UNIT 1ST - INTRODUCTION T0 FINANCIAL MARKET GYA

5so2
FinancialMarket
RARY
Primary Market
Secondary Market
b

Public Issue Private Plancement Over The Counter Exchange Traded

Market Market

Financial Market Overview

Provide a crucialchannel for the allocation of savings to those with
They facilitate the transfer of funds from savers to productive needs for them.
economic growth and developmnent. entrepreneurs companies needing investment, fostering
or
The securities market, a key componcnt of the financial market, has two
and the secondary market. main segments: theprimary market
1. Primary Market - The primary market allows issuers of
raise funds to meet their investment needs. This segment issecurities, including governments and corporations, to
essential for the initial sale of securities to investors.
Components:
1) Public Issue: - Under the Companies Act, 1956, an issue is
considered public if it results in the allotment of
securities to 50 investors or more. This method is typically used by larger companies raise substantial
to
amounts of capital.
2) Private Placement:-Involves issuing securities to a select group of
individuals or institutions (not exceeding
49).It is often employed by smaller companies seeking to raise funds without a public offering.
2. Secondary Market The secondary market enables the trading of securities after they have
been initially offered to
the public in the primary market or listcd on a stock cxchange. It provides liquidity and the
tobuy and sell securities. Components: opportunity for invest ors
1) Over-the-Counter (0TC) Market:
OTCmarkets are informal markets where trades are directly negotiated between
parties.
They typically involve less regulation and greater flexibility compared to formal exchanges.
2) Exchange-Traded Market:
This market operates through formal exchanges, where securities are bought and sold through
standardized procedures.
It includes equity markets (for trading shares), derivatives markets (for trading contracts based on
underlying assets), and debt markets (for trading bonds and other debt instruments).
Products and Participants
Major Participants Parties
The investors Individual Investors, Corporate Investors, Foreign Venture Capital, Investors, Flls
The issuers Listed Companies
The intermediaries Depositories and Depository Participants (DP),Trading member ,Clearing house, Clearing
bank

5
 UNIT IST - INTRODUCTIONTO FINANCIAL. MARKET

participants
Market regulators to the Board of India (SEBD), -
Principal regulator
1. Securities and Exchange
(RB),
2. Reserve Bank of india (MCA)
Affairs
3. Ministry of Corporate Afairs (DEA) of the Ministry of Finance.
4. Department of Economic

Products
Products:and Participants
- Financial markets facilitate reallocation of savings fromsavers to entrepreneurs. Savings are linket
products called securities
through a range of complex financial
investments by a variety of intermediaries[SC(R) A] 1956 Include
(Regulation) Act of like nature in or of any incorporate
the Securities Contracts stocks or other marketable securities
scripts,
1) Shares, bonds,
2) Government securities,
Compar
3) Derivatives of securities,
scheme,
4) Units of collective investment
derivatives
types - equities, debt securities and
Note: - securities broadly can be of three
Products
Market Segments and their Year launch Instruments
Market segment Debt securities State and Central Governme:
June 1994
1. Wholesale Debt Market (WDM) Segment securities, T-Bills, PSU Bonds, Corporate
debentures, Commercial Papers, Certificate
Deposits etc (Money Market Instruments
November 1994 Equity shares, warrants, debentures
2. Capital Market (CM) Segment
3. Futures & Options (F&O) Segment June 2000 Index Futures, Index Options, Stock Options
And Stock Futures
4. Currency Derivatives Segment (CDS) August 29, 2008 US Dollar-Indian Rupee
Segment
Euro-INR, Pound S-NR, Japanese Yen-INR
Currency Derivatives Segment (CDS) Fcbruary2010
Segment
Interest rate futures August 31, 2009

Contract Note
Contract note is a confirmation of trade(s) done on a particular day for and on behalf of a client.
Astock-broker should issue a contract note to his clients for trades (purchase/sale of securities).
The contract note should contain name and address (registered office address as well as dealing office address) ot
the TM, the SEBI registration number of the TM, details of trade viz. order number, trade number, order time, nt
time, security name, quantity, trade price, brokerage, settlement number and details of other levies.
As per Regulation 18 of SEBIRegulations, 1992, the TM should preserve the duplicate copy of thecontract nots
issued fora minimum of five years. The TM should ensure that:
1. Issued toa client within 24 hours and should be signed by the trading member
2. Stamp duty is paid.
3. All statutory levies are shown separately in the contract note
Brokerage
The maximum brokerage chargeable by TM in respect of trade in the CM segmen is fixed at 2.5% of the co
price
The brokerage should be indicated separately from the price, in the contract note. For example:
o Client has sold I0000 shares of serip @ Rs. 50.
maximum brokerage- brokerage rate * value of the transaction= 2.5 9,* 10000 shares *Rs. 50) = K
12,500
NOTE:- However, in Capital Market segnment, trading member can charge brokerage upto 25 paise| per shareifthe
market value of the scrip is less than Rs 10/-,
6
 UNIT IST - INTRODUCTION TOFINANCIAL MARKET

