Arbitrage: Buying securities in one country, currency or market, and selling in another to take advantage of price differences.

Arbitration: Settlement of claims, differences of disputes between one member and another and between a member and its clients, authorized clerks, sub-brokers, etc, through appointed arbitrators. It is a quasi-judicial process that is faster and is an inexpensive way of resolving a dispute. The exchange facilities the process of arbitration between the member and their clients. After both the parties select the arbitrator and after due deliberation and after considering the merits of the case an award is given. In India, Arbitration is governed by the Arbitration and Conciliation Act 1996.

auction: An Auction is a mechanism utilized by the exchange to fulfill its obligation to a counter party member when a member fails to deliver good securities or make the payment. Through Auction, the exchange arranges to buy good securities and deliver them to the buying broker or arranges to realize the cash and pay it to the selling broker.

bad delivery cell: When delivery of shares turns out to be bad because of company objection etc. the investor can approach the bad delivery cell of the stock exchange through his broker for correction or replacement with good delivery

bid and offer: Bid is the price of share a prospective buyer is prepared to pay for particular scrip. Offer is the price at which a share is offered to sale.

Bull: An investor who buys a security in the hope of selling it at a higher price, as he thinks the market will go up. A bull market is a rising market in which bulls would prosper.

Bear: An investor who sells a security in the hope of buying it back at a lower price, as he thinks the market will go down. A bear market is a falling market in which bears would prosper.

Badla" Carrying forward of transaction from one settlement period to the next without effecting delivery or payment is called 'badla'. "BADLA" means something in return. The Badla System has been in practice for several decades in the stock exchanges. SEBI has prohibited Badla transactions now in Indian Stock Exchanges.

Bid price: The buying price for securities in the market.

Bonds: Debt securities which generally entitle the holder to a fixed-rate of interest during their life and repayment of the amount of the bond at maturity.

Blue Chips: Blue Chips are shares of large, well established and financially sound companies with an impressive record of earnings and dividends. Generally, Blue Chip shares provide low to moderate current yield and moderate to high capital gains yield.

circuit breakers: It is a mechanism by which Exchange temporarily suspends the trading in security when its price are volatile and tend to breach the price band.

Clearing House: Each exchange maintains a Clearing House to act as a central agency for effecting delivery and settlement of contracts between all members. The days on which the members pay or receive the amounts due are called pay-in or pay-out days respectively.

Company Objection: After buying the shares, the investors' send the certificate along with the transfer deed to the company for transfer and registration in their names. In certain cases the company for reasons such as signature difference or fake/forged/stolen shares or court injunction preventing transfer rejects the registration. In such cases the company may return the share certificate and transfer deed along with the letter termed as objection memo. All such cases are identified as Company objections.

Contract Note: Contract note is a statement of confirmation of rate done on a particular day and on behalf of a client. A contract note is issued in the prescribed format, in a manner establishing legally enforceable relationship between the members in respect of the trade stated in that contract note.

cum-bonus: The shares are described as cum-bonus when potential purchaser is entitled to receive the current rights.

cum-rights: The shares are described as cum-rights when a potential purchaser is entitled to receive the current rights.

Disclose Quantity (DQ) order: The system provides the facility for entering orders with quantity conditions: DQ order allows the member to disclose only a part of the order quantity to the market. DQ should not be less than 10% of the order Quantity. And at the same time should not be greater than or equal to the order quantity.

Global Depository Receipts (GDRs): Global Depository Receipts means any instrument in the form of a depository receipt or certificate (by whatever name it is called) created by the Overseas Depository Bank outside India and issued to non-resident investors against the issue of ordinary shares or Foreign Currency Convertible Bonds of issuing company. Since April 1992, Indian companies with good track record are permitted to raise funds from the international market by way of Global Depository Receipts(GDRs). GDRs are issue in the name of a foreign bank and normally listed on Luxembourg or London Stock Exchange. This provides opportunities to international investors to participate in the Indian capital Market without going through the hassles of paper-based settlement system. Underlying company shares of GDR are held by a custodian bank in India . A GDR issued in America is an American Depository Receipt (ADR).

The holder of a GDR does not have voting rights. The proceeds are collected in foreign currency thus enabling the issuer to utilize the same for meeting the foreign exchange component of project cost, repayment of foreign currency loans, meeting overseas commitments and for similar other purposes.

It has less exchange risk as compared to foreign currency borrowings or foreign currency bonds.

GTC, GTD or IOC Orders

A Good Till Cancelled (GTC) order remains in the system until the trading member cancel it. However the system cancels this order if it is not traded within a number of days parameterized by the exchange.

A good Till Days/date(GTD) order allows the user to specify the number of days or date till which the order should stay in the system if not executed. The maximum number of days for which the GTC/GTD order can remain in the system is notified by the exchange from time to time after which the order is automatically cancelled by the system. The days-counted are inclusive of the Day/Date on which the order is placed and inclusive of holidays

An immediate or cancel (IOC) Order allows the user to buy or sell a security as soon as the order is released into the system, failing to which the order is cancelled from the system. Partial match is possible for the order and the unmatched portion of the order is cancelled immediately.

