History of stock market

Historian Fernand Braudel suggests that in Cairoin the11th century, Muslim and Jewish merchants had already set up every form of trade association and had knowledge of many methods of credit and payment, disproving the belief that these were originally invented later by Italians. In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. A common is belief is that in late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurze, and in 1309 they became the "Brugse Beurse", institutionalizing what had been, until then, an informal meeting, but actually, the family Van der Beurze had a building inAntwerp where those gatherings occurred ; the Van der Beurze had Antwerp, as most of the merchants of that period, as their primary place for trading. The idea quickly spread around Flanders and neigh boring counties and "Beurzen" soon opened in Ghentand Amsterdam. There are stock markets in virtually every part of the world at this moment. Some of the important stock markets are United States. In the middle of the 13th century,Venetianbankers began to trade ingovernment securities. In 1351 the Venetian government outlawed spread ingrumors intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. The Dutch later started joint stock companies, which let share holders invest in business ventures and get a share of their profits - or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. The Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock exchange to introduce continuous trade in the early 17th century. The Dutch "pioneered short selling, option trading, debt-equity swaps, merchant banking, unit trusts and other speculative instruments, much as we know them" (Murray Sayle, "Japan Goes Dutch", London Review of Books XXIII.7,April 5, 2001). There are now stock markets in virtually every developed and most developing economies, with the world's biggest markets being in the United States, Canada, China (Hongkong), India, UK, Germany, France and Japan.

Function and purpose of stock market

The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.

History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an upcoming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behaviour of the stock market and, in general, on the smooth operation of financial system functions. Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counter party could default on the transaction. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

Relation of the stock market to the modern financial system

The financial system in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth, compared to less than 20 percent in the 2000s. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals, e.g., pension funds, mutual funds, hedge funds, insurance investment of premiums, etc. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance, permitting a higher proportion of shares to bonds. Similar tendencies are to be found in other industrialized countries. In all developed economic systems, such as the European Union, the United States, Japan and other developed nations, the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another.

The behavior of the stock market

From experience we know that investors may temporarily pull financial prices away from their long term trend level. Over-reactions may occurso that excessive

optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low. According to the efficient market hypothesis (EMH), only changes in fundamental factors, such as profits or dividends, ought to affect share prices.(But this largely theoretic academic viewpoint also predicts that little or no trading should take placecontrary to factsince prices are already at or near equilibrium, having priced in all public knowledge.) But the efficient-market hypothesis is sorely tested by such events as the stock market crash in 1987, when the Dow Jones index plummeted 22.6 percentthe largest-ever one-day fall in the United States. This event demonstrated that share prices can fall dramatically even though, to this day, it is impossible to fix a definite cause: a thorough search failed to detect any specific or unexpected development that might account for the crash. It also seems to be the case more generally that many price movements are not occasioned by new information; a study of the fifty largest one-day share price movements in the United States in the post-war period confirms this. Moreover, while the EMH predicts that all price movement (in the absence of change in fundamental information) is random (i.e., non-trending), many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer. Various explanations for large price movements have been promulgated. For instance, some research has shown that changes in estimated risk, and the use of certain strategies, such as stop-loss limits and Value at Risk limits, theoretically could cause financial markets to overreact. Other research has shown that psychological factors may result in exaggerated stock price movements. Psychological research has demonstrated that people are predisposed to 'seeing' patterns, and often will perceive a pattern in what is, in fact, just noise. (Something like seeing familiar shapes in clouds or ink blots.) In the present context this means that a succession of good news items about a company may lead investors to over react positively (unjustifiably driving the price up). A period of good returns also boosts the investor's self-confidence, reducing his (psychological) risk threshold. The stock market, as any other business, is quite unforgiving of amateurs. Inexperienced investors rarely get the assistance and support they need. In the period running up to the recent Nasdaq crash, less than 1 percent of the analyst's recommendations had been to sell (and even during the 2000 - 2002crash, the average did not rise above 5%). The media amplified the general euphoria, with reports of rapidly rising share prices and the notion that large sums of money could be quickly earned in the so-called new economy stock market.

Crashes
A stock market crash is often defined as a sharp dip in share prices of equities listed on the stock exchanges. In parallel with various economic factors, areas on for stock market crashes is also due to panic. Often, stock market crashes end speculative economic bubbles.

There have been famous stock market crashes that have ended in the loss of billions of dollars and wealth destruction on a massive scale. An increasing number of people are involved in the stock market, especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market. There have been a number of famous stock market crashes like the Wall Street Crash of 1929, The stock market crash of 1973 4, the Black Monday of 1987, the Dot-com bubble of 2000. One of the most famous stock market crashes started October 24, 1929 on Black Thursday. The Dow Jones Industrial lost 50% during this stock market crash. It was the beginning of the Great Depression. Another famous crash took place on October 19, 1987 Black Monday. On Black Monday itself, the Dow Jones fell by 22.6% after completing a 5 year continuous rise in share prices. This event not only shook the USA, but quickly spread across the world. Thus, by the end of October, stock exchanges in Australia lost 41.8%, in Canada lost 22.5%, in Hong Kong lost 45.8%, and in Great Britain lost 26.4%. The names Black Monday and Black Tuesday are also used for October 2829, 1929, which followed Terrible Thursday--the starting day of the stock market crash in 1929. The crash in 1987 raised some puzzles-main news and events did not predict the catastrophe and visible reasons for the collapse were not identified. Thisevent raised questions about many important assumptions of modern economics, namely, the theory of rational human conduct, the theory of market equilibrium and the hypothesis of market efficiency. For some time after the crash, trading in stock exchanges worldwide was halted, since the exchange computers did not perform well owing to enormous quantity of trades being received at one time. This halt in trading allowed the Federal Reserve system and central banks of other countries to take measures to control the spreading of worldwide financial crisis. In the United States the SEC introduced several new measures of control into the stock market in an attempt to prevent a re-occurrence of the events of Black Monday. Computer systems were upgraded in the stock exchanges to handle larger trading volumes in a more accurate and controlled manner. The SEC modified the margin requirements in an attempt to lower the volatility of common stocks, stock options and the futures market. The New York Stock Exchange and the Chicago Mercantile Exchange introduced the concept of a circuit breaker.

