Contract notes are one of the most important legal papers available for stock market investors. It keeps track of all transactions at one location, as well as profit and loss information. The availability and legality of important information relating to a transaction makes it critical for an investor or trader to truly understand the market in this document.
Any trade made by a stock broker on a stock market is recorded by a contract note. It confirms a trade executed on the client's behalf on a stock exchange (BSE / NSE) on a given day. This document is sent to you by your broker and contains information about the shares you bought or sold through him. It's also possible that the document will be provided in electronic format with a digital signature.
What are the Contents of a Contract Note?
The primary contract information is outlined in the contract note, which includes the date, period, size, quantity exchanged, and so on. This also gives you a reference number that you can use to double-check transaction data with the stock exchanges.
In a standardized format, a good contract note should have the following information.
- Trading member/sub-broker's SEBI registration number
- Order number, transaction size, transaction price, trade time, traded amount, brokerage paid, settlement reference number, share broker charges and other service charges information are all examples of trade information.
- For the electronic format, an authorized member's signature or a digital signature is required.
- Arbitration rules and bylaws
Significance of Contract Note
As the number of people investing in the stock market grows, the odds of fraud and conflict expand as well. SEBI has taken a number of steps to protect the interests of all investors. The digital contract note, which shows the price, brokerage, service tax, and STT in the required format, is one of the first steps in that direction.
An investor can be confident that the order he placed through his broker was executed simply by looking at this document. This paper is required before you can file a lawsuit or arbitration against your broker. You should always count on your broker for share market to provide contract notes on time.
A contract note's primary function is:
- Estimation of total brokerage fees
- Capital Gains Calculation
- In the event of a dispute with the broker, legal evidence is required.
- Calculation of data for the purpose of filing a tax return
- Cross-examination of the transactions' authenticity