Indicators of
stock market

Market Market
Index
capitalisation. capitalisation Turnover Turnover
ratio ratio

Indicators Role
Index
Give information about the price movements of products in the
commodities or any other markets. financial,
Meant to capture the overall behavior of the equity markets
Created by selecting a group stocks that are representative of the whole market or
a specified sector or segment of the market.
The blue chip index of NSE is CNX Nifty
Market capitalization Closing price of share * Number of outstanding shares
Value of all listed shares on the country»s
Computed on a daily basis. exchanges
Market capitalization ratio - Market Capitalisation / GDP
Used as a measure of stock market size
Share turnover =Total number of shares of the company's stock that were
Use to mneasure liquidity of the stock bought and sold * price
Share turnover Ratio
Turnover at Exchange / Market Capitalisation at Exchange
Used as a measure of trading activity or liquidity in the
stock markets
|Reforms in Indian Securities Markets
1. Creation of Market Regulator
(SEBI)
SEBI- : Securities and Exchange Board of India,
established under SEBI Act 1992.
Objectives- :
Protecting the interests of investors in securities.
|Promoting the development of the securities market.
Regulating the securities market.
|2. Sereen-Based Trading
Pre-NSE Era-:Trading was based on an open outcry system, which was
NSE Introduction- : Introduced a nationwide online, fully inefficient and time-consuming.
November 3, 1994. automated screen-based trading system (SBTS) on
3. Reduetion of Trading Cycle
Old Cycle- :Trading cycle varied between 14 to 30 days with an
additional fortnight for settlement.
Rolling Settlement-: Introduced in December 2001; progressively reduced to T+2
days by April 2003.
Current Cycle-: From January 27, 2023, India follows a T+1 days settlement cycle.
4. EquityDerivatives
Trading
SC(R) Act Amendment 1995-: Lifted the ban on options in
securities.
Trading-:Began in 2000 with index futures; now includes index futures, index options, single stock futures, and
single stock options.
5. Demutualization
 UNIT IST - INTRODUCTION TO FINANCIAL,
Historical Structure- : Stock cxchanges were owncd, controllcd. and MARKET
managed by
NSE Structure-: Sct up with a demutualized governance
trading.
brokcrs.
structurc separating ownership.
Current Practice-; All stock cxchanges in India now have a
6. Application Supported by Blocked Amount (ASBA)
Function-: Allows investors to apply for IPOs/FPOs and rights issues
demutualized
setup. .managcrnent, at

without
Mechanism-: Amount is blocked in the investor's account and only
7. Globalization
immedi
debited upon ate
allotment.payment
Overseas Resource Raising-: Indian companies can issue ADR,
GDRs, FCCBs. and ECD
Global Accessibility-: Indian exchanges' trading platforms
FUs Investment- : Allowed to invest in all types of accessible via the Internet worldvs
securitics up to 24% of the
8. Launch of India VIX22 paid-up capital ofa? comipar:
Function-: Mcasures cxpected fluctuation in an underlying index based on
Launch-: India VIX (based on Nifty 50 Index Option prices) order book of index
Trademark-: VIX is a trademark of Chicago Board Options Exchange launched by NSE in April 2008. options,
9. Direct Market Access (CBOE).
Introduction-: SEBI allowed direct market access
Function- :Brokers offer clients direct access to the(DMA) institutional investors in April2008
for
intervention. exchange
trading system without manual broker
10. Launch of Securities Lending &
Borrowing Scheme
Introduction- : Securities Lending & Borrowing mechanism allowed in
Function-: Enables market participants to take short positions April 2008.
11. Issue of Capital and Disclosure cost-effectively.
Requirements (1CDR)Regulations 2009
Introduction-: SEBI issued ICDR Regulations in August 2009, replacing DIP
Function-:Governs all disclosure norms regarding the issue of Guidelines 2000.
12. Dematerialisation securities.
Function-:Conversion of securities into electronic form.
Depositories- : NSDL and CDSL.
Requirement- : Public listed companies making an IPOof Rs.10 crore or more
form. must do so in dematerialized
|13. Clearing Corporation
Function-: Manages clearing and settlement process, mitigating
First Clearing counter-party risk.
in April 1996. Corporation-:National Securities Clearing Corporation Ltd. (NSCCL), commenced operatets
14. Investor Education and Protection Fund (IEPF)
Establishment-: Set up by the Ministry of Corporate Affairs in October 2001.
Purpose- : Protect investor interests, promote
awareness, and handle investor claims.
Support- : SEBI and stock exchanges also maintain
investor protection funds and grievance cells.

8
 UNIT IST - INTRODUCTION TO FINANCIAL MARKET
Investor
grievences

Investor
protection Investor
fund service cell Arbitration

1. Investor Service Cell (ISC)

Function: - Handles investor complaints against trading members/companies related to claims/disputes for
transactions exccutcd on the Exchangc.
Forwarding Complaints: - Complaints are forwarded to the trading members for
Follow up: - ISC follows up with the trading members to resolution and clarifications.
resolve complaints
Arbitration: -If conflicting claims cannot be resolved. investors are promptly.
prescribed by the Exchange. advised to use the arbitration mechanism
2. Arbitration
" Definition: - A quasi-judicial process and an alternate dispute
Conciliation Act, 1996 resolution mechanism under the Arbitration and
Aim: -Quicker resolution of disputes when parties are
not satisfied with the complaint
resolve the complaint amicably. resolution process or cannot
Governance: Governed by the rules, byelaws, regulations &circulars issued by the
-
Filing Deadline: - Arbitration should be filed within six exchange and SEBI.
ISC time. months from the date when the dispute arose, excluding
3. Investor Protection Fund (IPF)
Establishment: -Set up as a trust under the Bombay
Settle Claims: - Utilized to settle claims of investors Public Trust Act, 1950 Administered by the Trustees
whose trading member has been declared a
expelled by the Exchange. defaulter or
Investor Education: - Stock exchanges can utilize interest
and research. income earned on lPF for investor education,
awareness,
Claim Limit :- The maximum amount of claim
payable to the investor is Rs. 15 lakh

GOotai

NVESTOR NSE ISC Cernter

Analys
T r n s trors
Meytaor

TRAOING MEMBER
HoiG meatingA/
Ct rGuircd torecciuion)

JOINT MEETING
GRC PANE.

2NVESTOR

ARBETRATIOrPANEA

SOURCE:- NSE INDIA.

