being a more common American usage.
An equity share is evidence of ownership in a
company. The physical evidence of this ownership of this document
is called the Share Certificate. Now days, shares are usually kept in
electronic, or dematerialized, form with a depository participant
(Banks, brokers, financial institutions) of the National Securities
Depository Limited (NSDL). However, if one wants one can still hold
the share in the physical form which has your name endorsed on it,
and is proved that you are a part owner of the company. Your
ownership rights are proportionate to the number of share you own.
Companies issue shares of a certain fixed denomination, called face
value or par value of that share, which is clearly indicated on a share
certificate in the physical form.

2. Investment: -
Investment essentially refers to what you do with
your savings in order to preserve them and make them grow or yield
an income. If you keep your savings in the form of cash, they are
certainly going to diminish in value because the purchasing power of
money is constantly going down as a result of inflation. (The value of
money is judged by the quantity of goods and services you can buy
with it). Therefore, if you want to maintain or increase the value of

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your savings, you have to keep them in forms other than cash. This
is what investment is all about, deployment of your saving with the
intentions of preserving or increasing their value. This deployment
can be done by using your savings to buy land, residential
properties, commercial properties, gold, jewelry, works of art, fixed
deposits in banks and companies, shares, bonds, infact, anything
whose value is likely to either remain constant or appreciate with
time. Investment also refer to using one's savings with the intention
of earning an income.

3. Demate A/c:-
On doing an online business ever customer has to
open and demate account in any bank whichever he likes. Demate
account is the account in which the trading done by the customer is
mentioned. If the customer sales or purchases any share the details
of this sale and purchasing are in demate account. This account
contents the name of the shares and also the number of shares held
or sold and also the rate of the share with this demate account. It is
also compulsory for every customer to open a saving account in the
bank because the amount which is to be received when the
customers sales the shares are transferred from the demate account
to the saving account.
It is the responsibility of the customers that the
share which he purchased or sales are properly transferred in
demate account from the stock exchange whichever he deals. The
amount of dividend whichever to be received on the shares when
held for one or more year are also transferred in this demate
account. It is compulsory for every customer to have a PAN no. For
opening an demate account. If PAN no. Is not there is no chance for

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the customer to do any trading on line. There is no limit of amount to
deal in this account.

4. Circuit Limit:-
While issuing the shares to the public the company
has to fix a particular limit of the rate of the per share this limit is
called as circuit limit. This circuit limit is generally fixed on the
percentage basis. This circuit limit is applied to both the ends of the
share. That is to the upper limit also and also to the lower limit
actually circuit limit is of two types
1) Upper limit
2) Lower limit
It is compulsory for every company to fix the circuit
limit. This limit is beneficial to both. The customer and also to the
company generally every company fix below 10%of the rate of per
share.

5.Upper Limit: -
While issuing the shares to the public the company
has to fix the upper limit this limit is also calculated in percentage the
limit is also beyond which the rate of the shares cannot exceed nor
that the customer doing the trading can sell above the level.
For ex. Customer wants to sell a share which is of
Rs10 and its upper limit is fixed at 10% so in this case the person will
have to sell it at Rs11 or the rate which ever he wants but the person
cannot sell it beyond this Rs 11 because by addition of upper limit to
the rate of share the maximum amount of the shares is Rs 11 only
and not above.

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6.Lower Limit: -
At the time of issuing share the company has to fix
the lower limit also. This lower limit is calculated on the basis of the
rate of the shares. This limit bears the same percentage, which is
mentioned for the upper limit of the share. Like upper limit in this limit
also the share minimum rate of the share is fixed the customer who
wants to se; the holding shares has to first consider the upper& lower
limit of the share he cannot sell the share below the lower limit and
not above the upper limit like the upper limit
Percentage generally in this limit also the percentage is below 10%
of the face value of the shares the percentage is below 10% of the
face value of the shares the percentage of the upper &lower limit is
equal to every type of share

For ex. Suppose the person wants to sell the shares and
the rate of the share is Rs. 10/- and the lower limit percentage is 10% of the
rate. So in this case the person cannot sell the share at below Rs. 9/-. He
will have to sell at above Rs. 9/- or up to the upper limit of the share.

7. Sensex:-
When the shares are issued to the public the stock
exchange gives a particular group to the company. For ex. The
Reliance Group is given the group “A” like this there are several
companies which fall in “A” Group. The weightage mean is calculated
according to its equity when all the companies of Group “A” has
calculated this weightage mean they are added all together when this
addition is done the result which comes down is known as “Sensex”.
The trading of shares of “A” group is totally
depended on this sensex value. The price of the share rises this

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sensex value also rises and when the price of this share comes
down the sensex value also comes down. With the sensex value the
investors can know that the share market is in plus position or minus
position.

