The Life Cycle of a Trade in the Indian Stock Market
- Shree Naman Securities and Finance
- Oct 9, 2024
- 1 min read
The life cycle of a trade in the Indian stock market involves several key stages, ensuring a smooth and efficient process from order placement to settlement. Here's a step-by-step breakdown:
Order Placement: The process begins when an investor places an order to buy or sell a stock through a trading platform. The order specifies the stock, quantity, and type (market order, limit order, etc.).
Order Matching: The trading platform matches the buy and sell orders from various investors. This is done through an electronic system that ensures the best possible match based on price and quantity.
Order Execution: Once matched, the order is executed, and the trade is confirmed. The investor's account is debited or credited accordingly.
Clearing: The clearing process involves calculating the obligations of the buyer and seller. A clearinghouse acts as an intermediary to ensure that both parties fulfil their obligations.
Settlement: The final stage is settlement, where the actual transfer of securities and funds takes place. In India, the T+1 settlement cycle is followed, meaning the trade is settled one working day after the trade date.
Post-Settlement Activities: After settlement, the trade is closed, and the investor receives confirmation of the transaction. Any discrepancies or issues are resolved during this phase.
This structured process ensures that trades are executed efficiently and transparently, maintaining the integrity of the market.