9
 UNIT IST - INTRODUCTION TO FINANCIAL,
CASE STUDY:M. Raman Mrit, purchaved 1000 shares of Company Xthrowgh his tradinz memter
MARKET
(NSE).However, after the ettlement date pased.
Natinnal Stock Erchange Mr. Raman Dizit
net credited to his Demat sceont. Concerned about the delay and potential
kis trading member and Indges a formal complaint.
Compiaint Lndging with Investor Service Cell (ISC:
nticedhehat the
finanial implieatins, (tyrAh
tharm h

M: Ratman Dxit files a cnplaint with the I5C.

SC acknaicdye rceetpt of the umnplaint and init1atcs an in vestigatim.
Investigation by 15C:
ISC reviewn coipia1nt and comtats thc trading menber (brker) for clarification and resolutice
They request details fron the broker regar dingthe excution of the transaction,
lor the delsy in cred1ting shares to Mr Raman Dizit's Demat auunt. wnfirmatin
of shares
purchases
Resolution Efforts:
ISC facilingtes comun icatin between Mr.Ratnarn Dizit and the trading member to reolve the
They monitor the progrcs of reolution cfforts, cnsuring that the tradingrnember addresses Mr.issue
RarrarnproniDizit'
paly
arcasonable timefrarne. s
Arbitration Consideration:
Ifthe trad1ng mernber fails to provide asatisfactory resol ution or if Mr. Rarnan Dizit rermaíns díssatisfied
wit h the
resoiution, he has the option to escalate the rmatter to arbitration.
Mt Raman Dzit would need to formally request arbitration, typically within siz months pryi.
from the date the disote re
zcludmg ISC% handl1ng time
Arbitratin Proces:
Asbrtrat1on procccd1ngs commenc, whee an impartial panel revicws the evidence presented by both parties (Mr. r
and the trad1ng rnember)
Rased on the findings, the arbitration pancl issues a decisiom,hich could include financial cornpensation if the tradin g
In lound liable
Role of Investur Protection Fund (1PF):
In cases where the rading member is unable to fulfill their obligations due o financial default or expulsion from the er:tec
the [PF umes into play.
The IPF smay umpensate Mr Rarnan Dizit for his losses, up to anaximurm anount prescritbed by the ezchan ge (cur:':, :
15 lakh p invetm)

Code of Advertisement is as follows

While issuing advertisements in the mediaTM have to obey with the Code of Advertisement prescribed by the
Exchange and to be subrnitted tu the Exchange to get príor approval
AdvertisementMaterialshall contain:
1. Sck Broke ID allotted by xchange and logo of the Stock Broker, if any.
2. Narne of the Stck Broker, reyistered office address of the member, SEBI Registration No.
3. Advertisernent In case of MutualFunds, IPO, Insurance, Comnodities, Bonds, Loans, etc then respective
regstration rumberts) where applicable shouid be mentioned.
4. Iuforration in advertisenent should be accurate, true, fair, clear, complete and concise.
5. 1f the rnember is only a distributor/s for any of the products mentioned in the advertisement, disclainer that they 212
only distributs/s of such products shuuld be specifically mentioned in the disclaimer.
6. Link of otficial website hyperlink has to provide when node of advertisernent is SMS/Message Pop-up, ett.
Advertisenent/Material shall avoid
1. Prohibit Superlative terms, such s best,no. I, ne of thebest, among market leaders, ctc unless such terns lb
provided by an entity independent of the Stock Broker.
2. Avoid Promise or yuarantee of assured return to the general investors.
3. Slatermcnt dexiged as likcly to be nisunderstood or likcly to disguise the significance of the statement.
4. Staternents which are false, misleading, biased, based on assumptions projections.
5. Any Stutement which directly or indirectly disgrace other advertisements or make unfair comparisons.
6. Give Recommendations such as BTST (buy today and sell tomorrow) cannot be mentioned in the advertisenio
7. Exploitive Statement designed to exploit of the investors duc to lack of knowledge.
 UNIT IST - NSE - MEMBERSHIP

NSE Membership prescribcd

Anyhody canbecome amcmber by complying with themember cligibility criteria and exittby surrendering
membership without any hidden cost. Advantages to
markct to the investore
1. Abltyto provide a fair, cfficicnt and transparcnt sccurities
trading facility for equities, derivatives, debt and
2. Special Access to a nation-wide hybrid
3. Key to use state-of-the-art electronic trading systems and technology.
New Membership:Thepersons eligible to become trading members of Exchange are:
\instrurnerts
1. Individuals.
2. Partnership firms registered under the Indian Partnership Act, 1932.
3. Limitcd Liability Partnerships registered under the Limited Liability Partnership Act, 2008.
4. Banks engaged in financial services through subsidiary
5. Banks for Currency derivates segment
6. Corporate body including companies as defined in the Companies Act, 2013.
Membership for Different Segments at NSE (combination for different segments)
1. Wholesale Debt Market (WDM) Segment
2. Capital Market (CM) segment
3. Capital Market (CM) and Wholesale Debt Market (WDM) segment
4. CapitalMarket (CM) and Futures &Options (F&0) segment
5. Capital Market (CM), Futures &Options (F&0)segment and Wholesale Debt Market (WDM) segmen
6. Curency Derivatives (CD) segment with or without the above mentioned segments.
7. Professional Clcaring Member (PCM).
Categories of membership Observation
Trading member Execute trades on his own account as well as on account of his clients but for clen
depend upon others clearing members
Trading cum sclf-clcaring Execute trades and clear and settle the trades executed on his own account as well as
member account of his clients.
Trading cum clcaring Execute trades on his own account as well as on account of his clients and clear and
member settle trades executedby themselves as well as by other trading members
Profcssional clcaring Donot trade but only clear and settle trades executed by other trading members (TMs
member They are typically banks, custodians etc. who clear and settle trades executed for thcr
clients (individuals, institutions etc.)

