CA FINAL- ADVANCED AUDITING &
PROFESSIONAL ETHICS
THEORY QUESTIONS AND ANSWERS
Q.1) Type of markets under NEAT
NEAT stands for
National Exchange for Automated Trading system
. It is a
fully computerized screen based trading system
.
It enables members from across the country to trade simultaneously with ease
and efficiency by keying their orders into system.
1.
(i)
Normal Market
: All orders of regular lot size or multiples thereof are
traded in the normal market. Normal market consists of regular lot orders,
special term orders, negotiated trade order and stop loss order depending on
their order tributes.
2.
(ii)
Odd Lot Market
: If the order size is less than the regular lot size such
orders are traded in the odd lot market. In an odd lot market both the price
and quantity of both the orders (buy and sell) should exactly match for the
trade to take place.
3.
(iii)
Spot Market
: Spot orders are similar to normal market orders except that
spot orders have different settlement periods vis-a-vis normal market.
4.
(iv)
Auction Market
: In the auction market, auctions are initiated by the
exchange on behalf of trading members, for completing the settlement
process.
Q.2) Circuit Filters
Circuit filters or Circuit Breakers are the price bands that set the upper and
lower limit within which a stock can fluctuate on any particular day.
A price band for a day is a function of previous trading day’s closing.
SEBI has directed the exchanges to apply circuit filters on scrips traded in rolling
settlement if their prices fluctuates more than 20% of closing price of scrip on
previous day in any direction.
However, for scrips forming part of sensex or in which derivatives and futures
are available, the fluctuation is restricted to 10%.
RAHUL JAIN
Q.3)Rolling Settlement:
A rolling settlement is one in which a transaction outstanding at the end of the
day have to be settled within X number of business days from the transaction
date.
If a transaction is entered on Monday on T+2 rolling settlement, it will be settled
on Wednesday when pay in or payout take place.
The pay in and pay out of funds are effected on the same specified date.
SEBI has mandated most of the scrips to be settled exclusively on rolling
settlement basis.
Q.4) Hit or Take Orders:
Hit or take orders occur in screen-based trading in stock exchange. This is a
variation of market orders
.
It enables faster order execution
without disturbing the limit order book.
This method converts the key strokes or mouse clicks of the broker into a limit
order at the touch line price for a particular scrip, without his having to place a
limit order.
Further all unexecuted orders of this type are automatically killed and are
therefore not stored in the order book.