Stock market index

The movements of the prices in a market or section of a market are captured in price indices called stock market indices, of which there are many, e.g., the S&P, the FTSE and the Euronext indices. Such indices are usually market capitalization weighted, with the weights reflecting the contribution of the stockto the index. The constituents of the index are reviewed frequently toinclude/exclude stocks in order to reflect the changing business environment.

Investment strategies
One of the many things people always want to know about the stock market is, "How do I make money investing?" There are many different approaches; two basic methods are classified as either fundamental analysis or technical analysis.

Fundamental analysis refers to analyzing companies by their financial statements found in SEC Filings, business trends, general economic conditions, etc. Technical analysis studies price actions in markets through the use of charts and quantitative techniques to attempt to forecast price trends regardless of the company's financial prospects. One example of a technical strategy is the Trend following method, used by John W. Henry and Ed Seykota, which uses price patterns, utilizes strict money management and is also rooted in risk control and diversification. Additionally, many choose to invest via the index method. In this method, one holds a weighted or unweighted portfolio consisting of the entire stock market or some segment of the stock market (such as the S&P 500or Wilshire 5000).The principal aim of this strategy is to maximize diversification, minimize taxes from too frequent trading, and ride the general trend of the stock market(which, in the U.S., has averaged nearly 10%/year, compounded annually, since World War II).

Stock exchange
A stock exchange is a form of exchange which provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it must be listed there. Usually, there is a central location at least for record keeping, but trade is increasingly less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of increased speed and reduced cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets are driven by various factors that, as in all free markets, affect the price of stocks (see stock valuation). There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities. A stock exchange, securities exchange or (in Europe) bourse is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial

instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

HISTORY
Securities markets took centuries to develop. The idea of debt dates back to the ancient world, as evidenced for example by ancient Mesopotamian clay tablets recording interest-bearing loans. There is little consensus among scholars as to when corporate stock was first traded. Some see the key event as the Dutch East India Company's founding in 1602, while others point to earlier developments. Economist Ulrike Malmendier of the University of California at Berkeley argues that a share market existed as far back as ancient Rome. In the Roman Republic, which existed for centuries before the Empire was founded, there were societates publicanorum, organizations of contractors or leaseholders who performed temple-building and other services for the government. One such service was the feeding of geese on the Capitoline Hill as a reward to the birds after their honking warned of a Gallic invasion in 390 B.C. Participants in such organizations had partes or shares, a concept mentioned various times by the statesman and orator Cicero. In one speech, Cicero mentions "shares that had a very high price at the time." Such evidence, in Malmendier's view, suggests the instruments were tradable, with fluctuating values based on an organization's success. The societas declined into obscurity in the time of the emperors, as most of their services were taken over by direct agents of the state. Tradable bonds as a commonly used type of security were a more recent innovation, spearheaded by the Italian city-states of the late medieval and early Renaissance periods. In 1171, the authorities of the Republic of Venice, concerned about their wardepleted treasury, drew a forced loan from the citizenry. Such debt, known as prestiti, paid 5 percent interest per year and had an indefinite maturity date.

Initially regarded with suspicion, it came to be seen as a valuable investment that could be bought and sold. The bond market had begun. From 1262 to 1379, Venice never missed an interest payment, solidifying the credibility of the new instruments. Other Italian city-states such as Florence and Genoa became bond issuers as well, often as a means of paying for warfare. Bonds were traded widely in Italy and beyond, a business facilitated by bankers such as the Medicis. War between Venice and Genoa resulted in suspension of prestiti interest payments in the early 1380s, and when the market was restored, it was at a lower interest rate. Venice's bonds traded at steep discounts for decades thereafter. Other blows to financial stability resulted from the Hundred Years War, which caused monarchs of France and England to default on debts to Italian banks, and the Black Death, which ravaged much of Europe. Still, the idea of debt as a tradable investment endured. As with bonds, the concept of stock developed gradually. Some scholars place its origins as far back as ancient Rome. Partnership agreements dividing ownership into shares date back at least to the 13th century, again with Italian city-states in the vanguard. Such arrangements, however, typically extended only to a handful of people and were of limited duration, as with shipping partnerships that applied only to a single sea voyage. The forefront of commercial innovation eventually shifted from Italy to northern Europe. The Hanseatic League, an alliance of mercantile cities such asBruges and Antwerp, operated counting houses to expedite trade. By the late 1500s, English merchants were experimenting with joint-stock companies intended to operate on an ongoing basis; one such was theMuscovy Company, which sought to wrest trade with Russia away from Hanseatic dominance. The next big step occurred in the Netherlands. In 1602, the Dutch East India Company was formed as a joint-stock company based in six locations with shares that were readily tradable. The stock market had begun, but since stocks were not allowed to be traded with multiple addresses for a company, the stocks were redesignated as coming just from Amsterdam. The Dutch East India Company, formed to build up the spice trade, operated as a colonial ruler in what's now Indonesia and beyond, a purview that included conducting military operations against recalcitrant natives and competing colonial powers. Control of the company was held tightly by its directors, with ordinary shareholders not having much influence on management or even access to the company's accounting statements. However, shareholders were rewarded well for their investment. The company paid an average dividend of over 16 percent per year from 1602 to 1650. Financial innovation in Amsterdam took many forms. In 1609, investors led by one Isaac Le

