finance projects working of stock exchanges

7/31/2019 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


20% above the closing rate as on the day prior to the day of auction of the


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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finance projects working of stock exchanges

Documents