List of Terms relating to Indian Stock Exchange

1. Group A Shares

These are the listed equity shares of large and well established companies
having broad investor base. These shares are actively traded and for
these shares the facility for carrying forward a transaction from one
accounting period to another is available. Naturally, these shares
attract a lot of speculative multiples. These facilities are not available
for group B shares. However, shares can be moved from Group B to
Group A and vice versa depending on criteria for shifting. For
instance the Bombay Stock Exchange has laid down several criteria
for shifting shares from Group B to Group A; such as, an equity base
of Rs. 10 crores, a market capitalization of Rs. 25-30 crores, a public
holding of 35 to 40 percent, a shareholding population of 15,000 to
20,000, good dividend paying status, etc.
2. Group B Shares

These are those listed shares which do not follow the criteria prescribed
for Group A shares. Group B shares are again divided into B1 and B
shares on BSE. B1 shares represent well traded scrips among B group
and they have weekly settlements.

3. Group C Shares

Under Group C, only odd lots and permitted securities are included. A
number of shares that are less than the market lot are called odd
lots. Market lot refers to the minimum number of shares of a
particular security that must be transacted on a stock exchange. Odd

lots have settlement once in a fortnights or once on Saturdays.

Permitted securities are those that are not listed on a stock exchange
but are listed on other exchanges in India. So they are permitted to
be traded on BSE. Odd lots cannot be easily transacted on the stock
exchange and so they are illiquid in nature.
4. Arbitration

Arbitration is a quasi-judicial process to resolve a dispute which is faster

and inexpensive. The stock exchange facilitates the process of
arbitration between the member and their clients. The disputes
between the parties are resolved through arbitration in accordance
with the by-laws of the exchange. Arbitration is required in the
matters such as settlement of claims, differences and disputes
between one member and another, between a member and his
clients, sub-brokers or authorised clerks etc.

5. Arbitrage

Arbitrage is undertaken to make a profit out of differences in prices of a

security in two different markets. It is a highly skilled speculative
activity. If the prices of a security differ substantially in the two stock
markets, the speculator purchases the security in the market where it
is cheap and sells it at a profit in another market where it is quoted
high and thus makes huge profit. The speculator has to act very fast
since the prices are highly sensitive and they may get equalised
within a short span of time.
The arbitrage may be carried on between the two markets within the
country or in two different countries. The former is called 'domestic
arbitrage' and the latter 'foreign arbitrage'. Arbitrage ultimately
helps in equalising the prices of securities at different places; hence,

it is beneficial to market. The brokers who carry arbitrage activity are

called arbitragers.
6. Auction

An auction is a mechanism utilised by the exchange to fulfil its obligation

to a counter party member when a member fails to deliver good
securities or make the payment. The stock exchange, in such cases,
arranges to buy good securities through auction and deliver them to
the buying broker or arranges to realise the cash and pay it to the
selling broker.

7. At Best Order

It is an order from an investor for the purchase or sale of securities

wherein the investor does not specify a price at which the purchase
or sale of securities should be made by broker on his behalf. Such
order must be executed by the broker at best possible price. The
client may also fix a time frame within which the order has to be
executed. e. g. "Buy 200 Reliance Industries at best".

8. Authorised Clerk

An authorised clerk is a representative appointed by a stock broker to

assist him in the securities trading. A broker cannot remain present
all the time on trading floor of stock exchange, hence he requires
assistants to carry out trading activities on his behalf. As per the
rules of the stock exchange, each broker can employ a specified

number of authorised clerks to transact his business. They are also

called 'member assistants'. At Bombay, Madras & Calcutta Stock
exchanges the number of authorised clerks allowed by a broker are 5,
3 and 8 respectively. Generally, authorised clerks are given power of
attorney to act on behalf of broker & hence they can sign on behalf of
brokers.
9. Bad Delivery Cell

A delivery of shares turns out to be bad if there is a company objection on

account of signature difference, or if shares are fake, forged or stolen
etc. In such a case the investor can approach the bad delivery cell of
stock exchange through his broker for correction or replacement with
good delivery.

10. Bid and Offer

Bid refers to the price of a share which a prospective buyer is ready to pay
for particular scrip. Offer is the price at which a share is offered for a
sale on stock exchange.

11. Brokerage

Brokerage means the commission charged by a broker for purchase or sale

of securities done through him. The maximum brokerage chargeable
as stipulated by SEBI is at present 2.5 % of the trade value.

12. BOLT

Bombay Stock Exchange has introduced BOLT. That is, BSE - On - Line Trading - System for listed securities. Trading is order driven as quote
driver system is discontinued. For this purpose BSE classified the
listed securities into 5 categories. Viz. A, B1, B2, F, G and Z. Out of
these A, B1 and B2 groups represent equity segment. Group F
represents securities which have fixed income, 'G' group represents
Government Securities whereas 'Z' represents those companies which
failed to comply with listing norms or failed to redress investors'
complaints or failed to comply with depository requirements. Trading
of securities of listed companies of other exchanges is also permitted
and these securities are categorised in 'Permitted Securities.'
13. 'Badla' or Carry Forward Trading

Carry Forward or 'Badla' refers to the trading in which the settlement of a

transaction is postponed to the next settlement period on payment of
some charges by way of interest known as Badla Charges. Carryover
or Badla is a facility given to the speculator by the other party to
carry forward the transaction from one settlement period to another.
The scrips in specified categories (i.e. Group A) alone could be carried
forward. Badla charges vary from period to period and are fixed
fortnightly.

