finance projects working of stock exchanges
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BY
YEDUDEV.S Reg No :(S1AA8A61112A)
GEMS B SCHOOL
2011-2013.
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WORKING OF STOCK EXCHANGES IN
INDIA
(WITH REFERENCE TO BSE AND NSE)
BY
YEDUDED.S
Reg No :(S1AA8A61112A)
GEMS B SCHOOL THRISSUR
2011-2013.
PROJECT GUIDE
MISS SHALINI
FROM
GEMS B SCHOOL THRISSUR
DATE OF SUBMISSION:
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CERTIFICATE
This is to certify that the Project work of FINANCIAL
MANAGMENT submitted to the College by the candidate
YEDUDEV.S bearing Reg. No: (S1AAA61112A) is the
product of bona fide research carried out by the candidate
under my supervision in QUALITY OF WORK LIFE
(GUIDE)
THRISSUR MISS. SHALINI PRANAV
NOVEMBER 2011 Lecturer QUALITY
OF WORK LIFE
Great Eastern ManagementSchool
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ACKNOWLEDGEMENT
The Project work was carried out under the remarkable guidance of
Miss. swapna, Lecturer, Great Eastern Management School. I am
grateful for her guidance and valuable suggestions and for the
constant encouragement and co-operation.
I also express my sincere gratitude and thanks to all the teachers who
helped me to complete this project.
YEDUDEV.S.
INDEX.INDEX.
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Executive summary.
Introduction.
Light on stock exchange and it services.
Role of SEBI.
Terminologies associated with stock exchanges.
Bombay Stock Exchange.
Introduction.
Capital listed and market capitalization.
BSE Sensex.
Trading system.
Settlement and clearing.
Demat pay in.
Computation of closing price.
Shortages and objections.
Basket trading system.
Settlement system.
Closing system.
Opportunities for foreign investors.
Transfer of ownership.
Safeguards.
Arbitration machinery.
Customer protection fund.
Grievances redressal.
Disciplinary actions.
Indices.
Disclosures and listing norms.
Computerized trading.
Future developments.
National Stock Exchange.
Introduction.
Locations.
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Listing.
Constitution.
Trading members.
Trading mechanism.
Market types.
Order books.
Order matching rules.
Order conditions.
Quantity conditions.
Trading workstation.
Computer to computer links facility.
National Securities Clearing Corporation Limited.
Badla trading.
Substitutes for Badla.
Financial derivatives.
Trading options.
Bibliography.
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EXECUTIVE SUMMARY
The project is an attempt to working of stock exchanges in detail. It provides thorough
knowledge of different aspects of trading in stock exchanges. The focus is basically
with Indian context. The report is divided in three parts. The first dealing with the
theory, ie, introduction of securities market, concept of stock exchanges, their role in
economy, their characteristics, role of SEBI etc.
The second part is the study made of different methods of trading and In all they offer 9
different avenues for investing, which have been explained in length in the pages to
come.
The third part is the Case, attached with the report, which is also taken from Franklin
Templeton India Ltd. The case speaks about 3 facts of investing; first being that growth
and value do not move in tandem; second being, value investing has rewarded long
term investors; and the third one as, value stocks have provided low relative volatility
over time.
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Introduction
Of all the modern service institutions, stock exchanges are perhaps the most crucial
agents and facilitators of entrepreneurial progress. After the industrial revolution, as the
size of business enterprises grew, it was no longer possible for proprietors or
partnerships to raise colossal amount of money required for undertaking large
entrepreneurial ventures. Such huge requirement of capital could only be met by the
participation of a very large number of investors; their numbers running into hundreds,
thousands and even millions, depending on the size of business venture.
In general, small time proprietors, or partners of a proprietary or partnership firm, are
likely to find it rather difficult to get out of their business should they for some reason
wish to do so. This is so because it is not always possible to find buyers for an entire
business or a part of business, just when one wishes to sell it. Similarly, it is not easy
for someone with savings, especially with a small amount of savings, to readily find an
appropriate business opportunity, or a part thereof, for investment. These problems will
be even more magnified in large proprietorships and partnerships. Nobody would like
to invest in such partnerships in the first place, since once invested, their savings would
be very difficult to convert into cash. And most people have lots of reasons, such as
better investment opportunity, marriage, education, death, health and so on for wanting
to convert their savings into cash. Clearly then, big enterprises will be able to raise
capital from the public at large only if there were some mechanism by which the
investors could purchase or sell their share of business as ands they wished to do so.
This implies that ownership in business has to be broken up into a lager number of
small units, such that each unit may be independently & easily bought and sold without
hampering the business activity as such. Also, such breaking of business ownership
would help mobilize small savings in the economy into entrepreneurial ventures.
This end is achieved in a modern business through the mechanism of shares.
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What is a share?
A share represents the smallest recognized fraction of ownership in a publicly held
business. Each such fraction of ownership is represented in the form of a certificate
known as a share certificate. The breaking up of total ownership of a business into
small fragments, each fragment represented by a share certificate, enables them to be
easily bought and sold.
What is a stock exchange?
The institution where this buying and selling of shares essentially takes place is the
Stock Exchange.
In the absence of stock exchanges, ie. Institutions where small chunks of businesses
could be traded, there would be no modern business in the form of publicly held
companies. Today, owing to the stock exchanges, one can be part owners of one
company today and another company tomorrow; one can be part owners in several
companies at the same time; one can be part owner in a company hundreds or thousands
of miles away; one can be all of these things. Thus by enabling the convertibility of
ownership in the product market into financial assets, namely shares, stock exchanges
bring together buyers and sellers (or their representatives) of fractional ownerships of
companies. And for that very reason, activities relating to stock exchanges are also
appropriately enough, known as stock market or security market. Also a stock exchange
is distinguished by a specific locality and characteristics of its own, mostly a stock
exchange is also distinguished by a physical location and characteristics of its own. In
fact, according to H.T.Parekh, the earliest location of the Bombay Stock Exchange,
which for a long period was known as the native share and stock brokers association,
was probably under a tree around 1870!
The stock exchanges are the exclusive centers for the trading of securities. The
regulatory framework encourages this by virtually banning trading of securities outside
exchanges. Until recently, the area of operation/ jurisdiction of exchange was specified
at the time of its recognition, which in effect precluded competition among the
exchanges. These are called regional exchanges. In order to provide an opportunity to
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investors to invest/ trade in the securities of local companies, it is mandatory foe the
companies, wishing to list their securities, to list on the regional stock exchange nearest
to their registered office.
Characteristics of Stock Exchanges in India
Traditionally, a stock exchange has been an association of individual members
called member brokers (or simply members or brokers), formed for the express
purpose of regulating and facilitating buying and selling of securities by the
public and institution at large.
A stock exchange in India operates with due recognition from the government
under the Securities and Contracts (Regulations) Act, 1956. the member brokers
are essentially the middlemen who carry out the desired transactions in
securities on behalf of the public(for a commission) or on their own behalf. New
membership to a Stock Exchange is through election by the governing board of
that stock exchange.
