Order management consists of entering orders, order modification, order cancellation and order matching.

Many brokers also provide depository services to investors amongst other services. To provide these services, the broker or the trading member has to get registered as a depository participant of a depository as per the SEBI Act 1992 and the Depositories Act of 1996.

As per SEBI (Portfolio Managers) Regulations - General Responsibilities of a Portfolio Manager : Every portfolio manager has to appoint a custodian in respect of securities managed or administered by it.

All orders can be modified or cancelled during the trading hours and pre-open market stage provided they are not fully executed.

For the orders, which are partially executed, only the open or unexecuted part of the order can be cancelled / modified.

Whenever there is short delivery of securities, Clearing Corporation/ Clearing House will conduct auction to buy the shares from the market participants. If on the auction day, there are no sellers for a particular short delivery, the Clearing Corporation / Clearing House will then carry out a process called “Close out”.

In this process, the buyer is compensated by paying the value of the short delivered security at the highest price prevailing across the stock exchange from the day of trading till the auction/close out day or 20% above the official closing price on the auction day, whichever is higher.

All orders come as active orders into the order book. If they get a match they will be executed immediately, else they will be entered into the order book according to price and time as passive orders.

The order matching in an exchange is done based on price-time priority. The best price orders are matched first. If more than one order arrives at the same price they are arranged in ascending time order.

Best buy price is the highest buy price amongst all orders and similarly best sell price is the lowest price of all sell orders

Stock brokers also offer Portfolio Management Services (PMS) to their clients. For this, a PMS license has to be obtained by them. PMS is normally offered to High Networth Individuals (HNIs).

Here the stock broker makes the investment decision on behalf of the client and manages his portfolio. The portfolio manager decides the mix of securities that the investor will invest in. Portfolio is updated with new stocks replacing existing stocks as and when required to optimize performance

Operational risk is the risk of losing money due to inadequate internal processes, people and systems or external events.

For the stock broker, operations risk is essentially risks such as non-payment, non-delivery of scrip, denial of matched order by client/s, trading errors, and sudden closure of banks where funds are deposited.