binggan
Joined: 15 Jan 2010
binggan's page
Posts: 1
27 Magic Points
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Subject: Offering more conveniences to the trader
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Fri Jan 15, 2010 4:32 am
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With the advent of automated forex trade, the financial sector is witnessing massive developments like never before. In the Indian stock market there are five trading days in the weekly settlement cycle because there is no trading on Saturdays and Sundays. Thus, a settlement cycle that starts on Wednesday (1 July 2009) will end on Tuesday (7 July 2009). All the trades which take place from Wednesday, 1 July 2009 to Tuesday, 7 July 2009 (Day 1-7) will be settled as follows:
• Monday, 13 July 2009: All securities delivered by the brokers to the National Stock Exchange (NSE) Clearing House (CH)
• Tuesday, 14 July 2009: All payments made by brokers to the NSE clearing house
• Wednesday, 15 July 2009: The CH makes the payment and delivery of shares to the brokers
This means that if an investor sold his shares on any day between 1 July and 7 July 2009, he will receive his payment on 16 July 2009. This enables an investor to trade in the market during the intervening period that is between Day 1 and Day 7, without having to make an investment or delivery of shares purchased. The following examples will explain this process:
Single transaction: You sold 100 ITC shares on Day 1 of the settlement cycle at Rs.800 for a total of Rs.80,000. Your broker will arrange delivery of the shares to the exchange on Monday (Day 13); receive payment from the stock exchange on Wednesday (Day 15). You will receive payment by Thursday (Day 16). Thus, it would not make any difference to the settlement of your sale had you sold it any day between Day 1 and Day 7. However, if you had sold the shares on Day 8, the settlement would fall into a different cycle.
Now imagine the huge set of accounting books and other options that were needed before the advent of the automated transaction process. Softwares are now available that helps to link the developments in the currency trade with the online stock trade.
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