Twotypes of memberships are offered:

Normal - Unrestricted business Cxpansion
Types of membership Cash segment Future and options segment Currency derivates Debts s
segment
Trading member Yes Yes Yes Yes
Trading cum self-clearing Yes Yes Yes Yes
member
Trading cum clearing Yes Yes Yes
member
Professional clearing
member
Yes Yes Yes

Alpha - For focused proprietary trading with limited clientele

Types of membership Cash segment Future and options segment
Trading member Yes Yes
Trading cum self-clearing member Yes Yes
Trading cum clearing member Yes

18
 SAG

UNIT IST - NSE- MEMBERSHIP

Eligibility Criteria for Membership at NSE
Thestandards for admissionof members are laid down by the Exchange in terms of
Corporatc structure (shareholding pattern), capital adequacy (Paid up
BRAR
2. Net worth, Interest Free Security Depsit (IFSD), Collateral Security capital),
3. Education,experience etc. Deposit (CSD).

Corporate Structure (Shareholding Pattern)

Securities markets are naturallyvolatile and risky, and hence risk control mechanisms are put in
exchange. One such risk containment tool is the concept of Dominant Promoter Group 'which is place
very
by the stock
applicants acquiring membership on the NSE. unique for
The Exchange needs to know the background, financial soundness and integrity of the
controlling interest. shareholders holding such

Dominant Promoter norms are applicable to all trading members.

1. Foreign Entities: Foreign entities are allowed to take trading
membership of the
subsidiary, subject to compliance with the guidelines of the RBI in this regard. Exchange through their Indian
2. Corporate sharcholders to be identified as dominant
sharcholders: Corporate shareholder identifies any person
or persons as thet dominant promoter group as per the aforesaid norms
applicable to the corporate trading
member.
3 Listed corporate trading member: In
case of listed corporate trading members, any person(s) identified as
promoter in the offer document would be eligible to constitute dominant promoter group.
4. Unlisted corporate trading member: If a person holds 51% of shares in the trading
or together his relatives will be eligible to constitute member corporate on his own
dominant promoter group.
5. Banks, central or state government owned finance and/or development institutions: allowed to be identified as
dominant shareholder(s) provided they have a net worth of at least Rs.50 crores:
Fees and Charges:
" Application Processing Fees: Rs 10,000/- + Applicable Service Tax.
"Admission Fees:One time Rs 5, 00,000/- + Applicable Service Tax except in case of
Alpha Membership
Annual subscription charges (Capital Market Segment):
1. For Corporate - Rs 1,00,000 P.A. + Applicable Service Tax
2. For Individuals/Partnership Firms - Rs 50,000 P.A.+ Applicable Service Tax
3. Banks subject to minimum prudential requirements of minimum net worth of Rs. 500 crores, minimum CGAR
of 10per cent, net NPA not exceeding 3 per cent and net profit should have been made for last 3 years..

Net worth and Other Deposit Requirements

Net worth of the member includes Capital and free reserves less non allowable assets.
Non allowable assets include fixed assets, pledged securities, member's card, non-allowable securities (unlisted
securities), bad deliveries, doubtful debts and advances, prepaid expenses, intangible assets.
Deposit requirements are of two types
1) Interest Free Security Deposit (IFSD):- to be in liquid Cash
Cash component:-Cash, bank guarantees, fixed deposit receipts, units of money market mutual fund and gilt
funds and any other form of collateral as may be prescribed from time to time.
2) Collateral Security Deposit (CSD). Can be cash or non cash form
Non-cash component: -Collateral deposits like deposit of approved list of DEMATS securities and units of the
other mutual funds and any other form of collateral
Admission Procedure for New Membership
Admission for new membership is a two way steps
1. Clearing the exam
The dealers on CM segment are required to clear the Capital Market (Dealers) Module of NCFM;

19
 MEMBERSHIP
UNIT IST - NSE -
clear the Derivativcs Market
Segment are required to
& Options
Dealers on Futures of NCFM
cquivalent examinationRecommendation Committee
(Dealers) Mh
Membership in thc prescribcd format along with
2. Intervicwwith Required to submit applicationform, other relcAN
a) Applieation: -
documents. information abouttheir capability &
conducts interviews of to acquire
The MRC
activities, financial standing and integrity.
b) MRC recommends
stock the
broking names for admission of trading members tothe Membership Selection Commit.
taking into consideration the
Board ofDirectors after
c)d) Either approve or
Registration
MRC
rejects:-
either approves
The
- Thethe
or rejects
fromSEBI: applications.
documents recomnendation.
of the member are then forwardedi to SEBI for registration,
e) Allowing: - After satisfying itself astocompliance with respect to all the prescribed norms, SEB0 grants,

in the name of the applicant.

) Registration CertificateTrading
Other formalities: member has to satisfy the Exchange and NSCCL regarding all the formalite:
relevant documents, for
fees/deposits and submission of enablernent.
requirementssuch as payment of enabled to trade on the NEAT system.
g) NEAT working: - Trading Member is
ONSE
oter

Forwarde SEBttcste

Sutmity watet
Mettber

Docunn ratd

ys

Source:- www.nseindia.conn

Procedure of surrender of Trading Memberships membership. Details of the norms and procedures:
Trading members can apply for surrender of their trading request in writing in the prescribed format.
its
1. Application: - Trading member is required to sendof membership, the trading member is required to comply w
2. Before submission of an application for surrender
format.
the pre-requisites for application of surrender in the prescribed
membership is subject to fulfillment of certain conditons.
3. Certificate:- The application of surrender of trading
segments on which the trading member Is regs
as submissionof original SEBI registration certificate(s) on all to dismantle and recover all the leased line(s
Exchange
4. Dismantle: - The trading member should request the
VSAT(s) and other equipment given to them at their dealing offices.
5.6. Exchange Notice to public by way of a public notification in newspapers
Further notice: - Letter is also sent to SEBI seeking pending dues, if any, from member.

