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Contract Note is a daily general of your transaction with the broker. In this article, we are going to discuss about contact note. Why the contract note is important? What we should check-in contact note? Comparison of contract note between a full-service broker and a discount broker? How can we save money if we switch to discount broker.
The contract note is the legal record of your share broker to give you complete details of your transaction carried out on the stock exchange. This document gives you confirmation of transaction done on a particular day, on an exchange, on behalf of you by your broker. It's a broker's responsibility to produce this document by the end of the day in case you have done any transaction/trading in the stock market. Usually, broker shares this document digitally with clients using their registered email. Historical contract notes are also available in your back office.
The contract note is the daily trading information from your broker. This will give you clear visibility on your transaction executed on the exchange with a reference number. Which can be used to cross-check the details with the exchanges in case of any discrepancy. Thus Contract Note is bridging document between you and stock exchange.
Your contract note has broker Information which include SEBI registration No, Clearing No, Trading no, CMBP ID, Signature of Authorized Signatory or Digital Signature in Electronic format, bylaws and regulations pertaining to Arbitration, your PAN number and personal information. All these information should be review.
Next section is your trading details:
Most importantly, you can see how much brokerage and other service charges are applied on your transaction as it shows:
You should check the number of orders you have given and how many of them are executed and at what price. This is your end of the day transaction snapshot so it will give you details on the net amount receivable or payable information.
It is clearly displayed in your contract note how much brokerage you pay per transaction. However to let you know, as per SEBI guidelines, your broker can charge max 2.5% on the higher side and 0.01 Rs on the lower side. Now it's up to your broker how much brokerage he charges to you. Other than brokerage another factor which can vary is transaction charges. All other charges are standard and the broker doesn't have any control over them.
Example of contract note comparison. Now to show how much you can save with a discount broker (Prostocks) as compared to full service broker (ICICI direct). We are here trying to compare the contract notes from both the broker. The below example of delivery trade with ProStocks and ICICIDirect.
ProStocks Contract Note
ICICIDirect Contract Note
With above example, it's clear that we paid Rs 0.15 per unit brokerage with ProStocks and Rs 6.78 per unit brokerage with ICICIDirect. If you are trading with Zerodha or Upstox, You don't have to pay any brokerage for delivery trading. Its completeley free.
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You can expect a contract note from your broker only when you have done some trade in market. Usually contract notes are generated after the market close on the same day. The timing of contract note generation will be differ broker by broker, but you will get an email before next business day.
The contract note can act as a cross reference in case of doubt to any transactions as you can verify the genuineness of the same on the BSE/NSE website. This document is a prerequisite for filing a complaint or arbitration proceedings against your broker. You should always insist on timely delivery of contract notes from your broker. Contract note is your daily ledger, so one should have to keep track of it for year-end tax filling. It helps you in following ways:
Usually you get a copy of your contract note in your registered email. You can get a historical contract note on the brokers back office software. Broker need to provide a historical contract notes on his website (back office) for min 1 year of period.
In case you have issues with your contract note, please contact your broker to resolve the issue. In case broker is not responding, you can use the invertor grievance with SEBI/NSE/BSE against the broker with valid proof of disputes.
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