At present, there are 23 stock exchanges in India, the largest among them beingthe Bombay Stock Exchange. BSE alone accounts for over 80% of the total
volume of transactions in shares.
Typically, a stock exchange is governed by a board consisting of directors
largely elected by the member brokers, and a few nominated by the government.
Government nominee include representatives of the ministry of finance, as well
as some public representatives, who are expected to safeguard the public
interest in the functioning of the exchanges. A president, who is an elected
member, usually nominated by the government from among the elected
members, heads the board. The executive director, who is usually appointed by
the by the stock exchange with the government approval is the operational chief
of the stock exchange. His duty is to ensure that the day to day operations the
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Stock Exchange are carried out in accordance with the various rules and
regulations governing its functioning.
The overall development and regulation of the securities market has beenentrusted to the Securities and Exchange Board of India (SEBI) by an act of
parliament in 1992.
All companies wishing to raise capital from the public are required to list their
securities on at least one stock exchange. Thus, all ordinary shares, preference
shares and debentures of the publicly held companies are listed in the stock
exchange.
Exchange management
Made some attempts in this direction, but this did not materially alter the situation. In
view of the less than satisfactory quality, of administration of broker-managed
exchanges, the finance minister in march 2001 proposed demutualisation of exchanges
by which ownership, management and trading membership would be segregated from
each other. The regulators are working towards implementing this. Of the 23 stock
exchanges in India, two stock exchanges viz., OTCEI and NSE are already
demutualised. Board of directors, which do not include trading members, manages
these. Theses are purest form of demutualised exchanges, where ownership,
management and trading are in the hands of three sets of people. The concept of
demutualisation completely eliminates any conflict of interest and helps the exchange to
pursue market efficiency and investors interest aggressively.
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Role of SEBI
The SEBI, that is, the Securities and the Exchange Board of India, is the national
regulatory body for the securities market, set up under the securities and Exchange
Board of India act, 1992, to protect the interest of investors in securities and to
promote the development of, and to regulate the securities market and for matters
connected therewith and incidental too.
SEBI has its head office in Mumbai and it has now set up regional offices in the
metropolitan cities of Kolkata, Delhi, and Chennai. The Board of SEBI comprises a
Chairman, two members from the central government representing the ministries of
finance and law, one member from the Reserve Bank of India and two other members
appointed by the central government.
As per the SEBI act, 1992, the power and functions of the Board encompass the
regulation of Stock Exchanges and other securities markets; registration and regulation
of the working stock brokers, sub-brokers, bankers to an issue (a public offer of
capital), trustees of trust deeds, registrars to an issues, merchant bankers, under writers,
portfolio managers, investment advisors and such other intermediaries who may be
associated with the stock market in any way; registration and regulations of mutual
funds; promotion and regulation of self- regulatory organizations; prohibiting
Fraudulent and unfair trade practices and insider trading in securities markets;
regulating substantial acquisition of shares and takeover of companies; calling forinformation from,undertking inspection, conducting inquiries and audits of stock
exchanges, intermediaries and self- regulatory organizations of the securities market;
performing such functions and exercising such powers as contained in the provisions of
the Capital Issues (Control) Act,1947 and the Securities Contracts (Regulation) Act,
1956, levying various fees and other charges, conducting necessary research for above
purposes and performing such other functions as may be prescribes from time to time.
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SEBI as the watchdog of the industry has an important and crucial role in the market in
ensuring that the market participants perform their duties in accordance with the
regulatory norms. The Stock Exchange as a responsible Self Regulatory Organization
(SRO) function to regulate the market and its prices as per the prevalent regulations.
SEBI and the Exchange play complimentary roles to enhance the investor protection
and the overall quality of the market.
Membership
The trading platform of a stock exchange is accessible only to brokers. The broker
enters into trades in exchanges either on his own account or on behalf of clients. Theclients may place their order with them directly or a sub-broker indirectly. A broker is
admitted to the membership of an exchange in terms of the provisions of the SCRA, the
SEBI act 1992, the rules, circulars, notifications, guidelines, etc. prescribed there under
and the byelaws, rules and regulations of the concerned exchange. No stockbroker or
sub-broker is allowed to buy, sell or deal in securities, unless he or she holds a
certificate of registration granted by SEBI. A broker/sub-broker compiles with the code
of conduct prescribed by SEBI.
The stock exchanges are free to stipulate stricter requirements for its members than
those stipulated by SEBI. The minimum standards stipulated by NSE for membership
are in excess of the minimum norms laid down by SEBI. The standards for admission
of members laid down by NSE stress on factors, such as, corporate structure, capital
adequacy, track record, education, experience, etc. and reflect the conscious endeavors
to ensure quality broking services.
Listing
Listing means formal admission of a security to the trading platform of a stock
exchange, invariably evidenced by a listing agreement between the issuer of the
security and the stock exchange. ; Listing of securities on Indian Stock Exchanges is
essentially governed by the provisions in the companies act, 1956, SCRA, SCRR, rules,
bye-laws and regulations of the concerned stock exchange, the listing agreement
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information on-line, which is updated on real time basis. The trading platform of the
CM segment of NSE is accessed not only from the computer terminals from the
premises of brokers spread over 420 cities, but also from the personal computers in the
homes of investors through the internet and from the hand-held devices through WAP.
The trading platform of BSE is also accessible from 400 cities.
Internet trading is available on NSE and BSE, as of now. SEBI has approved the use of
Internet as an order routing system, for communicating clients orders to the exchanges
through brokers. SEBI- registered brokers can introduce internet-based trading after
obtaining permission from the respective Stock Exchanges. SEBI has stipulated the
minimum conditions to be fulfilled by trading members to start internet-based trading
and services.
NSE was the first exchange in the country to provide web-based access to investors to
trade directly on the exchange. It launched Internet trading in February 2000. It was
followed by the launch of Internet trading by BSE in March 2001. The orders
originating from the personal computers (PCs) of investors are routed through the
Internet tot eh trading terminals of the designated brokers with whom they have
relations and further to the exchange of trade execution. Soon after these orders get
matched and result into trades, the investors get confirmation about them on their PCs
through the same Internet routes.
SEBI approved trading through wireless medium or WAP platform. NSE is the only
exchange to provide access to its order book through the hand held devices, which use
WAP technology. This serves primarily retail investors who are mobile and want to
trade from any place when the market prices for st0ocks of their choice are attractive.
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Demat Trading
A depository holds securities in dematerialized form. It maintains ownership records of
securities in a book entry form and also effects transfer of ownership through book
entry. SEBI has introduced some degree of compulsion in trading and settlement of
securities in dematerialized form. While the investors have a right to hold securities in
either physical or demat form, SEBI has mandated compulsory trading and settlement
of securities in dematerialized form. This was initially introduced for institutional
investors and was later extended to all investors. Starting with 12 scrips on January 15,
1998, all investors are required to mandatorily trade in dematerialized form in respect
of 2,335 securities as at end-June, 2001.