20
 UNIT IST - NSE- MEMBERSHIP

Trading
members

SEBI
(Intermediaries Authorised
Sub- Broker
Regulations,
2008
Person

Stock Brokers
Intermediary who arranges to buy and sell securities on the behalf of clients. SEBI grants a certificate to a stock
subject to the conditions that the stock broker: broker
a) Hold the membership of any stock exchange;
b) Abide by the rules, regulations and bye-laws of the stock
c) Pay the amount of fees for registration in the prescribed
exchange or stock exchanges.
manner.
d) 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.
Authorized Persons
Responsible for increasing business volume by contacting a large number of investors who are interested in
investing in securities and stocks.
Authorized persons are engage under stockbrokers to extend investment facilities to investors
Trading members of the Exchange can appoint authorised persons in the Capital Market.
Rights and duties
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.
Avoid issuing contract notes, confirmation memo and/or bills in their namne.
Not allowed to have any trading relationship with the Clients.
Sub Brokers
The trading members may appoint sub-brokers to act as agents for assisting the investors in buying, selling in
securities. Trading members desirous of appointing sub-brokers are required to submit the folowing documents
a) Copy of sub-broker -broker agreement duly certified by the trading members
b) Application form for registration as asub-broker with Securities and Exchange Board of India
) Recommendation letter to be given by the trading member with whom the sub-broker is affiliated
d) Reference Letter from the applicant's Banker
e) Declaration from Sub-Broker about Non-Conviction or presently not under trial for any offence
9 Sub brokers Proof of address :- Telephone Bill, Electricity bill, Voter ID, Driving License, Passport, MOA
(Registration certificate), Rent agreement, Leave and License agreement, Ration Card.
The important documents relating to dealing through a sub-broker are given below:
1) Sub-broker client agreement
2) Individual client registration application form
3) Non-individual client registration application form
Eligibility for sub Brokers
Asub-broker may be an individual, apartnership firm or acorporate. In case of corporate or partnership firm, the
directors or partners and in the case of an individual sub-broker applicant should comply with the following
requirements:
1. Have not been debarred by SEBI
institution recognized by the Government or rou
b Bither passed 12h standardequivalent examination from an
standard with 2years of work experience in securities market.

21
 MEMBERSIHIP
-
UNIT IST - NSIE
age dishonesty
than 21 years of involving fraud or
3. Not be less convicted ofany offence
4. Not have been
accordance with SEBI (Stock
registration from SEBI in

conditioBrnsokorstha
Registration certificate of a:sub-broker, subject to the c
Sub-brokers are requircd to
obtain grant a certificate to
Regulations, 1992. SEBI may
brokers) Rules and prescribed manner.
should pay the fees in the grievances of theinvestors within one month of the date of t
a) He adequate steps for redress of
b) He shouldtake complaint and keep SEBI.
reccipt of the
Cancellation of Registration member.
sub-broker truly certified by the trading
1. PAN card of the Sub-Broker for surrender ofregistration.
from sub-broker registration (onthe letter head of (TM).
2. Application Trading member for surrender of
scrved to the sub broker
3. Request letter of thenon-traceable thana copy of termination notice affidavit must be submitted to SEBIin
4. If thesub broker is certificate is lost, FIR copy along with the this regr
5. In casethe original Member and the Sub-Broker separately surrender of
the concerned Trading notification intimatingtheinvestors/general public of the registration
6. Submit Copy of public be in English)
advertisement should
broker.(The content of the
registration documents.
Write the detail of Client Broker into an agreement in the specified format provided by NSE
is required to enter (UDR)
1. Trading member (TM) the clauses mentioned in Uniform Documentary Requirement investor riok.
all
2. Agreement should contain (KYC) requirements, the TM should ask for information such as:
3. Under-Know Your Client PAN number, employment, age,
investments experience.
financial profile, address details, income,(MCA), trading nembers are required to make the constituent/clients on
Agreement
4. Under Member Constituent
of
TM is admitted.
a) Trading segment to which on the Exchange by issuing Risk
Disclosure Document (RDD).
b) Basic risks involved in trading

Unique Client Code (UCC)

members/brokers to use unique client codes for all clients.
SEBI has made it mandatory for all trading
unique code and retain a copy of the document.
Brokers should verify the documents with respect to the exchanges/clearing corporations
Brokers should Provide the PAN and UCC of their clients to the stock
Margins from theClients
themselves from client default.
Members should have a risk management system to protect
Margins are an important element of such a system.
beneficiary account.
The margin collected is kept separately in the client bank account/client
In case of default, they are utilized for making payment to the clearing corporation for margin and settlement
respect to that client.

Execution of Orders
The trading member should provide the client with the relevant order confirmation/ moditication slip or copy
thereof.
Where the client requires any of his orders to be cancelled after the order has been entered in the system o
been executed, the trading member may, if it sodesires, obtain the order cancellation details in writing Irom u
client
The trading member should accordingly provide the client with the relevant order cancellation details, Io u
so required by the client. itshould
Where a rading member receives a request for order modification or order cancellation from the client,
modification
duly bring it totheir noticethat if thetotal order results in atrade inthe meantime, the requests for
cancellation cannot be executed.