Investor Protection Fund (IPF): The IPF is maintained by the exchange to take care of investor's claim, which may arise out of non settlement of obligation by the trading member for trades executed on the exchange. The IPF is used to settle claims of such investors whose trading member has been declared as defaulter. The maximum amount of claim payable from IPF to the investor (where the TM through whom the investor has dealt, is declared defaulter) is Rs. 5 Lacs

Insider Trading: The purchase or sale of securities by someone who possesses 'inside' information affecting securities which has not yet been made available to the market and which, if made available, would significantly affect the share price. In India such deals are a criminal offence.

market lot: Market lot is the minimum number of shares of a particular security that must be transacted on the exchange. Multiples

odd lot: A number of shares that are less than the market lot are known as odd lots. These shares are illiquid in nature, as they cannot be transacted

Neat-iXS: Neat-iXS is a web based order routing, real time market info display, and portfolio mgmt and client info display system. Neat-iXS in the current version routes orders to and displays real time market info of NSE. Client registered with the brokerage house of NSE and who have hosted Neat-iXS can trade directly at NSE after appropriate risk management by the brokerage house.

Non Parri Passu (NPP) share: In case of company issues new shares during the financial year, these shares, unless specified otherwise, are entitled only for pro-rata dividend in respect of financial year in which these were issued. These shares are known as NPP shares, which like the ordinary shares are eligible for only a part of dividend.

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 benefit's is clearly determined.

over the counter trading: Trading in those stocks, which are not listed on a stock exchange.

Order driven trading: It is trading initiated by buy or sell orders from investors or brokers.

price rigging: When a person or persons acting in concert with each other collude to artificially increase or decrease the price of the security, that process is called price rigging.

Portfolio: A collection of securities owned by an investor.

Price bands: The exchange has fixed price bands for different securities within which they can move within a day. As per SEBI directing, all securities traded at or above price Rs 10- and below Rs 20- have a daily price band of +- 25%. All securities traded below price Rs 10- have a daily price band of +-50%, Price band for all securities traded at or above price Rs 20/- have a daily price band of +- 8%. But for 200 Scrips the price band is fixed +- 12%. The previous day's closing price is taken as the base price for calculating the price.

Price/Earnings ratio (P/E ratio): The P/E ratio is a measure of the level of confidence investors have in a company (rightly or wrongly). Generally, the higher the figure, the higher the confidence. It is calculated by dividing the current share price by the last published earnings per share - where earnings per share is net profit divided by the number of ordinary shares.

Price-Time Priority: his is the priority order in which orders for buy and sell are to be matched. For this purpose the system arranges all orders in the priority of price and within price by time.

Quote driven trading: Trading where brokers/market makers give buy/sell quote for a scrip simultaneously.

Rights issue: An invitation to existing shareholders to purchase additional shares in the company.

Rolling Settlement: In a Rolling Settlement trades executed during the day are settled based on the net obligation for the day. Presently in NSE, the trades pertaining to the rolling settlement are settled on a T + 2 day basis where T stands for the Trade day.

screen based trading: When buying/selling of securities is done using computers and matching of trades is done by a stock exchange computer.

Settlement: The process of transferring stock from seller to buyer and arranging the corresponding movement of money between the two parties

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.

settlement Guarantee Fund: The Clearing Corporation has set up the settlement guarantee fund (SGF) through contributions of its trading members. The SGF is intended primary to guarantee the completion of settlement up to the normal pay-out for trade executed in the regular market The SGF ensures that the settlement is not held upon account of failure of trading member to meet their obligations and all market participants (TM, custodians, investors etc.) who have completed their part of obligations are not affected in any manner whatsoever.

Short delivery: Short delivery refers to a situation where the client, who has sold certain shares during a settlement cycle fails to deliver the shares to the member either fully or partly.

Specified Shares and Non-Specified Securities: All the listed securities on the stock exchange are classified as either (i)'specified shares'-'A' Group shares or (ii) 'non-specified securities'-'B' Group securities. The Stock Exchange authorities notify from time to time the shares, which should be included in the specified list. The main difference between specified shares and non specified securities is in the process of settlement of transactions. Only equity shares are included in the specified list . The considerations for an equity share to be included in the specified list are generally the size of the company, the number of shareholders, dividend record, growth prospects and average volume of business.

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

Stag: One who applies for a new issue in the hope of being able to sell the shares allotted to him/her at a profit as soon as dealing starts, is known as a Stag.

Stop Order Loss: A Stop loss Order allows the trading member to place an order which gets activated only when the last traded price (LTP) of the share is reached or crosses a threshold price called trigger price.

Stop Transfer Case: Stop transfer is the process whereby the company under grounds provided for in the companies' act 1956 stops the transfer of shares. Company on the strength of a copy of FIR generally affects the stop transfer or court order when some securities are reported missing/lost/stolen by the holder of the securities.

transfer deed: A transfer deed is a form 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 a 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.

Transmission: Transmission is the lawful process by which the ownership of securities is transferred to the legal heir/s of the deceased.

Trade guarantee: It is the guarantee provided by the clearing corporation for all trades that are executed on the exchange. In contrast the settlement guarantee ,guarantees the settlement of trade after multilateral netting.

Underwriting: An arrangement by which a company is guaranteed that an issue of shares will raise a given amount of cash. Underwriters undertake to subscribe for any of the issue not taken up by the public. They charge commission for this service.