The Short Version
A contract note is the legally binding document a broker must issue to a client for every trade executed on their behalf. It records the exact terms of the trade — order and trade numbers, time of execution, quantity, price, brokerage, and all applicable taxes/charges — and serves as formal proof of the contract between broker and client. Exchanges require it to be issued within a fixed window (commonly within 24 hours of the trade), and it's an essential document for tax filing and dispute resolution.
Explain It Like I'm 10
A contract note is like a detailed receipt from a store, except far more formal — it doesn't just say 'you bought something,' it itemizes the exact price, the exact time, every small fee added on top, and gives you a reference number you could point to later if there's ever a disagreement about what you actually bought and for how much.
Step-by-Step Example
- 1 You place an order to buy 50 shares of a stock through your broker.
- 2 The order executes at 10:14:32 AM at a price of $42.10, and gets a unique trade number from the exchange.
- 3 By the next business day, your broker issues a contract note listing: quantity (50), price ($42.10), brokerage charged, STT, GST, stamp duty, and the total net amount payable.
- 4 Months later, you notice a fee on your account you don't recognize. You pull up that specific contract note to check exactly what was charged and when.
- 5 Because the contract note itemizes every charge separately, you can clearly see whether the disputed amount matches what was actually disclosed at the time of the trade.
Quick Recap
- ✓ It must include order number, trade number, trade time, quantity, price, brokerage, and taxes/statutory charges (like STT and stamp duty) separately.
- ✓ It's issued per trading day/segment, and today is typically delivered electronically rather than on paper.
- ✓ It is the primary evidence in any dispute between an investor and broker over a trade's terms.
- ✓ A missing or delayed contract note is itself a regulatory violation the investor can report.