The business of taking advantage of difference in price of a security traded on two or more stock exchanges, by buying in one and selling in the other (or vice versa).


Settlement of claims differences or disputes between one member and another and between a member and his clients, authorised clerks, sub-brokers etc., through appointed arbitrators.

At best

An instruction from the client to the broker authorising him to use his discretion and try to execute an order at the best possible price. An 'at best' order is valid only for the day it is placed.


The process of gradually buying more and more securities in a declining market (or selling in a rising market) in order to level out the purchase (or sale) price.


Carrying forward of transaction form one settlement period to the next without effecting delivery or payment.


Transaction between two members of the exchange. The terms "dealings" and "contracts" also have identical meanings.


An individual who expects price to go down.

Bear Markets

A weak or falling market characterised by absence of buyers.

Blue Chips

Blue Chips are shares of large, well established and financially sound companies with impressive records of earnings and dividends. Generally, Blue Chip shares provides low to moderate current yield and moderate to high capital gains yield. The price volatility of such shares is moderate.


A free allotment of shares made in proportion to existing shares out of accumulated reserves. A bonus share does not constitute additional wealth to shareholders. It merely signifies recapitalization of reserves into equity capital. However, the expectation of bonus shares has a bullish impact on market sentiment and causes share prices to go up.

Book Closure

Dates between which a company keeps its register of members closed for updating prior to payment of dividends or issue of new shares or debentures.


A bull is a operator expecting a rise in price so that he can later sell at a higher price.

Bull Market

A rising market with abundance of buyers and few sellers.

Cash Settlement

Payment for transactions on the due date as distinct from carry forward (Badla) from one settlement period to the next.

Clearing Days or Settlement Days

Dates fixed in advance by the exchange for the first and last business days of each clearing. The intervening period is called settlement period, which is normally one week in the case of 'specified' shares and ten days in the case of 'non-specified' securities.

Clearing House

Each Exchange maintains a clearinghouse to act as the central agency for effecting delivery and settlement of contracts between all members. The days on which members pay or receive the amounts due to them are called pay-in or payout days respectively.


A situation where by a single interest or group has acquired such control of a security that these cannot be obtained or delivered for performance of existing contracts except at exorbitant prices. In such situations, the Governing Board may intervene to regulate or even prohibit further dealings in that security.


Temporary reversal of trend in share prices. This could be a reaction (a decrease following a consistent rise in prices) or a rally (an increase following a consistent fall in prices).


Reckless heavy short sales leading to unduly depressed prices. In such a situation, the Governing Board may prohibit short sales, fix minimum prices below which sells or purchases are not permitted and limit further dealings only to closing out of existing contracts.


Means "with". A cum price includes the right to any recently declared dividend (CD) or right share (CR) or bonus share (CB).


A transaction may be for "spot delivery" (delivery and payment on the same or next day) "hand-delivery" (delivery and payment on the date stipulated by the exchange, normally within two weeks of the contract date), special delivery (delivery and payment beyond fourteen days limit subject to the exact date being specified at the time of contract and authorized by the exchange) or "clearing" (clearance and settlement through the clearing house).


Means "without". A price so quoted excludes recently declared dividend right or bonus shares.

Floating Stock

The fraction of the paid-up equity capital of a company, which normally participates in day-to-day trading. On an average, about 30 per cent of equity capital is held by promoters; another 30 per cent by financial institutions and the balance 40 percent by the public, mostly for long-term investment. Consequently, the floating stock of a company rarely exceeds 15 - 20 percent of its equity capital. Low floating stock causes erratic price movement as in the case of securities in the non-specified shares.

Governing Board

A stock exchange functions under the direction and supervision of its Governing Board. It generally consists of a specified number of elected members, a whole time Executive Director and representatives of the Government. Securities and Exchange Board of India (SEBI) and public. The size and structure of the board varies from exchange to exchange.


Member brokers of a stock exchange who specialise in buying and selling of specific securities from and to fellow members. Jobbers do not have any direct contact with the public, but they render a useful function of imparting liquidity to the market.

Jobber's Spread

The difference between the price at which a jobber is prepared to sell and the price at which he is prepared to buy. A large difference reflects an imbalance between supply and demand.

Kerb Dealings

"Khangi Bhao" or 'band na Bhao'. Transactions done on behalf of members after the official close of the trading hours in the street or at the entrances to or in the vicinity of the Stock Exchange. The Bye-laws of the Stock Exchange, Mumbai prohibit its members from participating in kerb deal dealings.

Limit Orders

Instruction to the broker limiting him to buying at a stated maximum price or selling at a stated minimum price.

Listed Company

A public limited company which satisfies certain listings conditions and signs a listing agreement wit the stock exchange for trading in it securities. One important listing condition is that 25% of its issued capital should be offered to the public.

Long Position

A bull position in a security


The membership of the exchange consists of such numbers of members as the exchange in general meeting may from time to time determine. According to the stock exchange rules, no person shall be a member if he is less than 21 years or is not an Indian citizen or has been adjudged bankrupt or proved an insolvent or has been compounded by this creditors or has been convicted of an offence involving fraud or dishonesty or is engaged as principal or employee in any business other than that of securities. Companies formed under the provisions if Section 12 or Section 322 of the companies Act, 1956 are eligible to become members subject to certain terms and conditions. Individuals are not deemed to be qualified unless they have a least two years market experience as an apprentice or as a partner or an authorised assistant/clerk.

Pari Passu

A term used to describe new issues of securities which have same rights as the issues already in existence.

Rights Issues

The issues of new shares to existing shareholders in a fixed ratio to those already held at a price which is generally below the market price of the old shares.

Selling Short

Normally one buys a security and then sells it later. This is described as going long and is profitable in rising markets. The reverse process-selling a security first, and then buying it later, is called selling short. This is profitable in a declining market.

Settlement Period

For administrative convenience, the stock exchange divides the year into a number of settlement periods each of generally one weeks duration in respect of 'specified shares' and one-week duration in respect of 'non-specified' securities. The first and the last day trading of each settlement period are fixed in advance and so are settlement days for delivery and payment.

Specified Shares

For the purpose of trading, a security is categorised either as a 'specified' or 'non-specified' security. This is done by the Stock Exchange Authorities.

Stamp Duty

The ad valorem duty of 1/2 per cent payable by buyers for transfer of shares in their name.

Unit of Trading

The minimum number of shares of a company, which are accepted for normal trading on the stock exchange. All transactions are generally done in multiple of trading units. Odd lots are generally traded at a small discount.

Volume of Trading

The total number of shares, which change hands in a particular company's securities. It is the sum of either purchases or sales, which necessarily equal. This information is useful in explaining and interpreting fluctuations in share prices.