Maire formed history's first bear syndicate, but their coordinated trading had only a modest impact in driving down share prices, which tended to be robust throughout the 17th century. By the 1620s, the company was expanding its securities issuance with the first use of corporate bonds. The Dutch West India Company was formed in 1621, bringing a new issuer to the burgeoning securities market. Amsterdam's growth as a financial center survived the tulip mania of the 1630s, in which contracts for the delivery of flower bulbs soared wildly and then crashed. New techniques and instruments proliferated for securities as well as commodities, including options, repos and margin trading.[2] Joseph de la Vega, also known as Joseph Penso de la Vega and by other variations of his name, was an Amsterdam trader from a Spanish Jewish family and a prolific writer as well as a successful businessman in 17th-century Amsterdam. His 1688 book Confusion of Confusions explained the workings of the city's stock market. It was the earliest book about stock trading, taking the form of a dialogue between a merchant, a shareholder and a philosopher, the book described a market that was sophisticated but also prone to excesses, and de la Vega offered advice to his readers on such topics as the unpredictability of market shifts and the importance of patience in investment. The year that de la Vega published also brought an event that helped spread financial techniques and talent from Amsterdam to London. This was the "glorious revolution," in which Dutch ruler William of Orange also ascended to England's throne. William sought to modernize England's finances to pay for its wars, and thus the kingdom's first government bonds were issued in 1693 and the Bank of England was set up the following year. Soon thereafter, English joint-stock companies began going public. London's first stockbrokers, however, were barred from the old commercial center known as the Royal Exchange, reportedly because of their rude manners. Instead, the new trade was conducted from coffee houses along Exchange Alley. By 1698, a broker named John Castaing, operating out of Jonathan's Coffee House, was posting regular lists of stock and commodity prices. Those lists mark the beginning of the London Stock Exchange. One of history's greatest financial bubbles occurred in the next few decades. At the center of it were the South Sea Company, set up in 1711 to conduct English trade with South America, and the Mississippi Company, focused on commerce with France's Louisiana colony and touted by transplanted Scottish financier John Law, who was acting in effect as France's central banker. Investors snapped up shares in both, and whatever else was available. In 1720, at the height of the mania, there was even an offering of "a company for carrying out an undertaking of great advantage, but nobody to know what it is."

By the end of that same year, share prices were collapsing, as it became clear that expectations of imminent wealth from the Americas were overblown. In London, Parliament passed the Bubble Act, which stated that only royally chartered companies could issue public shares. In Paris, Law was stripped of office and fled the country. Stock trading was more limited and subdued in subsequent decades. Yet the market survived, and by the 1790s shares were being traded in the young United States.

The role of stock exchanges

Stock exchanges have multiple roles in the economy, this may include the following:

Raising capital for businesses

The Stock Exchange provides companies with the facility to raise capital for expansion through selling shares to the investing public.

Mobilizing savings for investment

When people draw their savings and invest in shares, it leads to a morerationalallocation of resources because funds, which could have beenconsume d, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and higher productivity levels and firms.

Facilitating company growth

Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion.

Redistribution of wealth
Stocks exchanges do not exist to redistribute wealth. However, both casual and professional stock investors, through dividends and stock price increases that may result incapital gains, will share in the wealth of profitable businesses.

Corporate governance
By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy thed e m a n d s o f t h e se sh a re h o ld e r s a n d t h e m o re st rin g e n t ru le s f o r p u b li c c o r p o r a t i o n s i m p o s e d b y p u b l i c s t o c k e x c h a n g e s a n d t h e g o v e r n m e n t . Consequently, it is alleged that public companies(companies that are owned by shareholders who are members of the general public and trade shares on public exchanges) tend to have better management records than privatelyheld companies(those companies where shares are not publicly traded, often owned by the company founders and/or their families and heirs, or otherwise by a small group of investors). However, some well-documented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies. The dot-com bubble in the early 2000s, and the subprime mortgage crisis in 2007-08, are classical examples of corporate mismanagement. Companies likePets.com(2000),Enron Corporation(2001), One.Tel(2001),Sunbeam (2001),Webvan(2001),Adelphia (2002),MCI WorldCom(200 2),Parmalat(2003),Fannie Mae(2008),Freddie Mac(2008),Lehman Brothers(2008), were among the most widely scrutinized by the media.

Creating investment opportunities for small investors

As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors.

Government capital-raising for development projects

Governments at various levels may decide to borrow money in order tofinance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such bonds can obviate the need

to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature.

Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

What Are Stocks?

The Definition of a Stock Plain and simple, stock is a share in the ownership of a company. Stock represents a claim on the company's assets and earnings. As one acquires more stock, his/her ownership stake in the company becomes greater. Whether one says shares, equity, or stock, it all means the same thing. Being an Owner Holding a company's stock means that a person is one of the many owners (shareholders) of a company, and, as such, he/she has a claim (albeit usually very small) to everything the company owns. Yes, this means that technically the person owns a tiny sliver of every piece of furniture, every trademark, and every contract of the company. As an owner, the person is entitled to his/her share of the company's earnings as well as any voting rights attached to the stock. A stock is represented by a stock certificate. This is a fancy piece of paper that is proof of a persons ownership. In today's computer age, we cant actually get to see this document because the depository participant keeps these records electronically, which is also known as holding shares "in street name." This is done to make the shares easier to trade. In the past when a person wanted to sell his or her shares, mouse or a phone call makes life easier for everybody.

