Select the correct order of trading and settlement procedure on the s…

Select the correct order of trading and settlement procedure on the stock exchange.

A. Signing a broker - client agreement
B. Open a DEMAT Account
C. Placing an order with a broker to buy or sell shares.
D. Broker will go online to match share and best price available.

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → A, B, C, D

A. Signing a broker - client agreement — first. An investor cannot trade directly on a stock exchange. He must first approach a registered broker, sign a broker-client agreement and a client registration form, and give details such as his PAN.
B. Open a DEMAT Account — second. Shares are now held in electronic form. So the investor opens a demat account with a depository participant to hold and transfer them, along with a bank account for the money side.
C. Placing an order with a broker to buy or sell shares. — third. Only now can he place an order, telling the broker how many shares to buy or sell and at what price.
D. Broker will go online to match share and best price available. — fourth. The broker then connects to the exchange online and matches the order with the best price available. When a match is found, the order is executed and settlement follows.

Note: Although the chapter ‘Financial Markets’ was dropped from the NCERT textbooks during rationalisation, it has stayed in the NTA syllabus every year since 2022, except for 2025, and it is part of the syllabus again from 2026. This question is therefore based on the pre-rationalised NCERT, an extract from which is given below.

NCERT (Pre-rationalised Edition): “Steps in the Trading and Settlement Procedure … The following steps are involved in the screen-based trading for buying and selling of securities:
1. If an investor wishes to buy or sell any security he has to first approach a registered broker or sub-broker and enter into an agreement with him. The investor has to sign a broker-client agreement and a client registration form before placing an order to buy or sell securities. …”

“2. The investor has to open a ‘demat’ account or ‘beneficial owner’ (BO) account with a depository participant (DP) for holding and transferring securities in the demat form. …”

“3. The investor then places an order with the broker to buy or sell shares. Clear instructions have to be given about the number of shares and the price at which the shares should be bought or sold. The broker will then go ahead with the deal at the above mentioned price or the best price available. …”