8. Scripts:-
The company, which has more than one working
area, it has to issue the share separately than that company is the
company which has the script of its name.
For Ex. The Reliance this company has its several
working area Namely Reliance, Capital Reliance, Infocom Reliance
Energy, Reliance Industry. So reliance company issues separate
share for separate working area but the bold name which is given to
the working area is “Reliance”. So in this case Reliance has its own
scripts. Other example Ambuja, Birla, Etc.

9. Groups:-
When the shares are issued by the company they
are given the particular group by the Stock exchange according to its
demand in the market. There are mainly 7 groups known as:-
i. Group “A”
ii. Group “B”
iii. Group “C”
iv. Group “K”
v. Group “T”
vi. Group “TS”
vii. Group “Z”
The company which are in great demand is given
as Group “A” company. And the company which are not in so

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demand are given in other group. This means that the companies are
given the group according to its demand.

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 BUYING AND SELLING

The first step is to open a demate account with your selected

Depository Participants (DP). All transactions on both the BSE and
NSE are done in demate securities.

When you buy shares, you are required to pay money to your
broker or sub-broker immediately upon getting the contract
note/confirmation memo for the purchase of shares. The broker issue
as contract note, whereas sub-broker issues a confirmation memo.
Similarly, when you sale shares you are required to give delivery of
your shares by transferring them to the demate account of your
broker/sub-broker immediately upon getting the contract note or
confirmation memo. When you buy the shares then the share you
have purchased will come first to demate account of your broker/sub-
broker. Once this happens, you can instruct your broker/sub-broker
to transfer those shares to your demate account for receiving shares
in your demate account you will have to give your broker or sub-
broker the details regarding your demate account.

When you sale shares you are required to give delivery of

share from your demate account by instructing your DP to transfer
the number of shares that you have sold from your account to the
demate account of your broker. In this regard, you will be required to
include the details of the demate account of your broker in the
instruction slip that you give to your DP. Your broker or sub-broker
will help you to fill in the delivery instructions. These instructions are
of a technical nature and the delivery instruction forms and
procedures differ from DP to DP.
PROCEDURE FOR REGISTRATION

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 For registration, send your name, address, phone no. and E-
Mail ID, package name and duration of your subscription with
payment details like DD, Cheque no., or online fund transfer detail.

Mode of payment:-
Pay us buy cheque or demand draft or pay for our
services to I.C.I.C.I bank. For more details E-Mail at
Shares@Indiaoye.com

DEALING THROUGH NSE TRADING MEMBER/SEBI

REGISTERED SUB-BROKER

1. Where do I go for buying/selling of shares?

To buy or sale securities you could approach either SEBI
registered trading member of the NSE or SEBI registered
Sub-broker of the trading member of the NSE.
2. What care should I take while investing?
Before making any investment, you must ensure that you:
 Obtain written documents explaining the investment
 Read and understand such documents,
 Verify the legitimacy of the investment,
 Find out the costs and benefits associated with the
investment,
 Assess risk return profile of the investment,
 Ascertain if it is appropriate for your specific goals,
 Compares these details other investment opportunities
available,
 Examine if it fits with other investments you are considering
or you have already made,

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  Deal only through an authorized intermediary,
 Seek all clarifications about the intermediary and the
investment,
 Explore the options available to you if something goes wrong
and then if satisfied make the investment.

We call this the 12 step to investing.

3. Why I should trade on Stock Exchange?

Any trade in securities outside stock exchanges other
than spot transactions are illegal. Hence, you do not get
any protection if you trade outside an exchange besides
the stock exchange NSE offers a ready market for your
securities. If you are trading outside and exchange you
have to waste considerable time to find out the right
person who is willing to undertake a corresponding
transaction with you. Other benefits of trading on an
exchange include you have to right to receive the best
price prevailing at that time for the trade you do not take
counter party risk which is assumed by a clearing
corporation you have accessed to the investor grievances
redressal mechanism of stock exchanges; you have
protection upto a limit from the investor protection fund
and you have access to all company related information
to enable an inform decision, etc.