Being a shareholder of a public company does not mean the shareholder have a say in the day-to-day running of the business. Instead, one vote per share to elect the board of directors at annual meetings is the extent to which the holder has a say in the company. For instance, being a Microsoft shareholder doesn't mean one can call up Bill Gates and tell him how he thinks the company should be run. In the same line of thinking, being a shareholder of Anheuser Busch doesn't mean oen can walk into the factory and grab a free case of Bud Light! The management of the company is supposed to increase the value of the firm for shareholders. If this doesn't happen, the shareholders can vote to have the management removed--well, this is the theory anyway. In reality, individual investors generally dont own enough shares to have a material influence on the company. It's really the big boys like large institutional investors and billionaire entrepreneurs who make the decisions. Shareholders not being able to manage the company isn't too big a deal. After all, the idea is that you don't want to have to work to make money? The importance of being a shareholder is that the person is entitled to a portion of the companys profits and have a claim on assets. Profits are sometimes paid out in the form of dividends. The more shares you own, the larger the portion of the profits you get. The claim on assets is only relevant if a company goes bankrupt. In case of liquidation, shareholders receive what's left after all the creditors have been paid. This last point is worth repeating: the importance of stock ownership is your claim on assets and earnings. Without this, the stock wouldn't be worth the paper it's printed on. Another extremely important feature of stock is its limited liability. This is a legal term, which means that the shareholder is not personally liable in the case of the company not being able to pay its debts. Other companies such as partnerships are set up so that if the partnership goes bankrupt the creditors can come after the partners (shareholders) personally and sell of their house, car, furniture, etc. Owning stock means that, no matter what, the maximum value one can lose is the value of his/her investment. Even if a company of which the person is a shareholder goes bankrupt, he/she can never lose his/her personal assets.

Debt vs. Equity

Why does a company issue stock? Why would the founders share the profits with thousands of people when they could keep profits to themselves? There a son is that at some point every company needs to raise money. To do this, companies can either borrow it from somebody or raise it by selling part of the company, which is known as issuing stock. A company can borrow by taking a loan from a bank or by issuing bonds. Both methods fit under the umbrella of "debt financing." On the other hand, issuing stock is called "equity financing."Issuing stock is advantageous for the company because it does not require the company to pay back the money or make interest payments along the way. All that the shareholders get in return for their money is the hope that the shares will some day be worth more. The first sale of a stock, which is issued by the private company itself, is called the initial public offering (IPO).

It is important to understand the distinction between a company financing through debt and financing through equity. When a debt investment such as a bond is bought, the return of money (the principal) along with promised interest payments is guaranteed. This isn't the case with an equity investment. By becoming an owner, the shareholder assumes the risk of the company not being successful. Just as a small business owner isn't guaranteed a return, neither is a shareholder. As an owner the shareholders claim on assets is lesser than that of creditors. This means that if a company goes bankrupt and liquidates, a shareholder doesn't get any money until the banks and bondholders have been paid out; this is called absolute priority. Shareholders earn a lot if a company is successful, but they also stand to lose their entire investment if the company isn't successful.

Risk
It must be emphasized that there are no guarantees when it comes toindividual stocks. Some companies pay out dividends, but many others do not. And there is no obligation to pay out dividends even for those firms that have traditionally given them. Without dividends an investor can make money on a stock only through its appreciation in the open market. On the down side, any stock may go bankrupt, in which case your investment is worth nothing. Although risk might sound all negative, there is also a bright side. Taking-on greater risk demands a greater return on your investment. This is the reason why stocks have historically outperformed other investments such as bonds or savings accounts. Over the long term, an investment in stocks has historically had an average return of around 10%-12%. A great proof of the power of owning equities is General Electric. One share bought in 1928 would be worth over $65,000 today!

Different Types of Stock

There are two main types of stocks: common stock and preferred stock. Common Stock Common stock is, well, common. When people talk about stocks in general they are most likely referring to this type. In fact, the majority of stock issued is in this form. Common shares represents ownership in a company and a claim on a portion of profits (dividends). Investors get one vote per share to elect the board members who oversees the major decisions made by management. Over the long term, common stock, by means of capital growth, yields higher returns than almost every other investment. This higher return comes at a cost as common stocks entail the most risk. If a company goes bankrupt and liquidates, the common shareholders will not receive money until the creditors, bondholders, and preferred shareholders are paid. Preferred Stock Preferred stock represents some degree of ownership in a company but usually doesnt have the same voting rights (this may vary depending on the

company). On preferred shares, investors are usually guaranteed a fixed dividend forever. This is different than common stock that has variable dividends that are never guaranteed. Another advantage is in the event of liquidation preferred shareholders are paid off before the common share holder (but still after debt holders). Preferred stock may also be callable, meaning that the company has the option to purchase the shares from shareholders at anytime for any reason (usually for a premium). Some people consider preferred to be more like debt than equity. A good way to think of these shares is in-between bonds and common shares.

Different Classes of Stock Common and preferred are the two main forms of stock. However, it's also possible for companies to customize different classes of stock in any way they want. The most common reason for this is when a company wants voting power to remain with a certain group. Hence, different classes of shares are given different voting rights. For example, one class of shares would be held by a select group and given 10 votes per share while a second class would be issued to the majority of investors with 1 vote per share. When there is more than one class of stock, the classes are traditionally designated as Class A and Class B. Berkshire Hathaway (ticker: BRK), the company of Warren Buffett (one of the greatest investors of all time), has two classes of stock. The different forms are represented by placing the letter behind the ticker symbol in a form like: "BRKa, BRKb" or "BRK.A, BRK.B".

How Stocks Trade

Most stocks are traded on exchanges, which are places where buyers and sellers meet and decide on a price. Some exchanges are physical locations where transactions are carried out on a trading floor. The other type of exchange is virtual, composed of a network of computers where trades are made electronically. The purpose of a stock market is to facilitate the exchange of securities between buyers and sellers, thus, reducing the risks of investing. A stock market is nothing more than a super-sophisticated farmers market linking buyers and sellers.

