How Does Trading Takes Place?
Trading of shares in a stock exchange takes place through Registered Stockbrokers, Transfer Agent etc.
Buyer gets in touch with a Broker, and gives him all the details of shares he wants to buy. Then the broker strikes a requisite deal and receives share certificate, and transfer form. After deducting, documents to the buyers.
As for seller, he also gets in touch with a broker and gives him details along with share certificates and transfer forms. Once the deal is struck, broker receives the payment and deducts his commission.
Each stock exchange has certain listed and permitted securities that are traded on its floor.
Apart, from NSC, and OTC, trading takes place mainly through on open outcry system on the trading floor of the exchange during the official trading hours.
There are several "notional" trading posts for different securities where the buyer and seller get in contact with each other. These buyers and seller, are authorized Brokers or Agents or a shareholder. Buyer make their bids and sellers make their offers, and bargains are closed at the mutually agreed upon prices. In stock, where jobbing is done, the "jobber", plays an important role. This is floor trading, where buyer and seller transact face to face using a variety of signals.
Screen based Trading
In a screen-based system, the trading ring is replaced by the computer screen and distant participants can trade with each other through the computer network. A large number of participants, geographically separated can trade simultaneously at high speeds. The screen based trading systems are of two types:
A) Quote Driven System, and
B) Order Driven System, and
Under the quote driven system for trading, market makes input two way quotes in the system. Market players, then contact the market makers over telephone, negotiable, and trace. Under the order driven system, client place their orders with the brokers, which are then fed, into the system. These are then automatically matched according to certain rules.
Procedure With Regard To Transfer of Shares
- Transfer of shares, is one of the most important right, of a member. Even Articles of Association, of a company, cannot take away this right, although it can place certain restrictions on transfer of shares.
- One of the common restriction on transfer in a private company is the pre-emption clause which states that the intending transfer, must first after the shares to the existing members of the company, so long as a member can be found to purchase them at a fair price.
- Transfer of shares, involves, two types of transaction, namely:
-Buying of shares, i.e. transferee
-Selling of shares, i.e. transferor