NATIONAL STOCK EXCHANGE

SUBMITTED BY:
Abhijeet Das (03016659311) Sahib Sarna (04116659311)

INTRODUCTION

The National Stock Exchange is the 9th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades, for both equities and derivative trading. NSE has a market capitalization of around US$1.59 trillion and over 1,552 listings as of December 2010. The NSE's key index is the S&P CNX, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalization. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%.

PURPOSE

Establishing a nationwide trading facility for all types of securities. Ensuring equal access to investors all over the country through an appropriate communication network. Providing for a fair, efficient and transparent securities market using electronic trading system. Enabling shorter settlement cycles. Meeting up with international benchmarks and standards.

INNOVATIONS
Being the first national, anonymous, electronic limit order book (LOB) exchange to trade securities in India. Since the success of the NSE, existent market and new market structures have followed the "NSE" model. Setting up the first clearing corporation "National Securities Clearing Corporation Ltd." in India. NSCCL was a landmark in providing innovation on all spot equity market (and later, derivatives market) trades in India. Co-promoting and setting up of National Securities Depository Limited, first depository in India.

Setting up of S&P CNX Nifty.

NSE pioneered commencement of Internet Trading in February 2000, which led to the wide popularization of the NSE in the broker community.

LISTINGS

Every NSE listed company is required to satisfy stringent financial, public distribution and management requirements.. High listing standards foster investor confidence and also bring credibility into the markets. NSE plays an important role in helping Indian companies access equity capital, by providing a liquid and well-regulated market. NSE has about 1319 companies listed representing the length, breadth and diversity of the Indian economy which includes from hi-tech to heavy industry, software, refinery, public sector units, infrastructure, and financial services..

Listing on NSE raises a company's profile among investors in India and abroad. Trade data is distributed worldwide through various news-vending agencies. More importantly, NSE lists securities in its Capital Market (Equities) segment and its Wholesale Debt Market segment.

ADVANTAGES OF TRADING AT NSE

Integrated network for trading in stock market of India. Fully automated screen based system that provides higher degree of transparency. Investors can transact from any part of the country at uniform prices. Greater functional efficiency supported by totally computerized network

MARKETS
Currently, NSE has the following major segments of the capital market:
Equity Futures and options Retail Debt Market Wholesale Debt Market Currency futures Mutual Fund Stocks lending borrowing

August 2008 Currency derivatives were introduced in India with the launch of Currency Futures in USD INR by NSE. Currently it has also launched currency futures in EURO, POUND & YEN. Interest Rate Futures was introduced for the first time in India by NSE on 31 August 2009, exactly after one year of the launch of Currency Futures. NSE became the first stock exchange to get approval for Interest rate futures as recommended by SEBI-RBI committee, on 31 August 2009, a futures contract based on 7% 10 Year GOI bond (NOTIONAL) was launched with quarterly maturities

TRADING HOURS

NSE's normal trading sessions are conducted from 9:15 am India Time to 3:30 pm India Time on all days of the week except Saturdays, Sundays and Official Holidays declared by the Exchange (or by the Government of India) in advance. The exchange, in association with BSE (Bombay Stock Exchange Ltd.), is thinking of revising its timings from 9.00 am India Time to 5.00 pm India Time. There were System Testing going on and opinions, suggestions or feedback on the New Proposed Timings are being invited from the brokers across India. And finally on 18 November 2009 regulator decided to drop their ambitious goal of longest Asia Trading Hours due to strong opposition from its members. On 16 December 2009, NSE announced that it would advance the market opening to 9:00 am from 18 December 2009. So NSE trading hours will be from 9.00 am till 3:30 pm India Time. However, on 17 December 2009, after strong protests from brokers, the Exchange decided to postpone the change in trading hours till 4 Jan 2010. NSE new market timing from 4 Jan 2010 is 9:00 am till 3:30 pm India Time.