What Causes Prices To Change?

Stock prices are changed everyday by market forces. It means that share prices change because of supply and demand. If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people want to sell a stock, there would be more supply than demand and the price would fall. Understanding supply and demand is easy. What is difficult to comprehend is what makes people like a particular stock yet dislike another stock. This comes down to figuring out what news is positive for a company and what news is negative. There

are many answers to this problem and just about any investor asked has their own ideas and strategies. That being said, the principal theory is that the price movement of a stock shows what investors feel a company is worth. The value of a company is its market capitalization, which is the stock price multiplied by the number of shares outstanding. For example, a company that trades at $100 per share and has 1,000,000 shares outstanding is worth less that a company that trades at $50 but has 5,000,000 shares outstanding. ($100 x 1,000,000 =$100,000,000 while $50 x 5,000,000 = $250,000,000). To further complicate things, the price of a stock doesn't just reflect what a company is worth currently, it takes into account the growth that investors expect in the future. The most important indicator of the worth of a company is its earnings. Earnings are the profit a company makes, and in the long run no company can survive without them. If a company never makes money, they aren't going to stay in business. Public companies are required to report their earnings 4 times a year (once each quarter).Wall Street watches with rabid attention at this time that is referred to as earnings season. The reason behind this is because analysts base their future value of a company on their earnings projection. If a company's results surprise (are better than expected), the price jumps up. If a company's results disappoint (are worse than expected), then the price will fall. Of course, it's not just earnings that can change the price of a stock. It would be a rather simple world if this were the case! A perfect example of this was the dot-com bubble. Dozens of Internet companies rose to have marketcapitalizations in the billions of dollars without ever making even the smallest profit. But these valuations did not hold and most of the Internet companies saw their values shrink to a fraction of their highs. Still, the fact that prices did move this much demonstrates that there are factors other than earnings that influence stocks. Investors have developed literally hundreds of thesevariables, ratios and indicators such as theP/E ratio, while others areextremely complicated and obscure with names like Chaikin Oscillator or Moving Average Convergence Divergence (MACD). So, why do stock prices change? The best answer is that nobody really knows for sure. Some believe that it isn't possible to predict how stocks will change in price while others think that by drawing charts and looking at past price movements, you can determine when to buy and sell. The only thing we do know as a certainty is that stocks are volatile and can change in price extremely rapidly. The important things to grasp about this subject are: 1. Supply and demand in the market determine stock price. 2. Price times the number of shares outstanding (market capitalization) is the value of a company. Comparing just the share price of two companies is meaningless. 3. Theoretically, earnings are what makes a company increase its value, but there are other indicators which investors use to predict stock price. 4. There is no consensus as to why stock prices move the way they do.

Buying Stocks
There are two main ways to purchase stock:

Using a Brokerage
The most common method to buy stocks is to use a brokerage. Brokerages come in two different flavors. Full-service brokerages offer you (supposedly) expert advice and can manage your account but also charge a lot. Discount brokerages offer little in the way of personal attention but are much cheaper. It used to be that only the wealthy could afford a broker as full service brokers aren't cheap! With the Internet came the explosion of online discount brokers. Because of them nearly anybody can now afford to invest in the market.

DRIPs & DIPs

Dividend Reinvestment Plans (DRIPs) and Direct Investment Plans (DIPs) are plans in which individual companies allow shareholders to purchase stock directly from the company for a minimal cost. Drips are a great way to invest small amounts of money at regular intervals.

How to Read a Stock Table/Quote

Any financial paper has stock quotes that will look something like the image below: Columns 1 & 2: 52-Week Hi and Low. These are the highest and lowest prices that a stock has traded at over the previous 52-weeks (1 year). This typically does not include the previous day's trading. Column 3: Company Name & Type of Stock. This column lists the name of the company. If there are no special symbols or letters following the name, it Is common stock. Different symbols imply different classes of shares. For example, "pf" means the shares are preferred stock. Column 4: Ticker Symbol. This is the unique alphabetic name which identifies the stock. If you watch financial TV the ticker tape will quote the latest prices alongside this symbol. If you are looking for stock quotes online, you always search for a company by the ticker symbol. Column 5: Dividend Per Share. This indicates the annual dividend payment per share. If this space is blank, the company does not currently pay out dividends.

Column 6:Dividend Yield. This is the percentage return on the dividend. It is calculated as annual dividends per share divided by price per share. Column 7: Price/Earnings Ratio. This is calculated by dividing the current stock price by earnings per share from the last four quarters. Column 8: Trading Volume. This figure shows the total number of shares traded for the day, listed in hundreds. To get the actual number traded, add"00" to the end of the number listed. Column 9 & 10: Day High & Low. This indicates the price range the stock has traded at throughout the day's trading. In other words, these are the maximum and the minimum people have paid for the stock. Column 11: Close. The close is the last trading price recorded when the market closed on the day. If the closing price is up or down mo re than 5%than the previous day's close, the entire listing for that stock is bold-faced. Keep in mind, you are not guaranteed to get this price if you buy the stock the next day because the price is constantly changing (even after the exchange is closed for the day). The close is merely an indicator of past performance and except in extreme circumstances serves as a ballpark of what you should expect to pay. Column 12: Net Change. This is the dollar value change in the stock price from the previous day's closing price. When you hear about a stock being "up for the day," it means the net change was positive.

The Bulls, the Bears, and the Farm

The Bulls
A bull market is when everything in the economy is great, people are finding jobs, GDP is growing, and stocks are rising. Things are just plain rosy! Picking stocks during a bull market is easier because everything is going up. Bull markets cannot last forever though, and sometimes they can lead to dangerous situations if stocks become overvalued. If a person is an optimist, believing that stocks will go up, he is called a bull and said to have a bullish outlook.