4. Is it necessary to deal with a semi registered brokers/sub-

broker/NSE trading member?
You are advised to deal with registered intermediaries as
it ensures speedy settlement as well as speedy dispute

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 resolution mechanism. The exchange can ensure the
settlement and handle dispute/claims arising out of only
those trades which are executed on NSE through
registered trading members/registered sub-brokers.
Thus, incase of any trade executed through non-NSE
entity, the investor may not be able to approach the
investor grievances cell of the exchange. In case of non-
settlement or a dispute arising out of same.

5. How do I verify the authenticity and the conduct of trading

member/sub-broker?
All the SBI registered trading member/sub-brokers
get the SBI registration certificate/no. You may ask
the trading member to furnish the same document
to verify the antecedents of the person. You may
verify the authenticity and the validity of the
registration with the exchange or from the
exchange, web site
WWW.NSEINDIA.COM/content/members/mem_dir
ectory.html. Generally reputation of a trading
member/sub-broker can be known from the existing
clients besides the exchange issues press release
as and when approves the surrender application of
any trade member and also when it expels any
trading member or declares any trading member a
defaulter.

6. What are my general rights and obligations?

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 As an investor you have the right to receive all
documents evidencing your investment if you are
trading on NSE, you should get the price at that
point of time and receive money and securities in
time. Your general obligations are to remain
informed about the intermediaries and securities
you are dealing with/in, to pay/deliver
funds/securities as and when called upon, to
exercise all rights conferred on you and to remain
vigilant.

REGISTRATION AS A CLIENT

7. What are the formalities for registration as a client for NSE

trading member/sub-broker?
You (clients) should register yourself with
registration trading member/sub-broker Rs. By:-
 Filing a client registration form.
 Signing a member constituent agreement.
 Signing a sub-broker-client agreement, if dealing through
a sub-broker.
 Obtaining a copy of the above agreement for one’s own
record.
The member-constituent agreement/sub-broker
client agreement contains the terms and conditions
including order/trade, confirmation, brokerage
charged by trading member/registered sub-broker,
delivery of securities and funds and therefore helps

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 reduced the chance of dispute. This agreement is
mandatory for all the person registering as a new
client of a NSE trading member/SEBI registered
sub-broker. On registration with a trading member
or a sub-broker, an uniform and unique client-ID
needs to be obtained, which is required to be
incorporated in all transactions on NSE.

8. What check points/precautions should one take before

signing the member-constituent agreement/sub-broker-client
agreement? What are my general rights and obligations?
As an investor you have the right to receive all
documents evidencing your investment if you are
trading on NSE, you should get the best price at
that point of time and receive money and securities
in time. Your general obligations are to remain
informed about the intermediary and securities you
are dealing with/in, to pay deliver funds/securities
as and when called upon, to exercise all rights
conferred on you and to remain vigilant registration
as a client.
One should read the various terms and conditions
carefully and understand their implications before
entering into this agreement with the trading
member/registered broker.
A check should be done whether the agreement is
on the stamp paper of requisite value and whether
the stamp paper is valid. Date of agreement should
be within the validity period of the stamp paper.

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The clients name and the name of the trading
member/sub-broker should be clearly mentioned in
the agreement. All the pages of the agreement
should be duly signed by the trading member as
well as the client (Investor). The witness should
also put their names and addresses against their
signature.
The investors (client) should check whether the
trading/registered sub-broker or the representatives
have the authority (such as board resolution, power
of attorney, etc.) to sign the member-constituent
agreement/sub-broker-client agreement.

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 PERFORMANCE OF COMPANIES

9. How do I know of the performance of the companies whose

securities I want to trade in?
There are no. of sources where information about
the company can be received. In terms of listing
agreement, the companies are required to make
continuous disclosures about the price sensitive
information. These disclosures are disseminated
through the website of the exchangers. Besides,
SEBI provides EDIFAR (Electronic Data Information
Filing And Retrieval System), which contain the
information about (i) financial statement comprising
of balance sheets, profit and loss a/c and full
version of the annual report, half yearly financial
statements, (ii) corporate governance reports (iii)
share holding pattern and (iv) action against the
company by a regulatory body. Apart from the
above the detail of the company are also available
with the various market participants and numerous
public online sites. News magazines also carry out
analysis of the companies periodically.

TRADING RELATED ISSUES

GIVING PURCHASE/SALE INSTRUCTIONS

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10. How do I give sale/purchase instructions to my trading
member/registered sub-broker?
A trading member will have to communicated the
order instruction in writing. The order instructions
should clearly indicate the security name weather
the order is for buy or sell, the quantity for each of
the security, rate specifications, and other relevant
instructions. This reduces chances of
miscommunication between the client (investors)
and the trading member/registered sub-broker at
the time of placing the deals on behalf the client.
You are advised to quote your uniform and unique
client id, while communicating with the trading
member or the sub-broker.

