The trading procedure at stock exchanges can be complex, and the specific procedures can vary depending on the exchange and the types of securities being traded. However, in general, the trading procedure at stock exchanges involves several key steps, including market opening, order placement, order matching, trade confirmation, and trade settlement. Market Opening: The stock exchange’s market opening is typically announced, and trading begins at the designated time. The exact time of the market opening may vary depending on the exchange, but it is typically during normal business hours. The opening is often signaled by a bell or other announcement, and traders begin placing orders to buy or sell securities. Order Placement: Traders place orders to buy or sell securities through their brokers. Orders can be placed using various methods, including phone, electronic trading platforms, or directly on the exchange floor. These orders are typically accompanied by specific instructions regarding Continue reading
Investment Ideas
Factors Determining Spot Exchange Rates in Forex Markets
It is the interplay of the forces of demand and supply that determines the exchange rate between two currencies in a floating rate regime. The exchange rate between, say, the rupee and US dollar depends upon the demand for US dollars and the supply of US dollars in the Indian foreign exchange market. The demand for foreign currency comes from individuals and firms who have to make payments to foreigners in foreign currency mostly on account of the import of goods and services and purchase of securities. The supply of foreign exchange results from the receipt of foreign currency normally on account of export or sale of financial securities to foreigners. Important Factors Determining Spot Exchange Rates 1. Balance of Payments: Balance of Payments represents the demand for and supply of foreign exchange which ultimately determine the value of the currency. Exports, both visible and invisible, represent the supply side Continue reading
Strategies of Futures Contracts
A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Futures contracts are special types of forward contracts in the sense that the former are standardized exchange-traded contracts. Futures Trading Strategies We look here at some strategies of futures contracts. We refer to single stock futures. However since the index is nothing but a security whose price or level is a weighted average of securities constituting an index, all strategies that can be implemented using stock futures can also be implemented using index futures. Hedging: Long security, sell futures Speculation: Bullish security, buy futures Speculation: Bearish security, sell futures Arbitrage: Overpriced futures: buy spot, sell futures Arbitrage: Under-priced futures: buy futures, sell spot 1. Hedging: Long security, sell futures Futures can be used as an effective risk–management tool. Take the case of an investor Continue reading
What is Investment ? – Concept, Definition and Features
Concept of Investment Man, it is said, lives on hope. But, hope is only a necessary condition for life, but not sufficient. There are many other materialistic things that he needs – food, clothing, shelter, etc. And, like his hope, his needs too keep changing through his life. To make things more uncertain, his ability to fulfill the needs too changes significantly. When his current ability (current income) to fulfill his needs exceeds his current needs (current expenditure), he saves the excess. The savings may be buried in the backyard, or hidden under a mattress. Or, he may feel that it is better to give up the current possession of these savings for a future larger amount of money that can be used for consumption in future. In contrast to the above situation, if the amount available for current consumption is less than the current needs, he has to Continue reading
Types of Credit Derivatives
In finance, a credit derivative is a securitized derivative whose value is derived from the credit risk on an underlying bond, loan or any other financial asset. In this way, the credit risk is on an entity other than the counter-parties to the transaction itself. This entity is known as the reference entity and may be a corporate, a sovereign or any other form of legal entity which has incurred debt. Credit derivatives are bilateral contracts between a buyer and seller under which the seller sells protection against the credit risk of the reference entity. Similar to placing a bet at the racetrack, where the person placing the bet does not own the horse or the track or have anything else to do with the race, the person buying the credit derivative doesn’t necessarily own the bond (the reference entity) that is the object of the wager. He or she Continue reading
Rolling Settlement System
Rolling Settlement process , also known as Compulsory Rolling Settlement (CRS) where trades on a stock exchange were to be accounted for and settled on T i.e. trade day plus “X” trading days, where “X” could be 1,2,3,4 or 5 days. Thus, in essence, it means that if say a T+n, where n is the number of days system of rolling settlement was to be followed, trades accounted for on the T i.e. trade day were to be settled on the nth working day minus the T day. The Account period of settling transactions was followed in India for a long time. It worked on the idea that transactions for an entire week were to be settled on a pre-specified date the very next week. However, this process was considered too technical and cumbersome. This settlement risk is lowered in Rolling Settlement as the settlement of debts accounting to different Continue reading