TRADING SYSTEM

NSE has a main computer which is connected through Very Small Aperture Terminal (VSAT) installed at NSE office. The main computer runs on a fault tolerant STRATUS mainframe computer at the Exchange. Brokers have terminals installed at their premises which are connected through VSATs/leased lines/modems. It electronically matches orders on a strict price/time priority and hence cuts down on time, cost and risk of error, as well as on fraud resulting in improved operational efficiency. It allows faster incorporation of price sensitive information into prevailing prices, thus increasing the informational efficiency of markets. It enables market participants, irrespective of their geographical locations to trade with one another simultaneously, improving the depth and liquidity of the market. It provides full anonymity by accepting orders, big or small, from members without revealing their identity, thus providing equal access to everybody. It also provides a perfect audit trail, which helps to resolve disputes by logging in the trade execution process in entirety.

MARKET PHASES

The trading system is normally made available for trading on all days except Saturdays, Sundays and other holidays. A trading day typically consists of a number of discrete stages as below: (i) Opening: The trading member can carry out the following activities after login to the NEAT system and before the market opens for trading: (a) Set up Market Watch (the securities which the user would like to view on the screen) (b) View Inquiry screens (ii) Pre-open: The pre-open session is for a duration of 15 minutes i.e. from 9:00 am to 9:15 am. The pre-open session is comprised of Order collection period and order matching period. The order collection period of 8* minutes shall be provided for order entry, modification and cancellation. During this period orders can be entered, modified and cancelled. Order matching period starts immediately after completion of order collection period. Orders are matched at a single (equilibrium) price which will be open price.

(iii) Normal Market Open Phase: The open period indicates the commencement of trading activity. To signify the start of trading, a message is sent to all the trader workstations. The market open time for different markets is notified by the Exchange to all the trading members. Order entry is allowed when all the securities have been opened. Trading in all the instruments is allowed unless they are specifically prohibited by the Exchange. (iv) Market Close: When the market closes, trading in all instruments for that market comes to an end. A message to this effect is sent to all trading members. No further orders are accepted, but the user is permitted to perform activities like inquiries and trade cancellation. (v) Post-Close Market: This closing session is available only in Normal Market Segment. Its timings are from 3.50 PM to 4.00 PM. Only market price orders are allowed. Special Terms, Stop Loss and Disclosed Quantity Orders, Index Orders are not allowed. (vi) Surcon: Surveillance and Control (SURCON) is that period after market close during which, the users have inquiry access only. After the end of SURCON period, the system processes the data for making the system available for the next trading day.

NSE MEMBERSHIP

There are no entry/exit barriers to the membership of NSE. Anybody can become a member by complying with the prescribed eligibility criteria and exit by surrendering membership without any hidden cost.

The trading members of NSE have certain benefits, which includes: (a) Access to a nation-wide trading facility for equities, derivatives, debt and hybrid instruments / products; (b) Ability to provide a fair, efficient and transparent securities market to the investors; (c) Use of state-of-the-art electronic trading systems and technology; (d) Dealing with an organization which follows strict standards for trading & settlement at par with those available at the top international bourses and constantly strives to move towards a global marketplace in the securities industry.

NEW MEMBERSHIP
The persons eligible to become trading members of Exchange are: (a) Individuals; (b) Partnership firms registered under the Indian Partnership Act, 1932. (c) Institutions, including subsidiaries of banks engaged in financial services; (d) Banks for Currency Derivatives Segment; (e) Body corporate including companies as defined in the Companies Act, 1956. A company is eligible to be admitted as a member if: i) It is formed in compliance with provisions of Section 12 of the Companies Act 1956 which mentions about the mode of forming incorporated company; ii) It complies with the financial requirements and norms as may be specified by SEBI; iii) The directors of the company shouldnt have been disqualified for being members of a stock exchange and should not have held the offices of the directors in any company which had been a member of the stock exchange and had been declared defaulter or expelled by the stock exchange; and (f) Such other persons or entities as may be permitted from time to time by RBI/SEBI under the Securities Contracts (Regulations) Rules, 1957.

AUTHORIZED PERSONS

Trading members of the Exchange can appoint authorized persons in the Capital Market, Futures & Options and Currency Derivatives Segments. Authorized Person is "Any person-individual, partnership firm, Limited Liability Partnership (LLP) or body corporate who is appointed as such by a stock broker (including trading member) and who provides access to trading platform of a stock exchange as an agent of the stock broker. Authorized Person can receive remuneration - fees, charges, commission, salary, etc. for his services only from the stock broker and shall not charge any amount from the clients. Accordingly, stock broker can share brokerage with the Authorized Person but shall not charge any amount directly from the clients. The clients introduced by the authorized person should have a direct relationship with the trading member i.e. the member-constituent agreement, know your client forms, etc. are executed between the client and the trading member. This implies that the authorized person is not allowed to have any trading relationship with the clients.

