The investor has to sign which document with a registered broker or sub broker before placing an order to buy or sell securities under screen based trading system ?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Broker client agreement
Option (1) Non disclosure agreement — Incorrect. This is a contract to keep information secret. It has no place in the trading procedure.
Option (2) Broker registration form — Incorrect. Registration is what the broker does with SEBI to become a member. What the investor fills is a client registration form, which is a different document.
Option (3) Agreement to Sell — Incorrect. This is a contract to transfer goods or property at a later date. It is not a document of the securities market.
Option (4) Broker client agreement — Correct. In screen based trading, every order goes through a member of the exchange. So before the first order is placed, the investor and the broker must put their relationship in writing. The broker-client agreement states the rights and duties of both sides, the brokerage to be paid, and how a dispute will be settled.
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): “The following steps are involved in the screen-based trading for buying and selling of securities: |