14. Bulls

Bulls are those brokers of stock exchange who are very optimistic of the
rise in prices of securities. Hence, they go on buying shares in
expectation of selling them at higher prices later. Thus, in a bull

market there will be excess of purchase over sales. Bulls are also
called 'Tejiwallas'.

15. Bears

Bears are those member brokers of stock exchange who are always
pessimistic in approach. They expect a fall in prices of securities.
Hence,

they

go

on

selling

securities.

They

are

also

called

Mandiwallas. A Bearish market refers to a market where prices of

shares are falling continuously where there are excess of sales over
purchases.
16. Blank transfers

Blank transfers facilitate speculative activities through badla transactions.

If a seller (or transferer) of security simply signs the transfer form
without specifying the name of buyer (or transferee), it is called a
blank transfer. Badla transactions involve temporary purchases and
sales of securities. If they have to be registered, it involves lot of
inconveniences due to registration fees, stamp duty, etc. Hence, to
avoid such inconveniences blank transfers are increasingly used to
carryover the transaction.

17. Circuit breakers

Its a mechanism by which Stock Exchanges temporarily suspend the

trading in a security when its prices are volatile and tend to breach
the price band.

18. Clearing

Clearing is a process through which all transactions between members of

stock exchange are settled through multilateral netting.

19. Company objection

For transfer of a security a transferer sends a scrip certificate along with

the transfer deed to the company. In some cases the company refuses
the registration of transfer on account of signature difference, or
fake, forged or stolen shares. In such cases the company returns the
documents sent along with a letter which is termed as a 'company
objection'.

20. Cornering

It refers to the process of holding entire supply of a particular security by

an individual or a group of individuals with a view to dictating terms
to the short sellers and earning more profits.

21. Clearing Settlement

Under this method, the transactions are cleared and settled through the
clearing house. Usually those securities which are frequently traded
and are usually in demand are cleared through the clearing house.

22. Client brokers

These brokers do simple braking business by acting as intermediaries

between the buyers and sellers and they earn only brokerage for
their services rendered to the clients.

23. Cum-bonus

The shares are called cum-bonus when a purchaser is entitled to receive

the current bonus declared by company.

24. Cum-rights

The share is described as cum-rights when a purchaser is entitled to

receive the current-rights shares declared by the company.

25. Day order

A day order, as the name suggests, is an order which is valid for the day
on which it is entered. If the order cannot be executed during the
day, it gets cancelled automatically.

26. Discretionary order

It is an order placed by a client to buy or sell shares at whatever price the

broker thinks reasonable. This is possible only when the client has
complete faith on the broker.

27. Ex-bonus

The share is described as ex-bonus when a purchaser is not entitled to

receive the current bonus, the right to which remains with the seller.

28. Ex-rights

The share is described as ex-rights when a purchaser is not entitled to

receive the current rights, the right of which remains with the seller.

29. Forward trading

Forward trading refers to trading where contracts traded today are settled
at some future date at prices decided today.

30. Good-bad delivery

A share certificate together with its transfer form which meets all the
requirements of title transfer from seller to buyer is called good
delivery in the market.
Delivery of a share certificate, together with a deed to transfer, which
does not meet requirements of title transfer from seller to buyer is
called a bad delivery in the market.

31. Hand Delivery Settlement

Under this method, the delivery of securities and payment are affected
within the time stipulated in the agreement or within 14 days from
the date of contract whichever is earlier. Most of the transactions are
conducted on the basis of hand delivery settlements.

32. Insider Trading

It means trading in a company's shares by a person who is associated with

that company. As a result of his association he has a secret price
sensitive information about the company such as expansion plans,
financial results, takeover bid, bonus or right issue etc. He tries to
exploit that information and maximise his profit through trading in
the scrip of that company. It is a crime and hence prohibited by stock
exchanges.

33. Jumbo certificate

A jumbo share certificate is a single composite share certificate issued by

consolidating-a large number of market lots.

34. Jobbers

A jobber is a professional independent broker who deals in securities on

his own behalf. Like brokers he does not purchase or sell securities on
behalf of a client for a commission. Instead he purchases the
securities in his own name and sells them out when the prices of
those securities increase and thereby earn a profit. He is like a
stockist of security of different companies. He buys securities as a
owner, keeps them for a very short period and sells them for profit
known as 'jobbers turn'. He works for a profit and not for a
commission.

35. Lame ducks

Lame ducks are bear brokers (expecting decline in prices) who ultimately
sell the securities ultimately at a loss by making wrong moves. They
lose in market due to the wrong prediction that share prices will
decline but in reality they increase. Generally, they contract to sell
securities which they do not posses, therefore, they are caught in a
wrong foot.