The Bears
A bear market is when the economy is bad, recession is looming, and stock prices are falling. Bear markets make it tough for investors to pick profitable stocks. One solution to this is to make money when stocks are falling using a technique called short selling. Another strategy is to wait on the sidelines until you feel that the bear market is nearing its end and only then start buying in anticipation of a bull market. If a person is a pessimist, believing that stocks are going to drop, he is called a bear and said to have a bearish outlook.

The Other Animals on the Farm - Chickens and Pigs

Chickens are afraid to lose anything. Their fear overrides their need to make profits and so they turn to only money- market securities or get out of the markets all together. While it's true you should never investment in something that you lose sleep over, if you avoid the market completely and never take any risk, you are guaranteed to never see any return. Pigs are high risk investors looking for the one big score in a short period of time. Pigs buy on hot tips and invest in companies without doing their due diligence. They get impatient, greedy, and emotional about their investments, and are drawn to highrisk securities without putting in the proper time or money to learn about these investment vehicles. Professional traders love the pigs, as it's often from their losses that the bulls and bears reap their profits.

INTRODUCTION OF DEPOSITORY
Depository
A depository is an organization which holds securities of investors in electronic form at the request of the investors through a registered Depository Participant. It also provides services related to transactions in securities. In India ,Depository Act defines a depository to mean a company formed and registered under Companies Act,1956 and which has been granted a certificate of registration under sub section(IA) of section 12 of Securities and Exchange Board of India Act,1992.

DEPOSITORY SYSTEM
It is a system whereby the transfer and settlement of scripts take place not through the traditional method of transfer deeds and physical delivery of scripts but through modern system of effecting transfer of ownership of securities by means of book entry on the ledgers or the depository without physical movement of scripts. The new system thus eliminates paper work, facilitates automatic and transparent trading in scripts, shortens the settlement period and ultimately contributes to the liquidity of investment in securities. This system is also known as Scriples trading system.

CONSTITUENTS OF DEPOSITORY SYSTEM

There are essentially four players in the depository system:1. The Depository Participant 2. The Beneficial Owner/Investor 3. The issuer 4. The Depository

FACILITIES OFFERED BY DEPOSITORY SYSTEM:

The following are some of important facilities offered by depository system:1. Dematerialization 2. Rematerialisation 3. Electronic settlement of trade 4. Electronic credit of securities allotted in public, rights and bonus issue. 5. Pledging or hypothecation of dematerialized securities. 6. Freezing of demat account.

ADVANTAGES OF DEPOSITORY SYSTEM:

The system is expected to offer the much awaited custodial services to Indian and Foreign investors together. It is likely to bring about the following benefits to various investors, issuing companies as well as nation: (A) Advantages to the Investors Quick transfer of funds and securities. Elimination of all risks associated with physical certificates. Minimized chances of fraud, theft of securities. Statement of accounts.

(B) Advantages to the issuer: Costs of registration & transfer of shares get reduced which were earlier incurred by the issuer company. Saving in cost involved at the time of public issues. Easy to attract foreign investors without any cost of issuance in overseas market. (C) Advantages to Intermediaries: Faster settlement Less risk of Bad Delivery Reduced chances of forgery, counterfeit certificates, loss in transit, theft etc.

SOME IMPORTANT POINTS

Who is the depository participant? A Depository Participant (DP) is an agent of the depository through which it interfaces with the investor. A DP can offer depository services only after it

gets proper registration from SEBI. Banking services can be availed through a branch whereas depository services can be availed through a DP. What is the minimum net worth required depositary? The minimum net worth stipulated by SEBI for a depository is Rs.100crore. How many depository participants are registered with SEBI? As on 31/03/2009, total of 711 DPs are registered with SEBI. Can an investor operate a joint account on either or survivor basis just like a bank account? No. The demat account cannot be operated on either or survivor basis like the bank account. Can an investor close his demat account with one DP and transfer all securities to another account with another DP? Yes. The investor can submit account closure request to his DP in the prescribed form. The DP will transfer all the securities lying in the account, as per the instruction, and close the demat account. Whether investors can freeze or lock their accounts? Investors can freeze or lock their accounts for any given period of time, if so desired. Accounts can be frozen for debits (preventing transfer of securiti es out of accounts) or for credits (preventing any movements of hindrances into accounts) or for both. Do dematerialised shares have distinctive numbers? Dematerialized shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable. What is Standing Instruction given in the account opening form? In a bank account, credit to the account is given only when a pay in slip is submitted together with cash/cheque. Similarly, in a depository account Receipt in form has to be submitted to receive securities in the account. However, for the convenience of investors, facility of standing instruction is given. If you say Yes for standing instruction, you need not submit Receipt in slip every time you buy securities. If you are particular that securities can be credited to your account only with your consent, then do not say yes [or tick ] to standing instruction in the application form.

 Is it possible to give delivery instructions to the DP overInternet and if yes, how? Yes. Both NSDL and CDSL have launched this facility for delivering instructions to your DP over Internet, called SPEED-e and EASI respectively. The facility can be used by all registered users after paying the applicable charges. Is it possible to get securities allotted in public offering directly in the electronic form? Yes, it is possible to get securities allotted to in Public Offerings directly in the electronic form. In the public issue application form there is a provision to indicate the manner in which an investor wants the securities allotted. He has to mention the BO ID and the name and ID of the DP on the application form. Any allotment made will be credited into the BO account. How cash corporate are benefit such as dividend / interestreceived? The concerned company obtains the details of beneficiary holders and their holdings as on the date of the book closure / record date from Depositories. The payment to the investors will be made by the company through the ECS (Electronic Clearing Service) facility, wherever available. Thus the dividend / interest will be credited to your bank account directly. Where ECS facility is not available dividend / interest will be given by issuing warrants on which your bank account details are printed. The bank account details will be those which you would have mentioned in your account opening form or changed thereafter. How would one receive non-cash corporate benefit such as bonus etc.? The concerned company obtains the details of beneficiary holders and their holdings as on the date of the book closure / record date from depositories. The entitlement will be credited by the company directly into the BO account.

