How Does The Stock Market Work ? Let’s Try To Understand It Through An Example.
Let’s Assume That We Have To Buy OR Sell Shares Of An XYZ Limited Company.
So For This, First Of All We Need A Broker, That Is, We Need A Middle Man Who Provides Us The Facility To Buy And Sell Shares Of Any Listed Company.
Friends, Without Any Broker, We Cannot Buy And Sell Shares Of Any Company.
Such As Zerodha, Upstox, And Groww Which Is A Discount Broker, Which Provide Us The Facility To Buy And Sell Shares Of Any Listed Company In The Stock Market.
So, According To The Example, If We Have To Buy OR Sell Shares Of An XYZ Limited Company, Then We Can Do This Work In Two Ways.
If We Have A Demat And Trading Account With A Full-Time Broker, Then In Such A Situation, We Have To Contact Our Broker Through Call OR Messages And Ask Him To Buy Or Sell The Shares Of That XYZ Limited Company.
And If We Have Our Demat And Trading Account With A Discount Broker, Then In Such A Situation, We Can Buy And Sell Shares Of Any XYZ Limited Company Ourselves Through The Website OR Software Provided By Our Broker.
Friends, The Job Of The Broker Is To Send Our Buy And Sell Orders To The Exchange.
And When Our Buy And Sell Orders Reach The Exchange, Then The Exchange’s Job Is To Match The Buyer And Seller Orders And Confirm Them, Then Send Them Back To The Broker.
And When The Broker Receives The Confirmation Order From The Exchange, Then The Broker Completes The Deal Between The Buyer And The Seller.
As A Result, The Shares Are Transferred From The Seller’s Demat Account To the Buyer’s Demat Account And The Money For Those Shares Is Transferred From The Buyer’s Trading Account To The Seller’s Trading Account, And In This Way A Deal Is Completed Between The Buyer And Seller.
Brokers Also Provide Us The Facility Of Demat And Trading Account. Just Like We Have A Saving Account In The Bank, In Which We Keep Our Money, Similarly The Broker Has Our Demat And Trading Accounts.
The Shares Of The Companies We Buy Are Kept In Demat Account, Whereas In Trading Account We Get The Facility To Keep Money.
Friends, When We Place A Buying And Selling Order In Our System, Then The Clearing House Takes Care Of Fulfilling That Order In The Right Way.
The Clearing House Gives A Guarantee To Buyers And Sellers That Their Transaction Will Be Completed Properly.
And Above All This There Is SEBI (Securities And Exchange Board Of India), Which Works To Regulate The Entire Stock Market.
Sebi Makes Rules And Regulations To Ensure That Everything Works Properly In The Stock Market. The Main Objective Of Sebi Is To Keep The Indian Stock Market Fair And Safe.