36. Limit order

It is an order for the purchase or sale of a scrip at a fix price specified by

the client. e.g. "Sell 100 TISCO shares @ Rs. 280".

37. Market Lot

Market lot refers to the minimum number of shares of a particular security

that must be transacted on the exchange. Market lot may be 10
shares, 20 shares, 50 shares or 100 shares. Multiples of the market
lot may also be transacted. In demat scrips the market lot is 1 share.

38. No-delivery period

Whenever a book closure or record date is announced by a company, the

Exchange sets a no-delivery period for that security. During this
period, trading is permitted in that security. However, these trades
are settled only after the no-delivery period is over. This is done to
ensure that investor's entitlement for corporate benefits is clearly
determined.

39. Odd lot

A number of shares that are less than the market lot are known as odd
lots. Under the scrip based delivery system, these shares are
normally traded at a discount to the prevailing price for the
marketable lot.

40. Order-driven trading

It is a trading initiated by buy I sell orders, from investors / brokers.

41. Over-the Counter trading

Trading in those stocks which are not listed on a stock exchange.

42. Open order

It is an order to buy or sell a security received from a client without fixing

any time limit or price limit on the execution of the order. It is similar
to discretionary order.

43. Pay-in

Pay-in day is the designated day on which the securities or funds are
delivered / paid in by the members to the clearing house of the
Exchange.

44. Pay-out

Pay-out is the designated day on which securities and funds are delivered
I paid out to the members by the clearing house of the Exchange.

45. Price band

The daily / weekly price limits within which price of a security is allowed to
rise or fall.

46. Price rigging (or Rigging the market)

When a person or persons acting in concert with each other collude to

artificially increase or decrease the price of a security, that process is
called price rigging or rigging the market. It is an undesirable activity
since it prevents the free interplay of demand and supply. Stock
exchanges and SEBI try to discourage such practice.

47. Quote-driven trading

Trading where brokers / market makers give buy I sell quote for a scrip
simultaneously.

48. Record date

Record date is the date on which the beneficial ownership of an investor is

entered into the register of members. Such a member is entitled to
get all the corporate benefits.

49. Rematerialisation of shares

It is the process through which shares held in electronic form in

depository are converted into physical form.

50. Screen based trading

When buying / selling of securities is done using computers and matching

of trades is done by a stock exchange computer.

51. Settlement

It refers to the scrip-wise netting of trades by a broker after the trading

period is over.

52. Settlement guarantee

Settlement

guarantee

is

the

guarantee

provided

by

the

clearing

corporation for settlement of all trades even if a party defaults to

deliver securities or pay cash.

53. Splitting /Consolidation

The process of splitting shares that have a high face value into shares of a
lower face value is known as splitting. The reverse process of
combining shares that have a low face value into one share of higher
value is known as consolidation.

54. Spot trading

Trading by delivery of shares and payment for the same on the date of
purchase or on the next day.

55. Stop transfer

It is an instruction given by a registered holder of shares to the company

to stop the transfer of shares in his name as a result of theft,
misplacement, loss of share certificates.

56. Stags

Stags are those members in share market who neither buy nor sell
securities in stock exchange. They simply apply for subscription to
new issues expecting to sell them at a higher price later when the
issues are quoted on stock exchange. Generally, stags buy new issues

and sell them on allotment or even before allotment for a profit.

Since they act fast they are called stags - a fast runner.

57. Spot delivery settlement

These transactions are to be settled by delivery and payment on the date

of contract or on the next day.

58. Special delivery

Delivery and payment made anytime exceeding 14 days, but not exceeding
2 months, following the date of the contract as may be stipulated
when entering into the bargain and permitted by the Governing
Board or the President.

59. Stop Loss Order

It is an order by a client to sell as soon as the prices fall upto a particular

level or to buy when the price rises up to a specified level. This is
mainly to protect the clients against a heavy fall or rise in prices so
that they may not suffer more than the pre-specified amount.

60. Trade guarantee

Trade guarantee is the guarantee provided by the clearing corporation for

all trades that are executed on the exchange. In contrast, at the
settlement guarantee, guarantees the settlement of trade after
multilateral netting.

61. Transfer deed

A transfer deed is a form that is used for effecting transfer of shares or

debentures and is valid for a specified period. It should be sent, to
the company along with the share certificate for registering the
transfer. The transfer deed must be duly stamped and signed by or on
behalf of the transferor and transferee and complete in all respects.

62. Wash Sales

Wash sales is a kind of fictitious transaction through which a speculator is

able to reap huge profit by creating a misleading picture in the
market. He makes fictitious sale of a security and then makes a
purchase of the same security at higher price through another broker.
Thus, he creates a misleading opinion in the market as if the price of
a security in question is rising. As a result of such false opinion, when
the price of the security actually rises the speculator sells it to earn a
good profit. Wash sale is a kind of cheating hence stock exchanges
impose severe penalty on such sales.

63. Wolves

These are the brokers who are fast and smart speculators. They quickly
perceive changes in the trends in the market and trade fast to make
profit. They are not generally caught in the wrong foot.