National Stock Exchange (NSE)

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National Stock Exchange of India Ltd (NSE)
NSE is incorporated in 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994, The Capital Market (Equities) segment in November 1994 and operations in Derivatives segment in June 2000.

The NSE was established with the main objectives of establishing a nationwide trading facility for equities, debt instruments and hybrids; ensuring equal access to investors all over the country through an appropriate communication network; providing a fair, efficient and transparent securities market to investors using electronic trading systems; enabling shorter settlement cycles and book entry settlements systems; and meeting the current international standards of securities markets.

Trading System

The NSE has an automated screen based trading systems, which allow orders to be placed at a “pre-determined” or “best” price. The automated screen based trading system for the NSE it is known as the ‘National Exchange for Automated Trading’ (NEAT) system.

The online trading systems follow the principles of an order driven market which facilitates efficient input of orders and automatic matching, resulting in faster execution of orders in a transparent manner. The member-brokers enter orders for purchase or sale of securities from work stations connected to the exchange trading systems. Order matching is anonymous (i.e. the orders are matched by the exchange system) and the identity of the counter-party is not revealed.

Orders are assigned a unique order number by the trading system (for a member broker, security and transaction type) and time-stamped on entry by the member broker by the trading system. The orders are processed for potential match. Pending orders are stored in different ‘books’ based on price-time priority in the following sequence:

* Best Price
* Within Price, by time priority.

Price priority - of two orders entered into the system, the order with the best price gets the higher priority for trade matching.

Time Priority - of two orders having the same price, the order entered earliest gets the higher priority for trade matching.

Order Matching - The trading system sorts pending orders in price-time priority for order matching purposes by matching the best buy order and best sell order. Best buy order is the one with the highest price and the best sell order is the one with the lowest price (the system sorts buy orders from the seller point of view and vicé versa). Orders may match with more than one order resulting in multiple trades for an order.

Member broker can place market orders (which will be matched with the best available order) or limit orders (wherein member can specify the price for the order) which will remain a part of order books until matching.

Additionally, member brokers can place conditions at the time of order entry. These conditions are as under:

* Time Conditions: These conditions, as the name suggests, can be classified as Day orders, Good till Canceled, Good till Date order and Immediate or Cancel order.
* Price conditions: This permits members to specify conditions to execute the trade at specified price or best price. Members can also place stop loss orders.
* Quantity conditions: The member can disclose a part of the order quantity to the market. For example, an order for quantity 1000 at a limit price can specify a disclosed condition of quantity 200. This will ensure that only 200 quantity at a point of time is displayed to the market. Once this quantity is traded, another quantity 200 is automatically released and so on till the full order is executed. The Exchange may set a minimum disclosed quantity criteria from time to time.
* Minimum FII: these orders allow the trading member to specify the minimum quantity by which an order should be filled.
* All or none orders: all or none orders allow a trading member to impose the condition that only full order should be matched against.

Please note that debt securities are mainly negotiated bilaterally and subsequently reported to the stock exchanges.

Trading Hours

Equities:
Monday to Friday
A) Pre-open session
Order entry & modification Open : 09:00 hours
Order entry & modification Close : 09:08 hours
*with random closure in last one minute. Pre-open order matching starts immediately after close pf pre-open order entry.

B) Regular trading session
09:15 hours - 15:30 hours

Block deal session is held between 09:15 hours and 09:50 hours

C) The Closing Session is held between 15:40 hours and 16:00 hours

Mutual Funds:
Monday to Friday 9:00 hours - 15:00 hours

Securities Lending & Borrowing Schemes:
Monday to Friday 9:15 hours - 15:30 hours

Equity Derivatives:
Monday to Friday 9:15 hours - 15:30 hours
Setup cutoff time for Position limit/Collateral value : 16:15 hours
Trade modification / Exercise market end time : 16:15 hours

Currency Derivatives:
Monday to Friday 9:00 hours - 17:00 hours

Interest Rate Futures:
Monday to Friday 9:00 hours - 17:00 hours

New Debt Segment:
Monday to Friday 9:00 hours - 17:00 hours
Collateral value Set up cut off time: 17:20 hours
Trade modification end time/Give up approval end time: 17:20 hours

Corporate Bond:
Monday to Friday 10:00 hours - 17:30 hours

Retail Debt Market:
Monday to Friday 09:15 hours - 15:30 hours

Wholesale Debt Market:
Monday to Friday
Same Day Settlement (Government Securities) 10:00 hours to 15:00 hours
Other Day Settlement (Government Securities) 10:00 hours to 17:15 hours
Same Day and Other Day Settlement (Non-Government Securities) 10:00 hours to 18:15 hours

Trading on Wholesale Debt Market segment is divided into three phases as under:

Pre-Open Market Phase

The pre-open period commences from 9:00 hours This period allows the trading member/Participant to:

set up counter party exposure limits
set up Market Watch (the security descriptor)
make inquiries

Market Open Phase

The system allows for inquiries of the following activities when the market is open for trading:

Order Entry
Order Modification
Order Cancellation
Negotiated Entry
Trade Cancellation
Setting up counter party exposure limits

Post Market Phase (also called SURCON)

During the period of SURCON (SURveillance and CONtrol) a trading member gets only inquiry access with a facility to request for trade cancellation. On completion of SURCON the trading system processes data and gets the system ready for the next day.

Security Identifiers
ISIN (International Securities Identification Numbering): Is used for all equities and dematerialized debt. Physical debt does not bear ISIN.

Other: Government Securities are identified by the Loan Code assigned by RBI. Treasury Bills are identified by their maturity date and tenure.

Instruments
Equities: Ordinary shares, preference shares, participating preference shares, cumulative preference shares, cumulative convertible preference shares, warrants, rights renunciations
Debt: Loans, debentures, convertible bonds, zero-coupon bonds, public sector undertaking bonds, State and Central Government bonds
Money Market: Government Securities, Treasury bills, commercial paper, bonds, bills of exchange and promissory notes.
Derivatives: Index Futures and Options, Single Stock Futures and Options, Interest Rate Futures
Other: Mutual Fund units, Exchange Traded funds

Board Lots
Equities: In the dematerialized segment, a board lot is one share.
Physical shares: 5, 10, 50 and 100 shares, odd lots can be sold, typically at a discount to current price. (However trading in physical segment is not open to Institutional investors. Institutions are allowed to sell physical securities provided the security is not connected to both / one of the depositories)
Debt: Board lots vary according to type of debt security.
Derivatives: Lot sizes for derivatives are defined for each underlying security by the Exchanges.