Identify the correct sequence of trading & settlement procedure:
(A) The investor has to sign a broker client agreement.
(B) The investor has to open a 'Demat' Account.
(C) An order confirmation slip is issued to the investor by the broker.
(D) The broker will then go online and connect to the main stock exchange.
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)
The steps of buying or selling shares follow this order.
Step 1: (A) The investor signs a broker-client agreement — First. The investor first goes to a registered broker and signs the broker-client agreement and a client registration form before placing any order.
Step 2: (B) The investor opens a ‘Demat’ account — Second. This account is needed to hold and transfer shares in electronic form.
Step 3: (C) An order confirmation slip is issued — Third. The investor places the order with the broker, and the broker issues an order confirmation slip to the investor.
Step 4: (D) The broker goes online — Fourth. The broker then goes online and connects to the main stock exchange to match the share and the best price available.
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 … 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. He will also have to open a bank account for cash transactions in the securities market.” “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.” |