Secondary Markets

Hint Common mistake: Classifying every exchange-related transaction as fresh capital raising. Think about whether an existing holding changes hands or a new security is issued.

Hint Common mistake: Confusing conversion into electronic form with sale or redemption. Focus on the form in which ownership is recorded.

Hint Common mistake: Assuming that account-opening checks assess whether every future trade is suitable. Think about why an intermediary needs reliable client information.

Hint Common mistake: Treating a general account statement as a substitute for checking trade confirmations. Recall the document that helps reconcile completed trades and charges.

Hint Common mistake: Assuming a limit order must execute as soon as it is submitted. Think about which side of an unfavourable price the buyer wants to avoid.

Hint Common mistake: Treating a stop-loss trigger as a guaranteed maximum loss. Distinguish the event that starts an order from the trade that may follow.

Hint Common mistake: Reversing the direction of securities pay-in and pay-out. Think about fulfilling the selling side’s delivery obligation.

Hint Common mistake: Using clearing and settlement as though they describe the same task. Distinguish calculating what is owed from completing the transfer.

Hint Common mistake: Thinking that depositing margin prevents losses on the position. Focus on the risk faced when a participant may owe money later.

Hint Common mistake: Applying the buyer’s preference for a low price to ranking competing bids. View the competing bids from the seller’s perspective.

Hint Common mistake: Assuming all orders at the same price execute simultaneously. After matching prices, recall the next priority used in the queue.

Hint Common mistake: Expecting every market order to execute at the last traded price. Look for the current price offered by sellers, not the previous trade.

Hint Common mistake: Confusing the midpoint of the quotes with the spread. Measure the gap between the two best quotes.

Hint Common mistake: Reporting sale proceeds as profit. First find the change per share, then account for the quantity.

Hint Common mistake: Deducting a stated total charge once for each side again. Use the total charge once, as an expense.

Hint Common mistake: Applying netting without checking that the trades are eligible. Offset the eligible sale quantity against the purchase quantity.

Hint Common mistake: Assuming a sale is complete merely because an order has executed. Compare the delivery obligation with the quantity actually supplied.

Hint Common mistake: Mixing up lakh and crore when multiplying price by share count. Value all outstanding shares at the quoted market price.

Hint Common mistake: Treating an unfilled order as an error even when its price is outside the market. Compare the buyer’s maximum with the sellers’ current offers.

Hint Common mistake: Assuming a temporary halt guarantees that prices will recover. Think about the role of a pause during unusually rapid market movement.

Hint Common mistake: Using a complaint mechanism as though it guarantees recovery of market losses. Think about the channel used to raise and follow an unresolved complaint.

Hint Common mistake: Assuming executed trades must represent genuine economic demand. Ask whether the displayed demand reflects genuine market interest.

Hint Common mistake: Treating access to borrowed securities as permanent ownership without obligations. Distinguish borrowing a security from buying it permanently.

Hint Common mistake: Assuming that negotiated trading means no regulation or reporting. Focus on how counterparties agree on the trade.

Hint Common mistake: Taking a simple average of price levels without using the traded quantities. Fill the better-priced quantity first and weight each price by its executed quantity.

Hint Common mistake: Using the full spread instead of the buy-price deviation from the midpoint. First locate the quote midpoint, then compare the purchase price with it.

Hint Common mistake: Using promoter or restricted holdings as though they were all free float. Value all shares first, then retain only the stated free-float proportion.

Hint Common mistake: Multiplying net shares by one price when purchases and sales had different prices. Offset actual sale proceeds against purchase value before adding the stated cost.

Hint Common mistake: Assuming sufficient total order-book depth means every price level is eligible. Include available quantities only at prices compatible with the limit.

Hint Common mistake: Interpreting the name of a protection fund as blanket market-loss insurance. Distinguish an investment losing value from an intermediary failing to meet obligations.