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 PRICE AT WHICH TRADED

11. What is price time priority?

The system arranges all orders in the priority of
price and within price by time. You have, let us say
placed buy order for hundred shares of company A
at Rs.285/- and another investor has placed a buy
order at Rs.290/-, than any one who places a sell
order in company A will be first matched with the
buy order of 2nd investor as he has given a better
price. This is price priority. Let us say both of you
have quoted Rs.285/- as the price at which you
want to buy shares of company A, than sell order
which comes in to the system at this price will be
matched against the order which was placed first.

12. How do I know my tm has given me the best price?

The NSE trading system matches order Rs. In such
a way that the order gets executed at a price which
is either equal to or better than the specified price
but never worse than it. Therefore, if you have
given an order for selling 100 shares at the rate of
Rs.50/-,your order will be traded in the system in
such a way that you will et a sale price of Rs.50,or
more but never the less. Similarly, if you have given
an order for buying 100 shares at the rate of Rs.50,
your order will be traded in the system in such a
way that you will get a buy price of Rs.50or less but
never come.

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13. How do I know that the broker has given me the correct
price?
Regulations provide that the client receives a
contract note indicating details like order number,
trade number, time, price, brokerage, etc. within 24
hours of the trade. In case of any doubts about the
details of the contract note, you(investor)can avail
the facility provided by NSE, wherein you can verify
the traders on your website WWW.NSEINDIA.COM
/content/equities/eq_trdverify.htm. The exchange
generates and maintains an audit trail of
orders/trades for a no. of years and you can
counter check details of order /trade with the
exchange .

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 CONTRACT NOTE

14. What is a contract note? What is its need? What is important

in contract note?
Contract note is a confirmation of trades done on a
particular day on behalf of the client. It establishes
a legally enforceable relationship between the client
and the trading member with respect to the
settlement of the trades. It also helps to settle
disputes/claim/differences in terms of the contract
note. It is a prerequisite for filling a complaint or
arbitration proceeding against the trading
member/sub-broker in case of a dispute. A valid
contract note should be in the prescribed form
contains the details of trades, stamped with
requisites value and duly signed by the authorized
signatory.
Contract notes are made in duplicate,
the trading members and the client should keep
one copy each. After verifying the details contained
therein, the client keeps the one copy and returns
the 2nd copy to the trading member duly
acknowledge by him. Do not accept
unsigned/duplicate contract note confirmation
memo or contract not confirmation memo signed by
any authorized person.

15. Will a contract note be issued even if the trade has been
executed through a registered sub-broker?

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 In case of a deal executed through a
registered sub-broker, the sub-broker is
required to issue purchase/sale notes to the
client (investor). However, the trading
member would issue to the registered sub-
broker back to back contract notes giving the
details of all transaction done by the sub-
broker through the trading members terminal.
16. What if the details contained in the contract/purchase/sale
notes are incorrect or the notes include some transaction
not pertaining to my order /trades?
Counter-check the details contained in the
contract note purchase/sale notes with those
on the order and trade confirmation slip.
Check whether the order number, trade
number and other details on the trade
confirmation slip match with those on
contract/purchase /sale notes. In case
discrepancy, bring the same to the notice of
the notice of the trading member /registered
sub-broker immediately by way of written
communication.

17. What are the points to be checked by an investor to check

the validity of a contract?

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To ensure that the contract note issued to you
by the trading member is a valid one, you
must verify the following details:
The contract note in the prescribed format
(annexure).
Name and address of the trading member.
SEBI registration no. of the trading member.
Details of trade like order no., trade no., trade
time security name, quantity, price,
brokerage, client code,etc.
The trade price should be separately shown
from the brokerage charged.
Signature of the authorized person.

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 BROKERAGE

18. What is the brokerage chargeable?

As stipulated by SEBI, the maximum
brokerage chargeable by a trading member in
respect of traders executed on the exchange
is fixed at 25% of the contract price. This
maximum brokerage is inclusive of the
brokerage charged by sub-broker which shall
not exceed 15% of the contract price. Apart
from the above, the trading member can
charge statutory levies.
19. What documents should I receive from the trading member
in respect of trade?
After the order/trade is placed/executed you
(investor) should receive an order/trade
confirmation slip from the trading member,
within 24 hours of the execution of trade, you
should also receive a contract note from the
trading member. Receipts of all the monies
paid to the brokers specifying the nature of
payment should also be obtained from the
trading member.
In case of derivates obtain receipt for
collateral deposited with Trading Member
(TM) towards margin.