Since the introduction of the depository system, dematerialization has progressed at a
fast pace and has gained acceptance among the participants in the market. All actively
traded scrips are held, traded and settled in demat form. The details of progress in
dematerialization in two depositories, viz., NSDL and CDSL., are presented as below:
In a SEBI working paper titled Dematerialization: A Silent Revolution in the Indian
Capital Market released in April 2000, it has been observed that India has achieved a
very high level of dematerialization in less than three years time, and currently more
than 99%of trades settle in demand form. Competition and regulatory developments
facilitated reduction in custodial charges and improvements in qualities of service
standards. The paper observes that one imminent and apparent immediate benefitof competition between the two depositories is fall in settlement and other charges.
Competition has been driving improvement in service standards. Depository
facility has effected changes in stock market microstructure. Breadth and depth of
investment culture has further got extended to interior areas of the country faster.
Explicit transaction cost has been falling due to dematerialization. Dematerialization
substantially contributed to the increased growth in the turnover. Dematerialization
growth in India is the quickest among all emerging markets and also among developed
markets excepting for the U.K and Hong Kong.
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INTRODUCTION
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as
"The Native Share and Stock Brokers Association", as a voluntary non-profit making
association. It has evolved over the years into its present status as the premier StockExchange in the country. It may be noted that the Stock Exchanges is the oldest one in
Asia, even older than the Tokyo Stock Exchange, which was founded in 1878.
The Exchange, while providing an efficient and transparent market for trading in
securities, upholds the interests of the investors and ensures redressal of their
grievances, whether against the companies or its own member-brokers. It also strives to
educate and enlighten the investors by making available necessary informative inputs
and conducting investor education programmes.
A Governing Board comprising of 9 elected directors (one third of them retire every
year by rotation), two SEBI nominees, a Reserve Bank of India nominee, six public
representatives and an Executive Director is the apex body, which decides the policies
and regulates the affairs of the Exchange.
The Executive Director as the Chief Executive Officer is responsible for the day-to-day
administration of the Exchange.
The average daily turnover of the Exchange during the year 2000-2001 (April-March),
was Rs.3984.19 crores and average number of daily trades was 5.69 lakhs. However,
the average daily turnover of the Exchange during the year 2001- 2002 has declined to
Rs. 1244.10 crores and number of average daily trades during the period to 5.17 lakhs.
The ban on all deferral products like BLESS and ALBM in the Indian capital Markets
by SEBI w.e.f. July 2, 2001, abolition of account period settlements, introduction of
Compulsory Rolling Settlements in all scrips traded on the Exchanges w.e.f. December
31, 2001, etc. have adversely impacted the liquidity and consequently there is a
considerable decline in the daily turnover at the Exchange.
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CAPITAL LISTED AND MARKET CAPITALIZATION.
The Stock Exchange, Bombay (BSE) is the premier Stock Exchange in India. The BSE
accounted for 46 per cent of listed companies on an all India basis as on 31st March1994. It ranked first in terms of the number of listed companies and stock issues listed.
The capital listed in the BSE as on 31st March 1994 accounted for 50% of the overall
capital listed on all the stock exchanges. Its share of the market capitalization was
around 74% as on the same date. The paid-up capital of equity, debentures/bonds and
preference were 73%, 31%, 44% respectively of the overall capital listed on all the
Stock Exchanges as on the same date.
On the BSE, the Steel Authority of India had the largest market capitalization of Rs.19,
908 crores as on the 31st March, 1994 followed by the State Bank of India with the
market capitalization of Rs.16, 702 crores and Mahanagar Telephone Nigam Limited
with the market capitalization of Rs.11, 700 crores.
BSE SENSEX
The BSE SENSEX, short form of Sensitive Index, first compiled in 1986 is a market
Capitalization-Weighted index of 30 component stocks representing a sample of large,
well-established and financially sound companies. The index is widely reported in both,
the domestic international, print electronic media and is widely used to measure the
used to measure the performance of the Indian stock markets.
The BSE SENSEX is the benchmark index of the Indian capital market and one, which
has the longest social memory. In fact the SENSEX is considered to be the pulse of the
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Indian stock markets. It is the oldest index in India and has acquired a unique place in
collective consciousness of the investors. Further, as the oldest index of the Indian
Stock Market, it provides time series data over a fairly long period of time. Small
wonder that the SENSEX has over the years has become one of the most prominent
brands of the Country.
Objectives of SENSEX
The BSE SENSEX is the benchmark index with wide acceptance among individual
investors, institutional investors, foreign investors, foreign investors and fund
managers. The objectives of the index are:
To measure market movements
Given its long history and its wide acceptance, no other index matches the BSE
SENESX in the reflecting market movements and sentiments. SENSEX is widely
used to describe the mood in the Indian stock markets.
Benchmark for funds performance
The inclusion of blue chip companies and the wide and balanced industry
Representation in the SENSEX makes it the ideal benchmark for fund managers to
compare the performance of their funds.
For index based derivatives products
Institutional investors, money managers and small investors, all refer to the BSE
SENSEX for their specific purposes. The BSE SENSEX is in effect the proxy for
the Indian stock markets. Since SENSEX comprises of the leading companies in
all the significant sectors in the economy, we believe that it will be the most liquid
contract in the Indian market and will garner a predominant market share.
Companies represented in the SENSEX
Company name Sector
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(As on 15.06.01)
Hindustan lever FMCG
Reliance limited Chemicals and petrochemicals
Infosys technologies Information technology
Reliance petroleum Oil and gas
ITC FMCGState bank of India Finance
MTNL Telecom
Satyam computers Information technology
Zee telefilms Media
Ranbaxy labs Healthcare
ICICI Finance
Larsen & toubro Diversified
Cipla Healthcare
Hindalco Metals and mining
HPCL Metal and miningTISCO Metal and mining
Nestle FMCG
Trading System
Till Now, buyers and sellers used to negotiate face-to-face on the trading floor over a
security until agreement was reached and a deal was struck in the open outcry system of
trading, that used to take place in the trading ring. The transaction details of the account
period (called settlement period) were submitted for settlement by members after each
trading session.
The computerized settlement system initiated the netting and clearing process by
providing on a daily basis statements for each member, showing matched and
unmatched transactions. Settlement processing involves computation of each member's
net position in each security, after taking into account all transactions for the member
during the settlement period, which is 10 working days for group 'A' securities and 5
working days for group 'B' securities.
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Trading is done by members and their authorized assistants from their Trader Work
Stations (TWS) in their offices, through the BSE On-Line Trading (BOLT) system.
BOLT system has replaced the open outcry system of trading. BOLT system accepts
two-way quotations from jobbers, market and limit orders from client-brokers and
matches them according to the matching logic specified in the Business Requirement
Specifications (BRS) document for this system.