DEMAT ACCOUNT
The whole depository system is based on demats account. So it is necessary to understand the concept of demat accounts. Whats a demat account? Demat refers to a dematerialised account. Just as you have to open anaccount with a bank if you want to save your money, make cheque paymen ts etc, you need to open a demat account if you want to buy or sell stocks. So it is just like a bank account where actual money is replaced by shares. You have to approach the DPs (remember, they are like bank branches), to open your demat account.

Lets say your portfolio of shares looks like this: 40 of Infosys, 25 of Wipro, 45 of HLL and 100 of ACC. All these will show in your demat account. So you dont have to possess any physical certificates showing that you own these shares. They are all held electronically in your account. As you buy and sell the shares, they are adjusted in your account. Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions.
Is a demat account a must?

Nowadays, practically all trades have to be settled in dematerialised form. Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of upto 500 shares to be settled in physical form, nobody wants physical shares any more. So a demat account is a must for trading and investing. Why demat? The demat account reduces brokerage charges, makes pledging/hypothecatio n of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership title of securities, and provides easy receipt of public issue allotments. It also helps you avoid bad deliveries caused by signaturemismatch, postal delays and los s of certificates in transit. Further, iteliminates risks associated with forgery, counterfeiting and loss due to fire, theft or mutilation. Demat account holders can also avoid stamp duty (as against 0.5 per cent payable on physical shares), avoid filling up of transfer deeds, and obtain quick receipt of such benefits as stock splits and bonuses.

Buying & Selling

The procedure for buying and selling dematerialized securities is similar to the procedure for buying and selling physical securities. The difference liesin the process of delivery (in case of sale) and receipt (in case of purchase) of securities. In case of purchase: The broker will receive the securities in his account on the payout day. The broker will give instruction to its DP to debit his account and credit investors account. Investor will give Receipt Instruction to DP for receiving credit by filling appropriate form. However one can give standing instruction. For credit in to ones account that will obviate the need of giving Receipt Instruction every time. In case of sale:-

The investor will give delivery instruction to DP to debit his account and credit the brokers account. Such instruction should reach the DPs office at least 24h ours before the pay-in as other wise DP will accept the instruction only at the investors risk.

Demat Benefits
The benefits are enumerated below: A safe and convenient way to hold securities; Immediate transfer of securities; No stamp duty on transfer of securities; Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.; Reduction in paperwork involved in transfer of securities; Reduction in transaction cost; No odd lot problem, even one share can be sold; Nomination facility; Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately; Transmission of securities is done by DP eliminating correspondence with companies; Automatic credit into demat account of shares, arising out of bonus /split/ consolidation/ merger etc. Holding investments in equity and debt instruments in an account.

Demat Conversion
Converting physical holding into electronic holding (dematerializing securities) In order to dematerialize physical securities one has to fill in a DRF (Demat Request Form) which is available with the DP and submit the same along with physical

certificates one wishes to dematerialize. Separate DRF has to be filledfor each ISIN Number.

The complete process of dematerialization is outlined below: Surrender certificates for dematerialization to respective depository participant. Depository participant intimates Depository of the request through the system. Depository participant submits the certificates to the registrar of the Issuer Company. Registrar confirms the dematerialization request from depository. After dematerialization of the certificates, Registrar updates accounts and informs depository of the completion of dematerialization. Depository updates its accounts and informs the depository participant. Depository participant updates the demat account of the investor.

Fees Involved
NOW to the crux the cost of opening and holding a demat account. There are four major charges usually levied on a demat account: Account opening fee, annual maintenance fee, custodian fee and transaction fee. All the charges vary from DP to DP. Account-opening fee Depending on the DP, there may or may not be an opening account fee. Private banks, such as ICICI Bank, HDFC Bank and UTI Bank do nothave one. However, players such as India Infoline Ltd., Karvy Consultants and the State Bank of India do so. But most players levythis when the person re-opens a demat account, though the Stock Holding Corporation offers a lifetime account opening fee, which allows you to hold on to your demat account over a long period. This fee is refundable. Annual maintenance fee This is also known as folio maintenance charges, and is generally leviedin advance. Custodian fee

This fee is charged monthly and depends on the number of securities (international securities identification numbers ISIN) held in the account. It generally ranges between Rs 0.5 to Rs 1 per ISIN per month. DPs will not charge custody fee for ISIN on which the companies have paid one-time custody charges to the depository. Transaction fee The transaction fee is charged for crediting/debiting securities to and from the account on a monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI Bank peg the fee to the transaction value, subject to a minimum amount. The fee also differs based on the kind of transaction (buying or selling). Some DPs charge only for debiting the securities while others charge for both. The DPs also charge if your instruction to buy/sell fails or is rejected. In addition, service tax is also charged by the DPs.