DEMATE SETTLEMENT

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20. What is the depositary?
A depositary is like a bank wherein the
deposits are securities (viz., shares,
debentures, bonds, govt.securities, units etc.)
in electronic form. Besides holding securities,
a depositary also provides services related to
transaction in securities.

21. Who is Depositary Participant (DP)?

Depositary provides its services to investors
through its agents called Depositary
Participant (DPs). These agents are
appointed by the depositary with the approval
of SEBI. According to SEBI regulations,
amongst others, three categories of entities
i.e. Banks, Financial Institutions, and
Members Of Stock Exchanges registered with
SEBI(TMs) can become DPs.

22. What is dematerialization?

Dematerialization is the process by which
physical certificates of an investor are
converted to an equivalent number of
securities in electronic form and credited in
the investors account with his DP.

23. What is the procedure for dematerialization?

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 In order to dematerialize certificates, you will
have to first open an account with DP and
then request for the dematerialization of
request form (DRF), which is available with
DP and submitting the same alongwith the
physical certificates. Ensure that the
certificates are defaced by marking
“Surrendered for dematerialization” on the
face of the certificate before the certificate are
handed over to the DP.

24. Why should I hold securities in depository and is it

compulsory for every inventory to open a depository account
to trade in capital market?
Holding securities in depository enables
immediate transfer of securities in case of
purchases. The stamp duty to be paid on
transfer of securities is not needed, all risks
associated with physical certificates like fake
securities, forgery, bad delivery, etc. is not
involved. Also since more than 99% of the
settlement at the stock exchanges is taking
place in demate form, it is advisable that
securities be held in demate form within DP.

25. How do I receive demate shares in my account towards my

purchase transaction and pay-in demate shares towards my
sale obligation?

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 For receiving demate securities in case of
purchase made you may give a one time
standing instruction to your DP. This standing
instruction can be given at the time of account
opening or later. Alternatively, you may
choose to give a separate receipt instruction
to your DP for receiving every credit. For pay-
in obligations, you should instruct your DP to
give ‘Delivery Out” instructions to transfer the
shares from your beneficiary account to the
pool/principal account of your trading member
through whom you have sold the shares. The
details of the pool/principal account of your
trading member /clearing member to which
shares to be transferred, security, quantity,
etc. should be mentioned in the ‘Delivery Out’
instruction given by you to your DP.
The instruction should be given well before
the prescribed securities pay-in day. SEBI
has advised that the ‘Delivery Out’ instruction
should be given at least 24 hours prior to the
cut-off time for the prescribed securities pay-
in to avoid any rejection of instruction due to
data entry error, networks problems etc.
AUCTION OF SHARES
26. What is an auction?
On account of non delivery of securities, by
the trading member, the securities are put for
auction by the exchange. This ensures that

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 the buying trading member receives the
securities on time. Non-delivery by the selling
trading member can arise on account of short
delivery and deliveries not rectified. The
exchange purchases the requisites quantity in
the auction market and gives them to the
buying trading member.

27. Can I avail the benefit of the auction mechanism, if I have shares
to deliver?
Yes, you can direct your trading member to
sell your securities in the auction. However
you should ensure that the securities are
readily available for delivery. Securities not
delivered on auction pay-in day are directly
squared off at a price specified by the
exchange /clearing corporation.

28. What happens if the shares are not bought in the auction?
If the shares are not bought in the auction,
the transactions are squared up as per SEBI
guidelines.

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 REDRESSAL OF COMPLAINT

Complaints to be addressed to:-

29. Whom should I approach if have a grievance against a sub-

broker /company?
You should bring it to the notice of the broker
with whom the sub-broker is affiliated. In case
the sub-broker broker fails to resolve the
dispute and in case of complaints against a
broker/company, you should take of the
matter with Investor Grievances Cell (IGC) of
the exchange. The cell takes up complaints
for redressal in respect of trades executed on
the exchange of trades pertaining to
companies traded on the exchange. You
should lodge the complaints in the prescribed
form with all associated documents such as
contract notes, purchase/sale notes, bills,
statement of accounts and the member client
agreement.