The matching logic for the Carry-Forward System as in the case of the regular trading
system is quote driven with the order book functioning as an "auxiliary jobber".
TRADING
TRADING
The Exchange, which had an open outcry trading system, had switched over to a fully
automated computerized mode of trading known as BOLT (BSE on Line Trading)
System. Through the BOLT system the members now enter orders from Trader Work
Stations (TWSs) installed in their offices instead of assembling in the trading ring. This
system, which was initially both order and quote driven, was commissioned on March
14, 1995. However, the facility of placing of quotes has been removed w.e.f., August
13, 2001 in view of lack of market interest and to improve system-matching efficiency.
The system, which is now only order driven, facilitates more efficient processing,
automatic order matching and faster execution of orders in a transparent manner.
Earlier, the members of the Exchange were permitted to open trading terminals only in
Mumbai. However, in October 1996, the Exchange obtained permission from SEBI for
expansion of its BOLT network to locations outside Mumbai. In terms of the
permission granted by SEBI and certain modifications announced later, the members of
the Exchange are now free to install their trading terminals at any place in the country.
Shri P. Chidambaram inaugurated the expansion of BOLT network the then Finance
Minister, Government of India on August 31, 1997.
In order to expand the reach of BOLT network to centers outside Mumbai and support
the smaller Regional Stock Exchanges, the Exchange has, as on March 31, 2002,
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admitted subsidiary companies formed by 13 Regional Stock Exchanges as its
members. The members of these Regional Stock Exchanges work as sub-brokers of the
member-brokers of the Exchange.
The objectives of granting membership to the subsidiary companies formed by the
Regional Stock Exchanges were to reach out to investors in these centers via the
members of these Regional Exchanges and provide the investors in these areas access to
the trading facilities in all scrips listed on the Exchange.
Trading on the BOLT System is conducted from Monday to Friday between 9:55 a.m.
and 3:30 p.m. The scrips traded on the Exchange have been classified into 'A', 'B1', 'B2',
'F' and 'Z' groups. The number of scrips listed on the Exchange under 'A', 'B1 ', 'B2' and
'Z' groups, which represent the equity segment, as on March 31, 2002 was 173,
560,1930 and 3044 respectively. The 'F' group represents the debt market (fixed income
securities) segment wherein 748 securities were listed as on March 31, 2002. The 'Z'
group was introduced by the Exchange in July 1999 and covers the companies which
have failed to comply with listing requirements and/or failed to resolve investor
complaints or have not made the required arrangements with both the Depositories, viz.,
Central Depository Services (I) Ltd. (CDSL) and National Security Depository Ltd.
(NSDL) for dematerialization of their securities by the specified date, i.e., September
30, 2001. Companies in "Z" group numbered 3044 as on March 31, 2002. Of these,
1429 companies were in "Z" group for not complying with the provisions of the Listing
Agreement and/or pending investor complaints and the balance 1615 companies were
on account of not making arrangements for dematerialization of their securities with
both the Depositories. 1615 companies have been put in "Z" group as a temporary
measure till they make arrangements for dematerialization of their securities. Once they
finalize the arrangements for dematerialization of their securities, trading and settlement
in their scrips would be shifted to their respective erstwhile groups.
The Exchange has also the facility to trade in "C" group which covers the odd lot
securities in 'A', 'B1', 'B2' and 'Z' groups and Rights renunciations in all the groups of
scrips in the equity segment. The Exchange, thus, provides a facility to market
participants of on-line trading in odd lots of securities and Rights renunciations. The
facility of trading in odd lots of securities not only offers an exit route to investors to
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dispose of their odd lots of securities but also provides them an opportunity to
consolidate their securities into market lots.
The 'C' group can also be used by investors for selling upto 500 shares in physical form
in respect of scrips of companies where trades are to be compulsorily settled by all
investors in demat mode. This scheme of selling physical shares in compulsory demat
scrips is called as Exit Route Scheme.
With effect from December 31, 2001, trading in all securities listed in equity segment
of the Exchange takes place in one market segment, viz., Compulsory Rolling
Settlement Segment.
Permitted Securities
The Exchange has since decided to permit trading in the securities of the companies
listed on other Stock Exchanges under " Permitted Securities" category which meet the
relevant norms specified by the Exchange. Accordingly, to begin with the Exchange has
permitted trading in scrips of five companies listed on other Stock Exchanges w.e.f.
April 22, 2002/
Computation of closing price of scrips in the Cash Segment:
The closing prices of scrips are computed on the basis of weighted average price of all
trades in the last 15 minutes of the continuous trading session. However, if there is no
trade during the last 15 minutes, then the last traded price in the continuous trading
session is taken as the official closing price.
A) Compulsory Rolling Segment (CRS):
Compulsory Rolling Settlement (CRS) Segment:
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With a view to introduce the best international trading practices and to achieve higher
settlement efficiency, as mandated by SEBI, trades in all the equity shares listed on the
Exchange in CRS Segment were to be settled on T+5 basis w.e.f. December 31, 2001.
SEBI has further directed the Stock Exchanges that trades in all scrips w.e..f. April 1,
2002 should be settled on T+3 basis. Accordingly, all transactions in all groups of
securities in the equity segment and fixed income securities listed on the Exchange are
settled on T+3 basis w.e.f. April 1, 2002
Under a rolling settlement environment, the trades done on a particular day are settled
after a given number of business days rather than settling all trades done during a period
at the end of an 'account period'. A T+3 settlement cycle means that the final settlement
of transactions done on T or trade day by exchange of monies and securities, occurs on
fifth business day after the trade day.
The transactions in securities of companies which have made arrangements for
dematerialization of their securities by the stipulated date are settled only in Demat
mode on T+3 on net basis, i.e., buy and sale positions in the same scrip are netted and
the net quantity is to be settled. However, transactions in securities of companies, which
have failed to make arrangements for dematerialization of their securities or /are in "Z"
group, are settled only on trade to trade basis on T+3 i.e., the transactions are settled on
a gross basis and the facility of netting of buy and sale transactions in a scrip is not
available. For example, if one buys and sells 100 shares of a company on the same day
which is on trade to trade basis, the two positions will not be netted and he will have to
first deliver 100 shares at the time of pay-in of securities and then receive 100 shares at
the time of pay-out of securities on the same day. Thus, if one fails to deliver the
securities sold at the time of pay-in, it will be treated as a shortage and the position will
be auctioned/ closed-out.
In other words, the transactions in scrips of companies which are in compulsory demat
are settled in demat mode on T+3 on netting basis and the transactions in scrips of
companies, which have not made arrangements for dematerialization of their securities
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by the stipulated date or are in "Z" group for other reasons, are settled on trade to trade
basis on T+3 either in demat mode or in physical mode.
The settlement of transactions in 'F' group securities representing Fixed Income
Securities is also on Rolling Settlement Cycle of T+3 basis.