22
 UNIT IST - NSE- MEMBERSHIP
Segregation/separation of Bank Accounts
It is compulsory for allTMs to keep the money of
the
Funds should be transferred from the client account to clients and their own money in a different Account.
the clearing account for the purpose of funds
obligations on behalf of the clients and vice- versa in case of funds pay-in
No payment for transaction in which the TM is pay-out.
taking position should be transferred from the Client
Account
Segregation'separation of Demat (Beneficiary) Accounts
" The trading members should keep the
dematerialized securities of
from holding their own dematerialized securities. client in a separate beneficiary account distinct
No delivery towards the own
transactions of the
client. For this purpOse, every trading member istrading members is allowed to be made from the account meant for
member exclusively for the securitics of the clientrequired
(to be
to open a beneficiary account in the
name of the trading
A trading member may keep one referred to as - client 'bencficiary account).
accounts for cach of its client as itconsolidated constituents "beneficiary account for all its constituents or different
may deem fit.
Sub-Broker-clients relations
Help the client in redress of grievance in respect of
Assist and co-operate in ensuring faster settlement oftransactions executed through its associated broker.
entered any arbitration proceeding arising out of the
transaction
Required to enter into a tripartite agreement with its clients and
the
Develops privacy of contract between the stock broker and the stock broker.
Special assistance to stock broker and clients to sub-broker's client.
all the settlements. reconcile their accounts at the end of each quarter with
reference to
Securities/ Funds
Transactions in securities executed on behalf of a client introduced through the
delivery/ payment between the stock broker the client directly, in accordancesub-broker should be settled by
byelaws of the Exchange and such settlementsandshould of the rules, regulations and
Delivery of securities and payment of funds relating tonot take place through sub-broker.
should be directly between the stock broker and the the transactions of a client introduced by the sub-broker
client of the sub broker.
Suspension & expulsion of Membership
The Exchange may expel or suspend, fine,
warn, withdraw any of the
guilty of disregard of any of the bye-laws,rules and regulations of the membership
Exchange
rights of a trading member if it is

Disobedience Of
Member

Suspension Expulsion
Basis of Suspension of
1. Trading member'sMembership
responsibility for partners, agents and employees:
Atrading member is fully
responsible for the acts and omissions of its partners, authorised
agents, authorized representatives and employees. officials, attorneys,
2. Suspension on failure toprovide
margin
Trading member when it fails to provide thedeposit and/or capital adequacy requirements:
Bye Laws, Rules and margin deposit and/or meets capital adequacy norms as provided in the
3. Regulations.
Un-business
a)
like conduct:
b)
Transaction or business dealings in fictitious names.
Circulation of rumors.
23
 MEMBERSIHIP
NSE-
UNIT IST -
valuee
rcflcct the truemarkct
docs not
sccuritics which
dealing in
c) Any unfair manipulationandrigging.
d) Market
c) Dishonorcd chequc. transactions with Clicnts
out
) Falure to carry
Unprofessionalconduct:rcquirementsandbrokeragechargcs
4. permitted
Avoidance of marginin whichdealingsnot period mar..
n) in sccurities suSpension
b) Business his business duringhis or sell or deal in securities
out SEBIto buy
c) Carrying with entities prohibited by
d) Dealings
5.
Misconduct: offence ofFraud
Convicted ofa criminal
a)
submit audited accounts.
b) Failure to returns.
false or misleading etc.
c) Make any subscription fee, arbitration charges
d) Avoidpaying trading member.
authority suspend the business of
Condition the relevant finds that the tradingdisturbed
member conducts
business in aa
business: When the relevant authority securities and its cquilibrium
1. Prejudicial exchange by making purchases or sales of trading member
harmful tothe
When in the relevant authoritythe
the opinion ofconstituent's
engages In
unwarrar:
2. offensive business: account
purchases or sales for its
business or effects that the trading member is in a bad
condition: When the relevant authority finds financial
3. Poor financial to do business with safety to its creditors.
and it cannot be permitted
Removal of Suspension member has been allowed hy eh
suspension of business as above shall continue until the trad1ng
The
authority to resume business. thing as the reletanr.
on its doing such act or providing such
It may be done on its paying such deposit or
may requre.

Consequences of expulsion
bound to fulfill transactions outstanding at he
1. FulfiHment of contracts: The expelled trading members are
outstanding transactions with or throu
his expulsion with the permission of the relevant authority close such
trading member.
Furnd
2. Lmpact of declaration of defaulter to follow: The provisions of pertaining to default and Protection
mentioned in the byelaws become applicable to the trading member expelled from the Exchange as if such a
member has been declared a defaulter
3. Trading members not to deal with expelled trading member: No trading member is allowed to transact b
with share brokerage with the expelled trading member except with the previous permission of the relevai :
4. Forfeit of Tradingmembership:-Stock Exchange forfeits allright of trading membership and priv1lcges
trading member of the Exchange.
5. Office vacated: The expulsion would create avacancy in any office or position held by the expelled radis
member.
6. Rights of creditorsunimpaired: The expulsion does not affect the rights of the trading members W
of the expelled trading member.
Consequences of Suspension
1) Trading men1bers not to deal with expelled trading member: No trading member is allowed to transactbus

with the expelled trading member except with the previous permission of the
2) relevant
Office vacated: The expulsion would create a vacancy in any office or position authorily
held by the expelledtrading
member.

