What is Equity Trade Life Cycle & its Various Phases | Espresso

What is Equity Trade Life Cycle and its Various Phases

Traders frequently plan profitable equity investments for themselves. Retail investors, groups, corporations, or groups operating for a customer are all examples of these investors. Day after day, trillions of transactions occur.

Published on 03 February 2023

Each aspect of a trade, from order to settlement, fits together perfectly and proceeds without any problems. Imagine that you have ever questioned why the process went so smoothly and what the firm and shareholders had to do with it.

It occurs due to the Equity Trade Life Cycle’s ongoing, systematic operation. Before we learn ‘what is equity trade life cycle,’ it’s crucial to take a look at what the equity trade system is.

Equity Trade System: What Is It?

Shares and stocks of businesses are exchanged on the equity market. Equities are exchanged in an equity market on the counter or through stock exchanges.

An equity market, also known as the share or stock market, enables both buyers and sellers to transact in equity or stocks within the same forum.

First and foremost, it’s critical to have a full knowledge of the Indian equity market. Where stocks of businesses or other corporations are exchanged is known as the equity market, often known as the share or the stock market.

The market enables sellers and purchasers to transact in shares or stocks via the same platform. Now that you know what an equity trade system is, let's jump into knowing what a trade life cycle is.

Equity Trade Life Cycle: What Is It?

If you’re scouring the internet to find the ideal answer to ‘what is a trade life cycle,’ you’ve landed on the right page.

The complete trading order procedure, including purchasing, selling, and exchanging any market instrument (stock), is known as the equity trade life cycle. Investor interest in trading equities is the first step in the equity transaction life cycle.

To accomplish this, the trader visits a licensed stockbroker, who then creates a trading deal for the stock. Once an agreement has been reached, the trade life cycle proceeds such that the trader and broker systems, which are in sync, may complete the full trade.

The back, middle, and front office operations make up the end-to-end flow of the equities trading life cycle, which covers the sequence of processes from the sell side.

Let’s examine each of these actions in more detail to comprehend the procedure from the sell-side perspective.

Equity Trade Life Cycle: Its Various Phases

Here, we examine the six steps of the equity trade life cycle and show what occurs exactly when you make a purchase:

Phase 1: Putting in a Trade Order

When you identify a trade opportunity in the stock exchange, it’s essential to issue a market order. Your trading platform alerts your stockbroker and financial institution of your purchase request whenever you place an order. The second phase of the equity trade life cycle is when your trade purchase order enters.

Phase 2: Assessing Risks

Your order is taken by a front-office sales dealer, who then sends it to the internal risk control division of the brokerage of your choice. Orders are forwarded to the exchange when this division certifies that they comply with risk guidelines and won’t jeopardize your finances.

Phase 3: Matching Order

Your order then travels to the appropriate exchange for matching. Here, a match is made between orders. There must be a buyer for the asset you want to purchase and a buyer willing to accept the asset’s asking price. To execute the trade, the market connects buyers and sellers.

Phase 4: Verifying Your Trade

The post-trade affirmation is sent back to the appropriate intermediaries once the market has matched an eligible buyer and a seller. Brokers then let clients know when a trade has been fully executed in the market. Before the trade moves on to the clearance step, it must be confirmed by the brokers of both the seller and the buyer.

Phase 5: Getting to The Clearinghouse

The clearinghouse’s or clearance agency’s job is to define every side of the deal’s responsibilities. These market-level middlemen ensure that transactions are closed and settled. Before trades are settled, which usually takes place two days just after the date of acquisition, reference numbers are assigned to them.

Phase 6: Date of Settlement

Money is officially transferred from the purchaser to the seller on the closing date. Nevertheless, there is no direct payment between the customers. The clearinghouse manages the resources and transfers the money into the appropriate accounts for the customers.

The backdrop of the voyage of the trade from allocation to settlement also includes numerous additional minor aspects. These intricate procedures get started every time you click the Sell or Buy checkout button, keeping the world’s stock system active.


Anyone engaged as a participant in one of these deals should be aware of the stock trading lifecycle. Traders or customers are guaranteed to comprehend the thorough execution of their market orders thanks to the broad knowledge of the equities trading life cycle.

This makes it possible for the purchase and sell sides to operate smoothly. Since there are billions of trades daily, understanding the stock trade life cycle provides a client with a clearer picture of the daily progress of their significant deals and a clear schedule.

Chandresh Khona
Team Espresso

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