The following tables summarizes the steps in the trading and settlement cycle for scrips
under CRS:
DAY ACTIVITY
Trading on BOLT and daily downloading of statements showing details of transactions
and margins at the end of each trading day.
6A/7A entry by the member-brokers.
T+1
Confirmation of 6A/7A data by the Custodians. Downloading of securities and funds
obligation statement by members.
T+3
Pay-in of funds and securities by 11:00 a.m. and pay-out of funds and securities by
2:00 p.m
T+4
Auction on BOLT.
T+5
Auction pay-in and pay-out.
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Pay-in and Pay-out for 'A', 'B1', 'B2', 'C', "F" & 'Z' group of securities
As discussed earlier, the trades done by members in all the securities in CRS are now
settled by payment of money and delivery of securities on T+3 basis. All deliveries of
securities are required to be routed through the Clearing House, except for certain off-
market transactions which, although are required to be reported to the Exchange, may
be settled directly between the members concerned.
The Clearing House is an independent company promoted jointly by Bank of India and
Stock Exchange, Mumbai for handling the clearing and settlement operations of funds
and securities on behalf of the Exchange. For this purpose, the Clearing & Settlement
Dept. of the Exchange liaises with the Clearing House on a day to day basis.
The Information Systems Department (ISD) of the Exchange generates Delivery and
Receive Orders for transactions done by the members in A, B1, B2 and F group scrips
after netting purchase and sale transactions in each scrip whereas Delivery and Receive
Orders for "C" and "Z" group scrips are generated on trade to trade basis, i.e., without
netting of purchase and sale transactions in a scrip.
The Delivery Orders provide information like scrip, quantity and the name of the
receiving member to whom the securities are to be delivered through the Clearing
House. The Money Statement provides scrip wise/item wise details of
payments/receipts for the settlement. The Delivery/Receive Orders and money
statements can be downloaded by the members in their back offices
The bank accounts of members maintained with the eight clearing banks, viz., Bank of
India, HDFC Bank Ltd., Global Trust Bank Ltd., Standard Chartered Bank, Centurion
Bank Ltd., UTI Bank Ltd., ICICI Bank Ltd., and Indusind Bank Ltd., are directly
debited through computerized posting for their settlement and margin obligations and
credited with receivables on accounts of pay-out dues and refund of margins.
The securities, as per the Delivery Orders issued by the Exchange, are required to be
delivered by the members in the Clearing House on the day designated for securities
pay-in, i.e., on T+3 day. In case of the physical securities, the members have to deliver
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the securities in special closed pouches (supplied by the Exchange) along with the
relevant details (distinctive numbers, scrip code, quantity, and receiving member) on a
floppy. The data submitted by the members on floppies is matched against the master
file data on the Clearing House computer systems. If there are no discrepancies, then a
scroll number is generated by the Clearing House and a scroll slip is issued. The
members can then submit the securities at the receiving counter in the Clearing House
Auto D.O. facility:
Instead of issuing Delivery Out instructions for their delivery obligations in a settlement
/auction, a facility has been made available to the members of automatically generating
Delivery-Out (D.O.) instructions on their behalf from their CM Pool A/cs by the
Clearing House w.e.f., August 10, 2000. This Auto D.O. facility is available for CRS
(Normal & Auction) and for trade-to-trade settlements. This facility is, however, not
available for delivery of non-pari passu shares and shares having multiple ISINs. The
members wishing to avail of this facility have to submit an authority letter to the
Clearing House. This Auto D.O facility is currently available only for Clearing Member
(CM) Pool accounts/Principal Accounts maintained by the members with National
Securities Depository Ltd. (NSDL) and Central Depositories Services Ltd. (CDSL)
Demat pay-in:
The members can effect demat pay-in either through Central Depository Services (I)
Ltd. (CDSL) or National Securities Depository Ltd. (NSDL). In case of NSDL, the
members are required to give instructions to their Depository Participant (DP)
specifying settlement no., settlement type, effective pay-in date, quantity, etc. The
securities are transferred to the Pool Account. The members are required to give
delivery-out instructions so that the securities are considered for pay-in.
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As regards CDSL, the members give pay-in instructions to their DP. The securities are
transferred to Clearing Member (CM) Principal Account. The members are required to
give confirmation to their DP, so that securities are processed towards pay-in
obligations. Alternatively, members may also effect pay-in from clients' beneficiary
accounts for which member are required to do break-up on the front-end software to
generate obligation and settlement ID.
The Clearing House arranges and tallies the securities received against the receiving
member wise report generated on the Pay-in day. Once this reconciliation is complete,
the bank accounts of members with seven clearing banks having pay-in positions are
debited on the scheduled pay-in day. This procedure is called Funds Pay-in. In case of
the demat securities, the securities are credited in the Pool Account of the members or
the Client Accounts as per the client details submitted by the members. In case of
Physical securities, the Receiving Members collect securities from the Clearing House
on the payout day and the accounts of the members having payout are credited on
Friday. This is referred to as Payout. In case of the Rolling Settlements, pay-in and
payout of both funds and securities is on the same day, in case of Weekly settlements,
pay-in of funds and securities is on Thursday and payout is on Friday.
The auction is conducted for those securities which members fail to deliver/short
deliver during the Pay-in. In case the securities are not received in an auction, the
positions are closed out as per the closeout rate fixed by the Exchange in accordance
with the prescribed rules. The close out rate is calculated as the highest rate of the scrip
recorded in the settlement in which the trade was executed and in the subsequent
settlement upto the day prior to the day of auction, or 20% above the closing price on
the day prior to the day of auction, whichever is higher. However, in case of close-out
for shares under objection or traded in "C" group, 10% instead of 20% above the
closing price on the day prior to the day of auction and the highest price recorded in the
settlement in which trade took place upto a day prior to auction is considered.
The Exchange has strictly adhered to the settlement schedules for various groups of
securities and there has been no case of clubbing of settlements or postponement of
pay-in and pay-out during the last six years.
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The Exchange is also maintaining a database of fake/forged, stolen, lost and duplicate
securities with the Clearing House so that distinctive numbers submitted by members
on delivery may be matched against the database to weed out bad paper from
circulation at the time of introduction of such securities in the market. This database has
also been made available to the members so that delivering and receiving members can
check the entry of fake, forged and stolen shares in the market
SHORTAGES AND OBJECTIONS
Shortages & consequent actionsThe members download Delivery/Receive Orders based on their netted positions for
transactions entered into by them during a settlement in 'A', 'B1', 'B2', and 'F' group
scrips and on trade to trade basis, i.e., without netting buy and sell transactions in scrips
in "C" & 'Z' groups and scrips in B1 and B2 groups which have been put on trade to
trade basis as a surveillance measure.
The seller members have to deliver the shares in the Clearing House as per the Delivery
Orders downloaded. If a seller member is unable to deliver the shares on the Pay-in day
for any reason, his bank account is debited at the standard rate (which is equal to the
closing price of the scrip on the day of trading) fixed by the Exchange for the quantity
of shares short delivered. The Clearing House arrives at the shortages in delivery of
various scrips by members on the basis of their delivery obligations and actual delivery.