24
 UNIT 1ST - NSE -MEMBERSHIP
3) Membership rights forfeited: Stock Exchange forfeits all right of
trading membcrship and privileges as a trading
member of the Exchange.
4) Application of declaration of defaulter to follow: The
provisions of pertaining to default and Protection Fund
mentioned in the byclaws become applicable tothe trading member expelled from the Exchange as if such
member has been dcclared a defaulter. trading
5) Trading Rights of creditors unimpaired: The
expulsion does not affect the rights of the trading members who are
creditors of the expelled trading member
6) Obligation to Fulfillment of contracts: The
expelled trading members are bound to fulfill transactions outstanding
at the time of his expulsion and it may with the
permission of the relevant authority.
CHAPTER AT A GLANCE
NSE Membership
1 Types of Members:
Individuals, partnership firms, LLPs, banks,corporate bodies.
2 Segments: Cash, derivatives, currency derivatives, debt.
3. Categories: Trading member, trading cum self-clearing
member. member, trading cum clearing member, professional clearing
4. Eligibility Criteria: Financial soundness, net
worth,comnpliance with SEBI regulations.
5. Admission Process: Exam clearance,
interview with Membership Recommendation Committee, SEB( registration.
6. Fees and Charges: Application feces,
admission fees, annual subscription charges.
|2. Stock Brokers
1 Role: Intermediaries facilitating buying and selling of securities on
behalf of clients.
2. SEBI Regulations: Certification, compliance with
exchange rules, redressal of investor grievances.
3. Authorized Persons: Assist in increasing
business volume, operate under stockbrokers' guidance.
4. Sub Brokers: Assist in transactions, registration with
SEBI, compliance with rules and regulations.
5. Client Registration: KYC requirements, agreement terms, risk
disclosure, unique client codes.
3. Sub Brokers
1. Role: Assist clients in securities transactions under the
supervision of stockbrokers.
|2. Registration: Certification by SEBI, compliance with educational and ethical standards.
3. Client Relations: Facilitate grievance redressal, assist in
transactions.
arbitration proceedings, and maintain privacy of client broker
4. Regulatory Compliance: Follow SEBI rules, maintain transparency in
transactions.
4. Market Operations and Regulatory Compliance
|1. Market Mechanisms: Dematerialization, unique client codes, segregation of client funds and securities.
2. Regulatory Oversight: SEBI regulations, compliance with exchange rules, risk
management systems.
|3. Suspension and Expulsion: Conditions leading to suspension or expulsion of trading
defaulters. members, consequences for
|4. Consequences: Fulfillment of outstanding contracts, restrictions on business dealings, forfeiture of
membership rights.
IMPORTANT QUESTIONS
Answer the given questions in one line/word (1 mark)
1. How does Member's Net Worth calculated? (CBSE 2018)
2. Are there any entry/exit barriers to the membership of NSE? (CBSE 2018)
3 Who is Sub- Broker?
4. What is the full form ofIFSD CBSE 2023

Answer the given questions in 30 - 50 words (3 marks)

I. List the documents that are submitted by a Trading Member to the Membership Department of the Exchange to appoint a Sub
Broker.
2. Explain Surrender of Trading Membership? (CBSE SAMPLE PAPER-2019-2020)
Answer the given questions in 50 - 80 words (4 marks)
1. Explain any two consequences of suspension. (CBSE 2023)

25
 TRADING
2"-INTRODUCTIONTO
UNIT
Neat Scrcen Order Managr
Trading Basics

based on open outcryysystem. Whe

Introduction exchanges in India was
trading on stock
Earlier: - In the past, the usually the ex changetrading ring, and
trade with each otb
Presently:at -a central
assemble NSE haslocation
a main computer connectedthrough VerySmall Aperture Terminal (VSAT) IA
at the
office.
The main computer runs
on afault tolcrant
STRATUS mainframe computcr Exchange.
Trading Network of NSE

Placing an order
toplace an order on his
An investor informs a broker
behalf. NTESNA

sends signal to the Satellite

The broker enters the order and
via VSAT/leased line/modem.
computer at NSE via
The signal is directed to a mainframe
VSAT at NSE's office.
The order confirmation message is immediately displayed
on the PC of the broker.
Working of order
best
" Allorders received on the system are sorted with the
priced order getting the first priority for matching i.e.,
the best buy orders match with the best sell order.
Flexibility:
The market screen at any point of time provides complete
information on total order depth in asecurity, the five best
buys and sells available in the market, the quantity traded
during the day in that security. NSE Mainframe Broker's orer8
Open Electronic Consolidated Limit Order Book (0ECLOB):
Investors can also know the fate of the order as soon as
they are placed with the trading members.

Advantages of the Sereen-Based Trading System (SBTS)

1. Provides full secrecy by accepting orders, big or small, from members without revealing their identis
providing equal access to everybody.
2. Allows faster incorporation of price sensitive information into prevailing
efficiency of markets. prices, thus increasing the
3. Provides transparency: - Now it's possible for market participants tosee the
market more transparent, leading to incrcased inyestor full market. which helps to tah
4. Enables market participants, confidence
irrespective of their geographical
the depth and liquidity of the market. locations, trade with one anotne
to
simultancously, improving
5. Reduce cost, risk
Fraud by electronically matches orders on a strict Price/Time Priority

40
 UNIT 2 - INTRODUCTION TOTRADING

Market
Segments

Whnlesale Deht Capltal Murket

Market (WDM) Futures & Currency
(CM) Options (F&0) Derivatives
Segment (CDS)

Normal Market Auction Market Odd Lot Market Retal Debt

Market

Capital Market types/NEAT System (four Segments)

1) Normal Market: Normal market consists of various
Orders, Spccial Ternm Orders, and Stop Loss Orders book types in which orders are separated as Regular Lot
2) Auction Market: Auctions are initiated bythe depending on the order attributes.
reasons. There are 3 participants in this market. exchange on behalf of trading members for settlement
related
a) Initiator - Party who
initiates the
b) Competitor - Party who enters auction process
c) Solicitor - the party who enters
orders on the same side as of the initiator
3) Odd Lot Market: The odd lot market orders on the opposite side as of the initiator
Trades Session. AIlorders whose orderfacility is used for the Limited
size is less than the regular lotPhysical Market and for the Block
These orders do not have any special terms size are traded in the odd-lot market.
4) Retail Debt Market: - System of capital attributes attached to them.( No further details required)
Trading in Retail Detail Market takes placemarket segment is used for
in the same manner as intransactions
in Retail Debt Market session.
equities (capital market) segment.
Corporate Hierarchy

