FORMALISING RELATIONSHIP

Prior to start of buying/selling, NSE regulations stipulate us to obtain 'Client Registration Form' containing the prescribed information about clients and to enter into prescribed 'Client-Member Agreement'. The relevant forms can be obtained on request.

Ours is an agency relationship. An agent, as per the Indian Contract Act, is a person employed to do any act for another or to represent another in dealings with third persons. We, who buy and sell securities on your behalf are your agents. However, the transactions as well as our relations are governed through NSE's regulations. Adherence to such regulations cement our relationship. In a short while, we shall review the whole transaction process to understand its implications.

BROKERAGE & LEVIES

NSE permitted maximum brokerage @ 2.5% of the value of the trade with a minimum of 30 paisa per share. The service tax (presently @ 12.24 % of the brokerage and transaction charges) is also to be borne by the client, besides we may also recover:

• Transaction charges as levied by NSE.
• STT as levied by NSE.
• Stamp duty as levied by NSE.

BROKERAGE APPLICABLE

The rate of brokerage applicable to a particular client is a matter of agreement between us and the client. The rate is normally determined on the basis of some specific criteria. Different brokerage rates may apply for different type of transactions. For example, the transactions not resulting in delivery of scrips attract lesser brokerage, provided adequate cash margins are provided.

MARGINS

The maximum value of order is determined by the amount of margins paid. You are therefore supposed to pay higher of;
i) 20% of order value / pending positions; or ii) losses booked; or iii) notional loss calculated daily in cases where price is adverse, assuming such pending position is closed at closing price.

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Let us look at certain points regarding dealing in securities:

Demat Security
A security issued or converted into electronic form consequent upon extinguishment of existing paper instrument.

DEPOSITORY

Depository Act, 1996 introduced Depository System of holding and handling securities to improve the efficiency of the capital market and to eliminate the various problems connected with dealings in physical securities. Depository holds securities in an electronic form on behalf of the owners. This is discussed in detail in part II "Understanding Depository System"

TRADE SETTLEMENT CYCLE OF DEMAT SECURITIES

TRADABLE SECURITIES

Shares, Debentures, Bonds and Units of Mutual Funds are traded at NSE. NSE has about 1016 companies listed representing the length, bredth and diversity of the Indian economy which includes from hi-tech to heavy industry, software, refinery, public sector units, infrastructure and financial services. This is to ensure that only those companies which meet certain standards are listed at NSE and this list is reviewed periodically.

BOOK-CLOSURE /RECORD-DATE

All the benefits, like dividend, bonus, rights etc. as announced by the company are available only to such persons who are shareholders on the cut-off date fixed for this purpose known as 'book-closure' or 'record-date'. You may even ask us the likely dates at the time of entering the order. Further, a 'book-closure' affects liquidity materially.

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An executed order is known as 'Trade'. It creates legally enforceable rights and Obligations on your as well as on our part.

ORDER PROCEDURE

Ordering is very critical and to be accurate, has to be very specific. The following need to be considered before placing an order:

TRADE RESULTING IN DELIVERY

When a potential purchaser is entitled to receive the current bonus, dividend and rights which have been announced for a share but the benefit entitlement date i.e. 'Book-Closure' or 'Record-Date' is yet to come.

It is a special type of order for sale or purchase of securities. Two price limits are specified with such orders, i.e., trigger price and the order price. These orders do not figure in the order book until the market price reaches the trigger price. When the market price touches the trigger price such order enters into the order-book automatically as a normal order and is executed as per normal order matching process. This mechanism is meant to protect the profit or limit the loss as explained below:

You bought 100 shares of X Co. @ Rs. 120 each. The present price of the scrip is Rs. 135. Anticipating more increase in price you do not want to book profit at present but wish to protect the profit of Rs. 10 per share. You would place a stop-loss order with a trigger price of Rs. 131 and limit of Rs. 130. The order enters into order book when the market price falls to Rs. 131 and the shares are sold if there is a buyer for Rs. 130 or higher. Where there is no buyer, the order shall remain pending at Rs. 130 as normal order.

ORDER PLACEMENT

Communication
While communicating, please clearly specify; name / account number; the scrip name; quantity; buying or selling. Where it is not in writing, kindly ensure that the receiver repeats it to you to confirm that you have been properly understood. Investors can further specify any of the following conditions:

• Price: System accepts the order within the price band for that particular day only. Market Rate (MR), the rate available at the time of entering order; Limit Order, specified prince.
• Disclosed Quantity: When a client don’t want to show his ordered quantity, he may order to show 10% or higher of the total quantity.
• Modification/Cancellation: Cancellation or Modification with respect to quantity, price and duration is permitted anytime before their execution.

CONFIRMATION PROCEDURE

Telephonic / Fax Confirmation
Out endeavout is always to confirm all the trades duting trading session itself These are re-confirmed 4: 15 p.m. onwards through phone/fax/modem ete. (after day-end processing is over). The clients who may not be available for reconfirmation should always revert.

Contract Note
A contract note issued in the prescribed format establishes a legally enforceable relationship between broker and client in respect of trades stated in that contract note. A serially numbered and duly stamped pre-printed contract note for purchase/sale of securities is to be issued to a client within 24 hours of the execution of a trade specifying date of transaction, order number, trade time, trade number, market rate, brokerage charged, net rate, service-tax and other levies, if any alongwith activity report generated by NSE system and a copy is to be retained by us. We send the contract note by post on the evening of trade itself. If not received in normal course, please do ask for a copy thereof.

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BECOMING INDISPENSABLE

Any client adhering to payment and delivery commitments irrespective of size of brokerage earned is indispensable to Vivek.

MEETING OUR COMMITMENTS

We are committed to reciprocating your adherence to the prescribed schedule for meeting your commitments. It is helpful to know pay-in and pay-out for smooth working relationship. In Demat segment, pay-in and pay-out is on same day which is 3rd day from the date of transaction.(till 10 A.M. On the 3rd day)

PAYMENT FOR SECURITIES SOLD

Payment for the securities sold is to be made by us to the client within two working days of pay-out by the Exchange.

DELIVERY AGAINST PURCHASES
Delivery of securities purchased is also made by us to the client within two working days of pay-out.

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