The members can download the statement of shortages on T+3 in Rolling Settlements.
After downloading the shortage details, the members are expected to verify the same
and report discrepancy , if any, to the Clearing House by 1:00 p.m. If no discrepancy is
reported within the stipulated time, the Clearing House assumes that the shortage of a
member is in order and proceeds to auction the same. However, in 'C' group, i.e., Odd
Lot segment the members are themselves required to report the shortages to the
Clearing House.
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The Exchange issues an Auction Tender Notice to the members informing them about
the names of the scrips, quantity slated for auction and the date and time of the auction
session on the BOLT. The auction for the undelivered quantities is conducted on T+4
for all the scrips under compulsory Rolling Settlements. The auction offers received in
batch mode are electronically matched with the auction quantities so as to award the
'best price'. The members who participate in the auction session can download the
Delivery Orders on the same day, if their offers are accepted. The members are required
to deliver the shares in the Clearing House on the auction Pay-in day, i.e, T+5. Pay-Out
of auction shares and funds is also done on the same day, i.e., T+5. The various auction
sessions relating to shortages, and bad deliveries are now conducted during normal
trading hours on BOLT. Thus, it is possible to schedule multiple auction sessions on a
single trading day.
In auction, the highest offer price is allowed upto the close-out rate and the lowest offer
price can be 20% below the closing price on a day prior to day of auction. A member
who has failed to deliver the securities of a particular company on the pay-in day is not
allowed to offer the same in auction. He can, however, participate in auction of other
scrips.
In case no offers are received in auction for a particular scrip, the sale transaction is
closed-out at a close-out price, determined by higher of the following:-
- Highest price recorded in the scrip from the settlement in which the transaction took
place upto a day prior to the day of the auction.
OR
- 20% above the closing price on a day prior to the day of auction.
However, in case of the close-out of the shares under objection and shortages in "C" or
"Z" group, 10% above the closing prices of the scrips on the pay-out day of the
respective settlement are considered instead of 20%.
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Further, if the auction price/close-out price of a scrip is higher than the standard price of
the scrip in the settlement in which the transaction was done, the difference is recovered
from the seller who failed to deliver the scrip. However, in case, auction/ close-out
price is lower than standard price, the difference is not given to the seller but is credited
by the Exchange to the Customers Protection Fund. This is to ensure that the seller does
not benefit from his failure to meet his delivery obligation. Further, if the offeror
member fails to deliver the shares offered in auction, then the transactions is closed-out
as per the normal procedure and the original selling member pays the difference below
the standard rate and offer rate and the offeror member pays the difference between the
offer rate and close-out rate.
Self Auction
As has been discussed in the earlier paragraphs, the Delivery and Receive Orders are
issued to the members after netting off their purchase and sale transactions in scrips
where netting of purchase and sale positions is permitted. It is likely in some
circumstances that a selling client of a member has failed to deliver the shares to him.
However, this did not result in a member's failure to deliver the shares to the Clearing
House as there was a purchase transaction of some other buying client of the member in
the same scrip and the same was netted off for the purpose of settlement. However, in
such a case, the member would require shares so that he can deliver the same to hisbuying client, which otherwise would have taken place from the delivery of shares by
the seller. To provide shares to the members, so that they are in a position to deliver
them to their buying clients in case of internal shortages, the members have been given
an option to submit floppies for conducting self-auction (i.e., as if they have defaulted
in delivery of shares to the Clearing House). Such floppies are to be given to the
Clearing House on the pay-in day. The internal shortages reported by the members are
clubbed with the normal shortages in a settlement and the Clearing House for the
combined shortages conducts the auction. A member after getting delivery of shares
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DAY ACTIVITY
T + 3 Pay-out of securities of Rolling Settlement
T + 4 Patawat Arbitration session :
Arbitration awards to be obtained from officials of the Bad Delivery Cell.
Securities under objection to be submitted in the Clearing House
Arbitration awards for invalid objection to be obtained from members of the
Arbitration Review Committee
T + 5
Members and institutions to submit rectified securities, confirmation forms and invalid
objections in the clearing house
Rectified securities delivered to the receiving members
T + 6
Arbitration Awards for invalid rectification to be obtained from officials of the Bad
Delivery Cell
Securities to be lodged with the clearing house
The un-rectified and invalid rectification of securities are directly closed-out by the
Clearing House instead of first inviting the auction offers for the same.
The shares in physical form returned under objection to the Clearing House are required
to be accompanied by an arbitration award (Chukada) except in certain cases where the
receiving members are permitted to submit securities to the Clearing House without
"Chukada".
These cases are as follows:
Transfer Deed is out of date.
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Cheques for the dividend adjustment for new shares where distinctive numbers are
given in the Exchange Notice is not enclosed.
Stamp of the Registrar of Companies is missing.
Details like Distinctive Numbers, Transferors' Names, etc. are not filled, in the Transfer
Deeds.
Delivering broker's stamp on the reverse of the Transfer Deed is missing.
Witness stamp or signature on Transfer Deed is missing.
Signature of the transferor is missing.
Death Certificate (in cases where one or more of the transferors are deceased) is
missing.
A penalty at the rate of Rs.100/- per Delivery Order is levied on the delivering member
for delivering shares, which are not in order. In the event a receiving member misuses
the facility of submitting shares under objection without "Chukada", a penalty of
Rs.500/- per case is charged and the penalty of Rs.100/- per Delivery Order levied on
the delivering member is refunded to him by debiting the receiving member's account
Close Out:
There are cases when no offer for particular scrip is received in an auction or when
members who offer the scrips in auction, fail to deliver the same. In the former case, the
original seller member's account is debited and the buyer member's account is credited
at the closeout rate. In the latter case, the offeror member's account is debited and the
buyer member's account is credited at the close-out rate. The closeout rates for closing
the positions in different segments are as under:
For 'A' + 'B1' + 'B2' + 'Z', 'Rolling demat' and 'F' group
The closeout rate is higher of the following rates:
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The highest rate of the scrip from the first day (trading day in case of Rolling demat
segment) to the day prior to the day on which the auction is conducted for the
respective settlement.
20% above the closing rate as on the day prior to the day of auction of therespective settlement.
For 'C' group segment
The close-out rate is higher of the following rates :
The highest rate of the scrip from the first day to the day prior to the day of auction
of 'A', 'B1', 'B2, and 'Z' group segment of the respective settlements; or
10% above the closing rate as on the day prior to the day of auction of 'A', 'B1', 'B2,
and 'Z' group; or
Transaction price.
In the 'C' group, i.e., Odd Lot Segment, no auction session is conducted. The shortages
are directly closed out.
