STOCK EXCHANGE TRADING MECHANISM :

The stock exchange is a key institution facilitating the issue and sale of various types of securities. It is a pivot around which every activity of the capital market revolves. In the absence of the stock exchange, the people with savings would hardly invest in corporate securities for which there would be no liquidity (buying and selling
facility). Corporate investments from the general public would have been thus lower.

Stock exchanges thus represent the market place for buying and selling of securities and ensuring liquidity to them in the interest of the investors. The stock exchanges are virtually the nerve centre of the capital market and reflect the health of the country’s economy as a whole.

Securities are traded in three different ways in stock exchanges ring, namely–settlement basis, spot basis and cash basis.

Shares of companies which are not in the spot list are known as ‘cash’ shares or ‘B’ Category shares. They are traded on cash basis or delivery basis and cannot be traded on settlement basis. The actual delivery of securities and payment has to be made on or before the settlement date fixed in the case of cash basis trading.

As far as spot trading is concerned the actual delivery of securities must be made to the buying broker within 48 hours of the contract. It is expected that the seller would be paid by the buyer immediately on delivery of securities.

All securities whether the specified list or cash list can be traded on spot basis or cash basis.