An investor gives the broker clear instructions about the number of s…

An investor gives the broker clear instructions about the number of shares and the price at which they should be bought. Which document does the broker issue to the investor at this stage?

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Order confirmation slip

Option (1) Contract note — Incorrect. The broker issues the contract note within 24 hours after the trade is executed. It records the shares, price, date, time and brokerage.

Option (2) Trade confirmation slip — Incorrect. This slip comes later, when the order is executed electronically at the price mentioned.

Option (3) Order confirmation slip — Correct. Placing an order means telling the broker the number of shares and the price. At this stage the broker issues an order confirmation slip to the investor.

Option (4) Client registration form — Incorrect. The investor signs this form with the broker-client agreement, before placing any order. The broker does not issue it.

NCERT (Pre-rationalised Edition): “Steps in the Trading and Settlement Procedure … 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. An order confirmation slip is issued to the investor by the broker.
4. The broker then will go on-line and connect to the main stock exchange and match the share and best price available.
5. When the shares can be bought or sold at the price mentioned, it will be communicated to the broker’s terminal and the order will be executed electronically. The broker will issue a trade confirmation slip to the investor.”