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Close Out:
There are cases when no offer for particular scrip is received in an auction or when
members who offer the scrips in auction, fail to deliver the same. In the former case, the
original seller member's account is debited and the buyer member's account is credited
at the closeout rate. In the latter case, the offeror member's account is debited and the
buyer member's account is credited at the close-out rate. The closeout rates for closing
the positions in different segments are as under:
For 'A' + 'B1' + 'B2' + 'Z', 'Rolling demat' and 'F' group
The closeout rate is higher of the following rates:
The highest rate of the scrip from the first day (trading day in case of Rolling demat
segment) to the day prior to the day on which the auction is conducted for the
respective settlement.
20% above the closing rate as on the day prior to the day of auction of the
respective settlement.
For 'C' group segment
The close-out rate is higher of the following rates :
The highest rate of the scrip from the first day to the day prior to the day of auction
of 'A', 'B1', 'B2, and 'Z' group segment of the respective settlements; or
10% above the closing rate as on the day prior to the day of auction of 'A', 'B1', 'B2,
and 'Z' group; or
Transaction price.
In the 'C' group, i.e., Odd Lot Segment, no auction session is conducted. The shortages
are directly closed out.
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Opportunities available for foreign investors
1. Direct investment:
Foreign Companies are now permitted to have a majority stake in their Indian
affiliates except in a few restricted industries. In certain specific industries,
foreigners can even have holding upto 100 per cent.
2. Investment through Stock Exchanges:
Foreign Institutional Investors (FII) upon registration with the Securities and
Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) are allowed
to operate in Indian Stock Exchanges subject to the guidelines issued for the
purpose by SEBI.
Important requirements under the guidelines are as under:
I. Portfolio investment in primary or secondary markets will be subject to a ceiling
of 24 per cent of issued share capital for the total holding of all registered FIIs in
any one company. The holding of a single FII in any one company is subject to a
ceiling of 5 per cent of the total issued capital.
However, in applying the ceiling of 24 percent the following are excluded:
Foreign investment under a financial collaboration (DFI), which is,
permitted upto 51 per cent in all priority areas.
Investment by FIIs through following alternative routes; Offshore
Single/Regional funds, GDR's and Euro convertibles.
II. Disinvestments will be allowed only through a broker of a Stock Exchange.
III. A registered FII is required to buy or sell only for delivery. It should not
offset a deal. It is also not allowed to sell short.
3. Investment in Euro Issues/Mutual Funds Floated Overseas:
Foreign investors can invest in Euro issues of Indian companies and in India-
specific funds floated abroad.
4. Broking Business:
Foreign brokers upon registration with the SEBI are now allowed to route thebusiness of registered FIIs. Guideline for the purpose have been issued by SEBI.
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order against passive orders in the book. Currently, pursuant to a SEBI directive
the Odd Lot Market is being used for orders which has a quantity less than or
equal to 500 (Qty more than the market lot) for trading. This is referred as the
Limited Physical Market (LPM).
6. Spot Book
The Spot lot book contains all spot orders (orders having only the settlement period
different) in the system. The system attempts to match an active spot lot order
against the passive orders in the book. Currently the Spot Market book type is being
used for conducting the Automated Lending & Borrowing Mechanism (ALBM)
session.
7. Auction Book
This book contains orders that are entered for all auctions. The matching process
for auction orders in this book is initiated only at the end of the solicitor period.
Order Matching Rules
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The best buy order is matched with the best sell order. An order may match partially
with another order resulting in multiple trades. For order matching, the best buy order is
the one with the highest price and the best sell order is the one with the lowest price.
This is because the system views all buy orders available from the point of view of a
seller and all sell orders from the point of view of the buyers in the market. So, of all
buy orders available in the market at any point of time, a seller would obviously like to
sell at the highest possible buy price that is offered. Hence, the best buy order is the
order with the highest price and the best sell order is the order with the lowest price.
Members can proactively enter orders in the system, which will be displayed in the
system till the full quantity is matched by one or more of counter-orders and result into
trade(s) or is cancelled by the member. Alternatively, members may be reactive and put
in orders that match with existing orders in the system. Orders lying unmatched in the
system are 'passive' orders and orders that come in to match the existing orders are
called 'active' orders. Orders are always matched at the passive order price. This ensures
that the earlier orders get priority over the orders that come in later.
Order Conditions
A Trading Member can enter various types of orders depending upon his/her
requirements. These conditions are broadly classified into three categories: time related
conditions, price-related conditions and quantity related conditions. For example
Time Conditions
DAY - A Day order, as the name suggests, is an order which is valid for the day
on which it is entered. If the order is not matched during the day, the order gets
cancelled automatically at the end of the trading day.
GTC - A Good Till Cancelled (GTC) order is an order that remains in the
system until the Trading Member cancels it. It will therefore be able to span
trading days if it does not get matched. The Exchange notifies the maximum
number of days a GTC order can remain in the system from time to time.
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GTD - A Good Till Days/Date (GTD) order allows the Trading Member to
specify the days/date up to which the order should stay in the system. At the end
of this period the order will get flushed from the system. Each day/date counted
is a calendar day and inclusive of holidays. The days/date counted are inclusiveof the day/date on which the order is placed. The Exchange notifies the
maximum number of days a GTD order can remain in the system from time to
time.
IOC - An Immediate or Cancel (IOC) order allows a Trading Member to buy or
sell a security as soon as the order is released into the market, failing which the
order will be removed from the market. Partial match is possible for the order,
and the unmatched portion of the order is cancelled immediately.
AON - All or None orders allow a Trading Member to impose the condition that
only the full order should be matched against. This may be by way of multiple
trades. If the full order is not matched it will stay in the books till matched or
cancelled.
Note: Currently, AON and MF orders are not available on the system as per SEBI
directives.
Price Conditions
Limit Price/Order
An order, which allows the price to be specified while entering the order into thesystem.
Market Price/Order
An order to buy or sell securities at the best price obtainable at the time of entering the
order.
Stop Loss (SL) Price/Order
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The one which allows the Trading Member to place an order which gets activated only
when the market price of the relevant security reaches or crosses a threshold price. Until
then the order does not enter the market.
Sell order
A sell order in the Stop Loss book gets triggered when the last traded price in the
normal market reaches or falls below the trigger price of the order.
Buy order
A buy order in the Stop Loss book gets triggered when the last traded price in the
normal market reaches or exceeds the trigger price of the order.
e.g. If for stop loss buy order, the trigger is 93.00, the limit price is 95.00 and the
market (last traded) price is 90.00, then this order is released into the system once the
market price reaches or exceeds 93.00. This order is added to the regular lot book with
time of triggering as the time stamp, as a limit order of 95.00
Quantity Conditions
Disclosed Quantity (DQ)- An order with a DQ condition allows the Trading Member to
disclose only a part of the order quantity to the market. For example, an order of 1000
with a disclosed quantity condition of 200 will mean that 200 is displayed to the market
at a time. After this is traded, another 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.