30. Who should I approach for redressal of my complaints?

Despite all the precautionary measures taken
by you and the exchange, there might be
some grievances. The exchange tries to solve
and sort out all the grievances, in addition to
this you also have the freedom to take up the

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 grievances with SEBI, consumer forum and
court of law.

31. Whom should I address my complaints against a trading

member/registered sub-broker or against any company traded on
NSE?
You should address all complaints to the
Mumbai office or the regional office of NSE
based on the dealing office where the deals
are executed.

INVESTOR PROTECTION FUND

32. What protection is available from Investor Protection Fund?

The exchange maintains an Investor
Protection Fund to make good investor
claims, which may arise out of non-settlement
of obligations by the trading member, who
has been declared a defaulter, in respect of
trades executed on the exchange. The
maximum amount of claim payable from the
fund is Rs.10 lakhs in respect of trades on
NES.

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 ELECTRONIC TRADING: THE ROLE OF A MARKET MAKER

Market makers (sometimes referred to as “AX”) provide continuous

bid and offer prices within a prescribed percentage spread for shares
in which they are designated to make a market. There can be any
where from 4 to 40 (or more) market makers for a particular stock
depending on average daily volume. The market makers play an
important role in the secondary market as catalysts, particularly for
enhancing stock liquidity and thus generally for promoting long-term
growth the market.
Market makers must maintain continuous two-sided quotes (bid &
ask) within a predefined spread. A market is created when the
designated market maker quotes bids and offers over a period of
time. They ensure here is a buyer for your sell order and a seller for
your buy order at any time.
Once the market maker has entered a price, they are obligated to
either buy or sell at least 1000 securities at that advertised price.
Once the market maker has either bought or sold these shares they
may then leave the market and enter a new bid or ask price to make
a profit on their previous trade.
Let’s say that market maker has entered a sell order for Microsoft
(MSFT) and the bid/ask is $65.25/$65.30. The market maker can try
to sell shares of MFST at $65.30, if they do, they can then turn
around and enter a bid order to buy shares in MSFT. The market
maker can bid higher or lower than the current bid of $65.25, if
he/she enters a bid at $65.26 than a new market is created because
their bid price is now best bid. If the market maker attracts a seller at
the new bid price of $65.30 and bought these shares back at $65.26.
As a result, the market maker made $40(1000shares x 4 cents) on

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the difference between the two transactions. This might not seem like
much, but doing this repeatedly with larger order sizes can provide
lucrative profits. All day long market makers do this, providing
liquidity to individual and institutional investors. The major risk for the
market maker is the time elapsed between the two transactions, the
faster they can make the spread the more money they can potentially
make.
However, making money from the differences in bid and ask prices is
not only the function of market makers. Their 1st priority is to provide
liquidity to their own firm’s client, for which they will receive a
commission. They may also facilitate trading for other brokerage
firms, very similar to the specialist’s duties.
It should also be noted that market makers are requested by law to
give customers the best bid or ask price for each market order
transaction. This ensures a fair and reasonable two-sided market. If
these regulations were not in place, we would see customers getting
gouged and share prices being much more volatile than they already
are.

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A STEP-BY-STEP GUIDE TO ACTUAL INVESTING

Given below is a simple step-by-step

summary procedure for selecting the right share to
invest in:-
 Preliminary Screening
 Examining The Company
 Analyzing The Company’s Finances
 Making An Investment Decision

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 CONCLUSION

Tips For Successful Investing

 Basic Principles
 Do not invest in unlisted shares
 Invest in active shares
 Diversify your investment
 Don’t over diversify
 Ensure liquidity of your investment
 In all investments there is a trade-off between
reward and risk
 Investment risks can be reduced through
knowledge and experience.

 Understanding The Stock Markets

 The stock markets always over-react
 Stock market prices never go straight up or straight
down
 Greed and fear are the two most dominant
emotions that influence stock behavior
 The stock markets are irrational in the short run, but
rational over the long-term

 Tactics And Strategy

 Do not speculate unless you have a natural flair for
it

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  When investing in shares go for the long-term
investments
 The stock markets are dominated by short-term
traders and speculators
 Invest in companies with a low price earning ratio
 Beware of bargain hunting in stock markets
 Be on the lookout for rights renunciations
 Averaging up is a sound investment strategy
 A company is generally good at its management
 Invest in companies, which have a clearly
identifiable plus factor.

Apart from this above tips you should keep in mind that stock
market is like a drunkard man. So as a result stock market is un
predictable. It fluctuates any times in a day. Trading online is risky. It
is not a work of a child, even a learned man can make a mistake
while trading.

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