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INTRODUCTION

The trading on stock exchange in INDIA used to take place through open outcry method without use of information technology for immediate matching or recording of trades. This was time consuming and inefficient. This imposed limits on trading volumes and efficiency. In order to provide efficiency, liquidity, and transparency NSE and BSE introduced nation wide online fully automated SCREEN BASED TRADING SYSTEM

SCREEN BASED TRADING


NSEs screen based trading is known as NEAT- National exchange for automated trading. BSES screen based trading is known as BOLT- Bombay online trading.

MECHANISM OF ONLINE TRADING


NSE has main computer which is connected through VERY SMALL APERTURE TERMINAL(VSAT) installed at its office. The main computer runs on a fault tolerant STRATUS mainframe computer at the exchange. Brokers have terminals installed at their premises which are connected through VSATS.

HOW TO PLACE ORDER


An investor informs broker to place an order on his behalf. The broker enters the order through his PC, which runs under windows NT and sends signal to the satellite via VSAT. The signal is directed to mainframe computer at NSE via VSAT at NSEs office. A message relating to the order activity is broad casted to respective member.

TERMINOLOGIES OF ONLINE TRADING


Snap quote:- feature available to get instantaneous market information on a desired security. Active and Passive orders:- when any order enters the trading system, it is an active order. It tries to find a match on the other side of books. If it finds a match trade is generated, if does not finds match it turns to passive order which is stored in order book.

BSE
BSE is the leading and the oldest stock exchange in India as well as in Asia. It was established in 1887 with the formation of "The Native Share and Stock Brokers' Association". BSE is a very active stock exchange with highest number of listed securities in India. Nearly 70% to 80% of all transactions in the India are done alone in BSE. The BSE has computerized its trading system by introducing BOLT (Bombay On Line Trading) since March 1995.

OTC Exchange of India (OTCEI)


Over-the-Country Exchange of India (OTCEI) was incorporated in the year 1990 as a Section 25 company under the Companies Act 1956. It is recognized by the Securities Contracts Regulation Act, 1956 as a stock exchange. The purpose of the formation of OTCEI was to aid enterprising promoters in raising finance for new projects in a cost effective manner and to provide transparent and efficient mode of trading to the investors.

OTCEI
OTCEI is the first screen based nationwide stock exchange in India created by Unit Trust of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance Corporation and its subsidiaries and CanBank Financial Services.

OTC Exchange of India (OTCEI)


It introduced several novel concepts to the Indian capital markets, like screen-based nationwide trading, sponsorship of companies, market making and scripless trading

OTCEI Fact

It is the first screen based nationwide stock exchange in India. It is the first exchange to introduce Market Making in India. It is the first exchange to introduce Sponsorship of companies in India. It is the only exchange which allows the listing of companies with a paid-up capital below Rs. 3 crores. It is the only exchange which allows the companies with less than 3 year track record to tap capital market. It has shifted trading from counter receipts to share certificates. It has introduced Weekly Settlement Cycle. It allows short selling. It allows the demat trading through NSDL. It has tied-up with NSCCL for Clearing.

National Stock Exchange


In order to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high powered Pherwani Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others. NSE is the largest and most modern stock exchange in India NSE provides exposure to investors in two types of markets, namely: Wholesale debt market Capital market

Trading at NSE
Fully automated screen-based trading mechanism Strictly follows the principle of an order-driven market Trading members are linked through a communication network This network allows them to execute trade from their offices The prices at which the buyer and seller are willing to transact will appear on the screen When the prices match the transaction will be completed A confirmation slip will be printed at the office of the trading member

Settlement in the Securities Market


Earlier trading in the stock exchange was held faceto-face (called pit-trading) without the use of computers and the advanced computer software as it is today. In those times, transactions were settled (i.e., actual delivery of shares, through share certificates, by the seller and payment of money by the buyer) in the stock exchange, only on a fixed day of the week, say on a Saturday, or a Wednesday irrespective of which day of the week the shares were bought and sold. This was called Fixed Settlement.

Settlement in the Securities Market


With the electronic / computer based system of recording and carrying out of share transactions, stock exchanges go in for rolling settlement. That means, transaction are settled after a fixed number of days of the transaction rather than on a particular day of the week. For example, if a stock exchange goes in for T+2 days of rolling settlement, the transaction is settled within two working days of occurring of the transaction,

Depository system in India


Before Introduction of depository system, the problems faced by the investors and corporate in handling large volume of paper were: Bad deliveries Fake certificates Loss of certificates in transit Mutilation of certificates Delays in transfer Long settlement cycles Mismatch of signatures Delay in refund and remission of dividend.

NSDL
National Securities Depository Limited (NSDL) does the above tasks for the trades done on NSE. It is a joint venture of: IDBI (Industrial Development Bank of India Limited); NSE (National Stock Exchange); and UTI (Unit Trust of India). NSDL is the first depository to be set up in India. It was registered by SEBI on June 7, 1996.

CDSL
The second depository Central Depository Services Limited (CDSL) has been promoted by Bombay Stock Exchange and Bank of India, Bank of Baroda and HDFC bank. It was formed in February 1999. Both depositories have a network of Depository participants (DPs) which are further electronically connected to their clients. So, DPs act as a link between the depositories and the clients.

Bank v/s NSDL


Holds funds in accounts Transfers funds between accounts Transfers without handling cash Safekeeping of money Holds securities in accounts Transfers securities between accounts Transfers without handling physical securities Safekeeping of securities

Constituents of Depository system


Depository DP (Depository participant) Securities, Issuers and Registrars and share transfer agent Stock exchanges and stock brokers Clearing house Banking system Investors

Depository participant
Depository Participant (DP) is the representative (agent) of the investor in the depository system providing the link between the Company and the client through the Depository. The clients Depository Participant will maintain his securities account balances and intimate the status of the holding from time to time. According to SEBI guidelines, Financial Institutions like banks, custodians, stockbrokers etc. can become participants in the depository. DP is one with whom a client needs to open an account to deal in electronic form.

Depository participant
While the Depository can be compared to a Bank, DP is like a branch of a bank with which one can have an account. Therefore, DPs are authorized to maintain accounts of dematerialized shares. They help in instantaneous electronic transfer of shares held in Demat form through electronic book entry system. Book entry system is a system under which no physical transfer of securities takes place. Fungibility means that all the holdings of a particular security are identical & inter-changeable & they have no unique characteristic such as distinctive number, certificate no., folio no. etc the registered owners are the depositories whereas the beneficiary owners are the people who are holding the securities at any given point of time

Facilities offered by DP
Opening of Depository accounts Dematerialization Dematerialization Settlement of trades in dematerialized securities Account transfer Transfer, transmission and transposition Pledge and hypothecation