In addition to the other fees, the DP also charges a fee for converting the shares from the physical to the electronic form or vice-versa. This fee varies for both demat and remat requests. For demat, some DPs charge a flat fee per request in addition to the variable fee per certificate, while others charge only the variable fee. For instance, Stock Holding Corporation charges Rs 25 as the request fee and Rs 3 per certificate as the variable fee. However, SBI charges only the variable fee, which is Rs 3 per certificate. Remat requests also have charges akin to that of demat. However, variable charges for remat are generally higher than demat. Some of the additional features (usually offered by banks) are: Some DPs offer a frequent trader account, where they charge frequent traders at lower rates than the standard charges. Demat account holders are generally required to pay the DP an advance fee for each account which will be adjusted against the various service charges. The account holder needs to raise the balance when it falls below a certain amount prescribed by the DP. However, if you also hold a savings account with the DP you can provide a debit authorization to the DP for paying this charge. Finally, once you choose your DP, it will be prudent to keep all your accounts with that DP, so that tracking your capital gains liability is easier. This is because, for calculating capital gains tax, the period of holding will be determined by the DP and different DPs follow different methods. For instance, ICICI Bank uses the first in first out (FIFO) method to compute the period of holding. The proof of the cost of acquisition will be the contract note. The computation of capital gains is done account-wise.

Rematerialisation
The process of converting electronic holdings (demat shares) back into Physical Certificates is called Rematerialisation. If one wishes to get back his securities in the physical form one has to fill in the RRF (Remat Request Form) and request his DP for rematerialisation of the balances in his securities account. The process of rematerialisation is outlined below;

One makes a request for rematerialisation. Depository participant intimates depository of the request through thesystem. Depository confirms rematerialisation request to the registrar. Registrar updates accounts and prints certificates. Depository updates accounts and downloads details to depository p articipant. Registrar dispatches certificates to investor.

Some important points

Can one pledge dematerialised securities? Yes. In fact, pledging dematerialised securities is easier and more advantageous as compared to pledging physical securities. What should one do to pledge electronic securities? The procedure to pledge electronic securities is as follows: Both investor (pledgor) as well as the lender (pledgee) must have depository accounts with the same depository; Investor has to initiate the pledge by submitting to DP the details of the securities to be pledged in a standard format ; The pledgee has to confirm the request through his/her DP; Once this is done, securities are pledged.

All financial transactions between the pledgor and the pledgee arehandled as per usual practice outside the depository system.

How can one close the pledge after repayment of loan? After one has repaid the loan, one can request for a closure of pledge by instructing the DP in a prescribed format. The pledge on receiving the repayment will instruct his DP accordingly for the closure of the pledge.

TRANSACTION STATEMENTS
How does one know that the DP updated the account after each transaction? The DP gives a Transaction Statement periodically, which will detailcurrent ba lances and various transactions made through the depositoryaccount. If so de sired, DP may provide the Transaction Statement atintervals shorter than the stipulated ones, probably at a cost. At w hat frequenc y w ill the investor receive his Transaction Statement from his DP? DPs have to provide transaction statements to their clients once in a month, if there are transactions and once in a quarter, if there are no transactions. Moreover, DPs can provide transaction statement in electronic form under digital signature subject to their entering into a legally enforceable arrangement with the BOs to this effect. What is to be done if there are any discrepancies in transaction statement? In case of any discrepancy in the transaction statement, one can contact his/her DP. If the discrepancy cannot be resolved at the DP level, one should approach the Depository.

LENDING AND BORROWING

What is Lending and Borrowing of Securities? If any person required to deliver a security in from another person who is willing to lend as per the Securities Lending and Borrowing Scheme.the market does not readily have that security, he can borrow the same

 Can lending and borrowing be done directly between two persons? No. Lending and borrowing has to be done through an Approved Intermediary registered with SEBI. The approved intermediary would borrow the Securities for further lending to borrowers. Lenders of the securities and borrowers of the securities enter into separate agreements with the approved intermediary for lending and borrowing the securities. Lending and borrowing is effected through the depository system.

NOMINATION
Who can nominate? Nomination can be made only by individuals holding beneficiary accounts either singly or jointly. Non-individuals including society, trust, body corporate, karta of Hindu Undivided Family, holder of power of attorney cannot nominate. Who can be a nominee? Only an individual can be a nominee. A nominee shall not be a society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family or a power of attorney holder. What is transmission of demat securities? Transmission is the process by which securities of a deceased accountholder are transferred to the account of his legal heirs / nominee. Process of transmission in case of dematerialised holdings is more convenient as the transmission formalities for all securities held in a demat account can be completed by submitting documents to the DP, whereas in case of physicalsecurities the legal heirs/nominee/surviving joint holder has toindepen dently correspond with each company in which securities are held. In the event of death of the sole holder, how the success ors should claim the securities lying in the demat account? The claimant should submit to the concerned DP an applicationTransmission Request Form (TRF) along with the following supporting documents:

In case of death of sole holder where the sole holder has appointed anominee : Notarized copy of the death certificate In case of death of the sole holder, where the sole holder has notappointed a nominee : Notarized copy of the death certificate

Any one of the below mentioned documents Succession certificate Copy of probated will Letter of Administration

The DP, after ensuring that the application is genuine, will transfer securities to the account of the claimant. The major advantage in case of dematerialised holdings is that thetransmission formalities for all securities held with a DP can be completed by interaction with the DP alone, unlike in the case of physical share certificates, where the claimant will have to interact with each Issuing company or its Registrar separately.

OBJECTIVE OF STUDY
The objective of the research means the purpose for which the research is being carried out. The objectives of this research are as follows: Primary Objective:The primary objective of my report is to impart a comparative and analyticalstudy of the depository and online share trading services of DepositoryParti cipants in India and basic understanding of the manner in which they function in this competitive environment, the products and services offered by DPs, entire process of share transactions and account openings and brokerage charged and different software used to facilitate the trading process. To know about the benefits derived from such system. Secondary Objective:Apart from understanding the stock Exchange terminologies or jargons, it was also aimed about reading of market conditions, the feasibility and growth of depository services of various depository participants in India. The clientservicing offered by the online share trading sites in real market situations.