SUB-BROKERS

Sub broker is an important intermediary between stock broker and client in capital market segment. The trading members of the Exchange may appoint sub-brokers to act as agents of the concerned trading member for assisting the investors in buying, selling or dealing in securities. The sub-brokers are affiliated to the trading members and are required to be registered with SEBI. A sub-broker is allowed to be associated with only one trading member of the Exchange.

Sub-brokers are required to obtain certificate of registration from SEBI in accordance with SEBI Rules and Regulations, 1992, without which they are not permitted to buy, sell or deal in securities. SEBI may grant a certificate to a sub-broker, subject to the conditions that: (a) he should pay the fees in the prescribed manner; (b) he should take adequate steps for redress of grievances of the investors within one month of the date of the receipt of the complaint and keep SEBI informed about the number, nature and other particulars of the complaints received; (c) in case of any change in the status and constitution, the sub-broker should obtain prior permission of SEBI to continue to buy, sell or deal in securities in any stock exchange; and (d) he should be authorized in writing, by a stock-broker being a member of a stock exchange.

SUSPENSION OF MEMBERSHIP

Following are some grounds on basis of which there can be suspension or expulsion of membership:

(i) Misconduct: A trading member is deemed guilty of misconduct for any of the following or similar acts or omissions namely: (a) Fraud or fraudulent act or if he is convicted of a criminal offence. (b) Violation of the provisions of any statute governing the activities, business and operations of the Exchange. (c) Improper conduct. (d) Failure to submit to or abide by arbitration. (e) Failure to testify or give information sought by the Exchange or any committee or any other person authorized on that behalf. (f) Failure to submit special returns in such form as the relevant authority may from time to time prescribe. (g) Failure to submit audited accounts. (h) Failure to compare or submit accounts with defaulter. (i) Failure to submit or make any false or misleading returns. (j) Make vexatious, malicious or frivolous complaints. (k) Failure to pay subscription fee, arbitration charges etc.

(ii) Trading members responsibility for partners, agents and employees: A trading member is fully responsible for the acts and omissions of its partners, authorized officials, attorneys, agents, authorized representatives and employees. If any such act which is against the relevant rules and regulations is committed or omitted by them then the trading member is liable to the same penalty to the same extent has that act been done or omitted by itself.

(iii) Un-businesslike conduct: A trading member is deemed guilty of un businesslike conduct for any of the following or similar acts or omissions namely: (a) Transaction or business dealings in fictitious names. (b) Circulation of rumors. (c) Any unfair dealing in securities which does not reflect the true market values. (d) Market manipulation and rigging. (e) Unwarrantable business which effects purchases or sales for its account or any account related to the trading member. (f) If a trading member accepts less than a full and bonafide money payment in settlement debt due by another trading member arising out of a transaction in securities. (g) Dishonoured cheque. (h) Failure to carry out transactions with constituents.

(iv) Suspension on failure to provide margin deposit and/or capital adequacy requirements: The Exchange can suspend the business of a trading member when it fails to provide the margin deposit and/or meets capital adequacy norms as provided in the Bye Laws, Rules and Regulations. The trading member shall remain suspended until he furnishes the necessary margin deposit or meet the capital adequacy requirements. (v) Unprofessional conduct: A trading member is deemed guilty of unprofessional conduct for any of the following or similar acts or omissions namely: (a) Business in securities in which dealings not permitted (b) Business for defaulting constituent who failed to carry out engagements relating to securities and is in default to another trading member (c) Transacts in business with an insolvent without obtaining the consent of the relevant authority even if the individual has obtained his final discharge from an insolvency court (d) Carrying out his business during his suspension period (e) Business with suspended, expelled and defaulter trading members (f) Business for employees of other trading members (g) Business for Exchange employees if it makes a speculative transaction in which an employee of the Exchange is directly or indirectly interested (h) Evasion of margin requirements (i) Evasion of brokerage charges (j) Dealings with entities prohibited by SEBI to buy or sell or deal in securities market

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