MF - Minimum Fill (MF) orders allow the Trading Member to specify the minimum
quantity by which an order should be filled. For example, an order of 1000 units with
minimum fill 200 will require that each trade be for at least 200 units. In other words
there will be a maximum of 5 trades of 200 each or a single trade of 1000. The
Exchange may lay down norms of MF from time to time.
Trading Workstation
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Market Watch Window
The Market Watch window is the main area of focus for a Trading Member. The
purpose of Market Watch is to view market information of pre-selected securities,
which are of interest to the Trading Member.
To monitor various securities, the trading member can set them up by typing the
Security Descriptor consisting of a Symbol field and a Series field. Invoking the
Security List and selecting the securities from the window can also set up securities.
The Symbol field incorporates the Company name and the Series field captures the
segment/instrument type. A third field indicates the market type.
For each security in the Market Watch window, market information is dynamically
updated on a real time basis. The market information displayed is for the current best
price orders available in the regular lot book. For each security, the corporate action
indicator (e.g., Ex or cum dividend, interest, rights etc.), the total buy order quantity for
the best buy price, best sell price, total sell order quantity for the best sell price, the Last
Traded Price (LTP), the last traded price change indicator ('+' if last traded price is
better than the previous last traded price and '-' if it is worse) and the no delivery
indicators are displayed. If the security is suspended, "SUSPENDED" appears in front
of the security.
On line index and Index Inquiry
With every trade in a security participating in Index, the user has the information on the
current value of the Nifty. This value is displayed at the extreme right hand corner of
the ticker window.
Index Inquiry gives information on Close, Open, High, Low and current index values at
the time of invoking this inquiry screen.
Inquiry Window
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which some activity has taken place. It does not display orders, which have entered the
books but have not been matched (fully or partially) or modified or cancelled.
Order Status (OS)
Order Status enables the user to look into the status of a specific order. Current status of
the order and other order details are displayed. In case the order is traded, the trade
details are also displayed.
Market Inquiry (MI)
Market Inquiry enables the user to view the market statistics like Open, High, Low,
Previous close, Last traded price change indicator, Last traded quantity, date and time
etc. A user may find inquiry screens like Market Movement, Most Active Securities and
Net Position useful. These are available in the supplementary menu.
Market Movement (MM)
The Market Movement screen provides information to the user regarding the movement
of a security for the current day. It gives details of the movement of the scrip for a time
interval. The details include total buy and sell order quantity value, Open, High, Low,
Last traded price etc.
Most Active Securities
This screen gives a list of the securities with the highest traded value during the day and
the quantity traded for each of them.
Net Position
This functionality enables the user to interactively view his net position for all securities
in which he has traded.
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Snap Quote
The Snap Quote feature allows a Trading Member to get instantaneous market
information on any desired security. This is normally used for securities which are not
already on display in the Market Watch window. The information presented is the same
as that of Market Watch window.
Order/Trade Window
Order entry mechanisms enable the Trading Member to place orders in the market. The
system will request re-confirmation of an order so that the user is cautioned before the
order is finally released into the market.Orders once placed on the systemcan bemodified or cancelled till they are matched. Once orders are matched they cannot be
modified or cancelled.
There is a facility to generate online order/trade confirmation slips as soon as an order
is placed or a trading is done. The order confirmation slip contains among other things,
order no., security name, price, quantity, order conditions like disclosed or minimum
fill quantity etc. The trade confirmation slip contains the order and trade no., date, trade
time, price and quantity traded, amount etc. Orders and trades are identified and linked
by unique numbers so that the investor can check his order and trade details.
Systems Message Window
This window is used to view messages from the Exchange to all specific Trading
Members.
Supplementary Menu
Some of the supplementary features in the NEAT system are:
On line back up
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An on line back up facility is provided which the user can invoke to take a back up of
all order and trade related information. There is an option to copy the file to any drive
of the computer or on a floppy diskette. Trading members find this convenient in their
back office work.
Off Line Order Entry
A member is able to make an order entry in the batch mode.
Computer-to-Computer Link (CTCL) Facility
NSE offers a facility to its trading members by which members can use their own
trading front-end software in order to trade on the NSE trading system. This Computer-
to-Computer Link (CTCL) facility is available only to trading members of NSE.
Through CTCL facility Trading Members can use their own software running on any
suitable hardware/software platform of their choice. This software would be a
replacement of the NEAT front-end software that is currently used by members to trade
on the NSE trading system. Members can use software customised to meet their
specialized needs like provision of on-line trade analysis, risk management tools,
integration of back-office operations etc. The dealers of the member may trade using
the software remotely through the member's own private network, subject to approvals
from Department of Telecommunication etc. as may be required in this regard.
National Securities Clearing Corporation Limited
National Securities Clearing Corporation Ltd. (NSCCL), a wholly owned subsidiary of
NSE, was incorporated in August 1995 and commenced clearing operations in April
1996. It has been set up with a philosophy to sustain confidence in clearing and
settlement of securities; promoting and maintaining, short and consistent settlement
cycles; to provide counter-party risk guarantee, and to operate a tight risk containment
system. It assumes the counter-party risk of each member and guarantees financial
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Before an investor start believing in the stories of superlative returns (in excess of 20
per cent), coupled with liquidity, safety and flexibility, it is imperative that one takes a
hard, rational look at the entire mechanism. This is so because financing badla is a
definite no-no for the first-time investor in the stock market and also for those who
don't have the time to constantly monitor the status of his/her investments and
fluctuations in the market returns
Vyaj Badla
In the vyaj badla system, there was a very high chance that an investor may end up with
an average annual return of 14-18 per cent or sometimes even higher. But having said
that, unfortunately, the returns were not guaranteed. This rosy picture could well be a
reality during a bull run, but when the market was under a bear hug, returns could
diminish to just around 6-8 per cent a year. Comparing it with a steady 12 per cent
annual return offered by a bank fixed deposit or any AAA rated corporate bandit
seemed that The high-risk and uncertain return of vyaj badla would start looking like a
bad investment option.
And then the taxman cometh! Vyaj badla transactions began to be treated as purchase
and sale of shares, thus getting subjected to capital gains tax of 30 per cent. Thus, an
investors final returns get lopped off to that extent. Although nay Sayers might feel
that vyaj badla provides an investor with an opportunity to maximize his earnings in a
bull market, the fact remains that it is a good option for the experienced investor. Else,
the nerve-wracking tension that accompanies stock market fluctuations may well take
its toll.
How did the Badla function?
Assume that there had been 12 trades of 100 shares each in "ABC" stock, and there are
12 separate buyers and sellers respectively. Among the buyers, while six wanted to
carry forward their positions, six want to take delivery. Of the sellers, eight wished to
deliver the shares while four were keen on carrying their positions forward. Now six
buyers made the payment for their purchases, while eight sellers effect delivery. Six
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and can churn out a fortune for himself as well. Hence, it is a way to turn your savings
into a fortune.
Bibliography
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