National stock exchange
The National Stock Exchange was set up with the basic idea of facilitating computerized trading in debt market instruments. It has a fully automated screen based trading system and operates on the principles of an order driven market. It is expected to operate as a model stock exchange and to provide a nationally integrated stock market system, facilitating an easy flow of transactions and resources on a cost effective manner.
MARKET SEGMENTS OF NATIONAL STOCK EXCHANGE The National Stock Exchange was intended to establish a viable and vibrant debt market which was in an underdeveloped stage. Now, it provides the traditional retail market for securities and also operates a wholesale debt market. The National Stock Exchange as conceived consists of three mutually exclusive segments:
? Wholesale debt market segment.
? Capital market segment
? Futures adoptions trading.
Wholesale and Debt Market Segment The wholesale debt market segment of the National Stock Exchange is a facility for institutions including subsidiaries of banks engaged in financial services and corporate bodies including companies to enter into high value transactions in instruments such as public sector undertakings bonds, treasury bills, government securities, commercial papers, certificate of deposits, floating yields bonds. Members on the wholesale debt market segment can trade on their own behalf of their clients.
National Stock Exchange trading system facilitates making of two ways quotes in a highly flexible manner. The high net worth corporate members of the wholesale debt market segment would be able to make such two way quotes in the retail market and any expresses or shortages in holding of their debt stock, they would be able to make good by having access to the wholesale debt market.
Capital market segment The capital market segment covers trading in equities and retail trade in convertible or non-convertible debentures and hybrids. This particular segment comprises the securities of medium and large companies with nation wide investor base. These will also include securities which are being traded on other stock exchanges. By virtue of equal access nation wide, such securities can be traded on the same price from any part of the country. This provides good trading and investment opportunities, increases the volume of trade and increases the liquidity considerably.
SAliENT FEATURES OF TRADING SYSTEM AT NATIONAL STOCK EXCHANGE
The National Stock Exchange has a fully automated screen based trading system. It operates on the principle of an order driven market providing complete flexibility to the members in the kind of orders that can be placed by them. The total systems solution adopted by the National Stock Exchange involves a technology which is the state of art. The National Stock Exchange does not have trading floors as in conventional stock exchanges. The trading entirely screen based with automated order matching. The screen provides entire market information at the press of a button which the existing telephone trade or trading floor cannot provide instantaneously. At the same time, the system provides for concealment of the identity of market operators. The screen gives all the information which is dynamically updated. As the market participants sit in their own offices, they have all the advantages of back office support and facility to get in touch with their constituents. The trading system of the National Stock Exchange is known as National Stock Exchange of automated trading. The National Stock Exchange is connected through a Very Small Earth Based Aperture Terminal or through leased telephone lines. Each trading member trades on the National Stock Exchange with other members through a computer located at the trading member?s office. Satellite links are established using Very Small Earth Based Aperture Terminals at the offices of the trading members. The brokers can sit in their own offices and trade on the system which offers versatile trading solution. Through the network, all the members receive complete market information simultaneously.
.liSTING The terms listing means admission of securities of a company to dealing on a recognized stock exchange. The principal objective of listing is to provide liquidity and marketability to listed securities and ensure effective monitoring of trading for the benefits of all participants in the market. A company desiring to get listing at the National Stock Exchange has to enter into a listing agreement and is required to ay the specified listing fees. Thereafter the company is required to comply with all clauses of the listing agreement and to send, details of book closure, record dates, a copy of annual report, half yearly reports and cash flow statements.
The securities of an entity may be listed at any of the following stages:
? At the time of public issue of shares or debentures.
? At the time of right issue of shares or debentures.
? At the time of onus issue.
? Shares issued on amalgamations or merger.
? Trading mechanism at the National Stock Exchange.
The National Stock Exchange is a completely on line screen based trading system accessible to all its trading members on equal time basis. The telecommunication link, connecting the trading, workstation on trading member premises to the National Stock Exchanges mainframe computer, is of crucial importance for the exchange to provide on line responses within a few seconds. The permission to applicants selected as trading members to trade on the exchange is act ordered in groups as telecom network expands progressively to cover all eligible trading members. The National Stock Exchanges Very Small Earth Based Aperture Terminal telecommunications network works as a closed user group and is available only to its members. For trading on the system, the trading member will also require a workstation which he is expected to purchase along with requisite software. The trading system provides enormous flexibility to trading members. While entering the order, a trading member can place various conditions in the order. The member may place limit on the price. The order may be matched at the best price available or it may be a limit order i.e., the order will match only if the price is better than the limit placed by the member. The trading member may specify the time period for which the order will be valid. Orders are matched automatically by the National Stock Exchange computer system. An order entering the system is unique order and gets a unique time stamp. The system conceals the identity of the trading member entering the order to the counter party.
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