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What is a Contract Note

13 Sep 2023

A contract note has relevance in the trading world. If you are involved in any practice that involves trading, you should know about the contract note meaning and how you should read it. A contract note is of prime importance as it confirms the entire information of the trades executed on a specific date. 

What is a Contract Note?

A contract note is an account of the total trades made on a particular day and acts as legal /official proof of transactions in offline or online trading. When you define contract note, you mean it to have the following parts: 

  • The order and number of the trade undertaken.
  • The order and time of the trade executed.
  • The name and symbol of the security traded.
  • The type of action that has been carried out - selling or buying shares/assets.
  • The kind of trade made - intraday or delivery. 
  • The price of the trade, with the quantity traded.
  • Any charges that were levied - brokerage fees and charges. 
  • The net amount that the trade yielded - payable or receivable. 

What Purpose Does a Contract Note Serve?

What is a contract note in stock market terms? If you know the purpose for which a contract note is generated, you will understand its importance better. The contract note serves a purpose for the reasons mentioned below: 

  • A contract note serves to confirm all the trades that are executed by an investor or a trader on any given date. 
  • A contract note is generated when traders undertake online trading and the total amount of brokerage charged is determined. 
  • The net amount that is payable or receivable is made clear. 

What is Contract Note for Shares?

Contract notes are generated for the transactions involving trading in stocks and shares. When you read a contract note, you will discover a number of columns that exhibit the finer details of the trades executed on a specific date. There will be a list of columns and these will be numbered. The following are the key sections of an actual contract note when securities/shares are traded:

  • Buy and Sell - This means the type of order placed by a trader/investor. 
  • Quantity Transacted - This means the amount of securities traded in. Positive amounts are stated as orders placed to buy and negative amounts mean those which are sold. 
  • Per Unit Gross Rate - This is the rate/price at which the order was executed.
  • Per Unit Brokerage - Every trade has a brokerage charge/fee.
  • Total Net (before levies) - This relates to the total amount of the trade or generated by it, before other fees and charges have been attached/levied. 

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Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account 


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