The market for long term securities like bonds, equity
and preferred stocks is divided into primary and
secondary market. The primary market deals with the
new issue of securities. Outstanding securities are
traded in the secondary market, which is commonly
known as stock market or stock exchange.
In secondary market, the investor can sell and buy
securities. Stock market predominantly deals in equity
Functions of stock exchange
Maintains active trading
Fixation of prices
Ensures safe and fair dealing
Aids in financing the
Dissemination of information
Self regulating organisation
A broker acts as a mediator between stock exchanges
and investors. He purchases and sells securities on
behalf of investors with their permission.
The broker has to abide by the code of conduct laid by
SEBI. The code of conduct prevents the malpractice,
manipulation and gives other statutory requirements.
If a broker is involved in manipulation, or price rigging
or gives the false information, his registration is likely
to be suspended. If the rules and regulations regarding
insider trading and take over codes are not adhered to
the registration may even be cancelled.
The broker and investor
Broker should provide adequate information about
Should be capable of giving short term and long
term suggestions to the investors.
Ability to confirm sale and purchase of securities
He should be able to provide price quotes quickly
He should have a good name in the society
Should have contact with other stock exchanges to
executes the orders profitably
The broker should also offer incidental services like
arranging for financing the clients transaction.
Types of orders
Best rate order
Stop loss order