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When you sign up for online commodity trading in India (and maybe even equities), if you opt for the convienience of electronic contract note, you are asked to sign a declaration that states:

I am aware of risk involved in dispensing with the physical contract note, and do hereby take full responsibility for the same

What is the risk of choosing electronic notes over physical ones?

  • In case of a dispute over whether an electronically placed order was executed correctly, will a court or arbitrator accept your print-out of the electronic order as a legitimate order, or will it require an actual piece of paper with an ink signature? – Dilip Sarwate May 18 '12 at 12:51
  • The contract note, whether physical or electronic, is generated post order execution, isn't it? I don't think it can be used a means of verifying if an order was executed as placed. And yes digitially signed contract notes are valid legal documents under IT Act of 2000. – ottodidakt May 19 '12 at 7:10
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  1. The risk that you don't see it. It might end up in your spam folder, the email server might fail etc. A physical note may have a delivery receipt (courier company's counterfoil or post details) but it's very difficult to ensure delivery with e-contract-notes.

  2. The risk that the note is modified before it gets to you. Physical contract notes are usually printed, and you are likely to notice modifications. E-notes can be changed (many such notes are sent as HTML in a non-encrypted zip file). Many brokers do digitally sign notes nowadays but it is no longer required.

But I think the regulation is a vestige of the past, and has mainly to do with 1) above, i.e. that they can't ensure delivery. There's no standard contract note format, or even a standard delivery mechanism either.

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