Corporate
Manager
Branch 1st
Branch 2nd

Dealer one Dealer two Dealer three Dealer Four

Corporate Manager Branch Manager

Placed at the highest level in a Dealer
trading frm. Assigned to a user who is placed Placed at the lowest level of the
under the corporate manager.
Receives the end-of-day reports Receives end-of-day reports for hierarchy.
for all branches of the trading Adealer can view and perform
member. all the dealers under that order and trade related
Sets branch order value limits branch. activities only for him and do
Set user order value limit for
and user order value limits is not have access to
cach of his branch.
available to the corporate View outstanding orders and
information on other dealers
manager. under either the same branch or
View outstanding orders and trades of all users of his branch other branches.
trades of all users of the trading and can also canccl/modify
outstanding order of all users of

41
 TRADING
2"-INTRODUCTIONTO
UNIT hisbranch
also
member and can
Cancel'odifyoutstandingorders
member.
of the trading
ofall users cominunicationitechnology for trad1ny.
satellite (NEAT
Neat System exchangein the worldto
use
Automated Trading
first Exchange for
NSEisthe
system,called National memorydatabase to achieve
Is trad1ng storcd in an in
Features of NEAT informationis 99.7o.
record of
end alltrading for users. It has uptime orders are
match on the
basis of
Atthe sever availability market, whercin
maximum system an order driven
performing various tasks like placing a buy or sell
of anorder
supports
NEATsystem to help in the status
consists of various functionsmarket movement, checking Rupees.
It watchon the quoted inIndian
orders, keeping a and prices are traded is notified bythe Exchange from time s
quantity fields are in units for various securities
All tick size
The regular lotsize and
NEAT CM
Logon Scrccn of number of Users allowed for
User ID: morethan one User. The each Traing
Member can have
EachTrading Exchange from time to time. its member, after
notificd by the Exchange(NSE)through passing the Y
National Stock
provided by
The User ID is
certification exam.
participating in trading himself or
Trading Member ID:
registered member of the exchange,
Any individual who is a Member.
clients, is a trading member.
Trading Member ID to cach Trading default password NeataCM:
assignsa enter the
The Exchange for the first time, he has to password in the Neu D
Password: When a user logs in the user to enter anew
entering this password, the system requests
exchange. On Password eight characters in lenl.
Features of User ID and
minimum of six characters and maximum of entered.
Password should contain user desires so and a
new password can be
be changed if the required to reset the passumes
Password can
forgetting his password, the trading member is
Inthe event of the user id.
corporate manager user

NEAT SCREEN

Log offlexit from the application permanently from the trading systenm by selecting his
1. Permanent Sign Off: User can log off which allows the User to disallow u
sign off is a useful feature
2. Tenporary SignOff. :-Temporarylogging off.
trading software without actually market updates
:all
During atemporary ign-off period, the application continuesto receive unauthorized
The user, however, annot enter orders or make inquiries, prevents
This allows the user to leave the trading system tenporarily inactive and minute
of5
system. for a period
The temporary sign off is automnatically activated when the user is inactive

42
 UNIT 2"-INTRODUCTION TOT'RADING
The user has to enter the password to resume activitics. If five attempts are made to sign on with an
incorrcct
password, the uscr is permancntly logged off
3 Exit: On selection of this option, the user comes out of signoff scrcen. The ticker displays information of all
trades in the system as and when it takes place.

Different phases of the Regular Market.

The trading system is normally made available for trading on all days cxcept Saturdays, Sundays and other
Holidays are declared by the Exchange from time to time: Market Phases holidays.
1. Opening: The trading member can Set up Market Watch (the securities which the user
would like to view on the
screen) before the market opens
2. Pre-open session The pre-open session is for duration of 15 minutes i.e. from 9:00 am to 9:15 am
Order entry & modification Opcn: 09:00 hrs (The pre-open session is comprised of Order collection period
and order matching period.
Order entry & modification Close: 09:08 hrs (Order matching period starts immediately after
of order collection period. Orders are matched at a single (equilibrium) price which completion
will be open price. The
order matching happens in the following sequence:
"Eligible limit orders are matched with eligible limit orders
" Residual eligible limit orders are matched with market orders
" Market orders are matched with market orders
3. Normal Market Open Phase:
Normal /Limited Physical Market Open: 09:15 hrs
Normal / Limited PhysicalMarket Close: 15:30 hrs.
The activities that are allowed at this stage are Inquiry, Order Entry, Order Modification, Order Cancellation
(including quick order cancellation), Order Matching and Trade Cancellation.
4. 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.
Nofurther orders are accepted, user is permitted to perform activities likeinguiries and trade cancellation.
5. Post-Close Market:
This closing session is available only in Normal Market Segment.
Its timings are from 3.40 PMto 4.00 PM. Only market price orders are allowed.
6. SURCON(SURCON)
Surveillance and Control is period after market close during which, the users have inguiry access only.
After the end of SURCON period, the system processes the data for making the system available for the next
trading day. When thesystem starts processing data,the interactive connection with the NEAT system is lost
and the message to that effect is displayed at the trader workstation.

MILESTONES IN TRADING PLATFORM

Internet Broking
SEBICommittee approved the use of Internet as an Order Routing System (ORS) for communicating clients
'orders to the Exchanges through brokers.
ORS enables investors to place orders with his broker and have control over the information and quotes and to
hitthe quote on an on-line basis.
" NSE was the first stock exchange in India to launch internet trading in early Fcbruary 2000.It provides web
based access toinvestors to trade directly on the Exchange.
Co-location
In January 2010, the NSE began offering a co-location facility to members. Members could place their servers in the
Exchange's premiscs in return for a fec.
Thisallowed them faster access to the buy and sellorders being disseminated by the exchange's trading engine. The
term 'co-location' mcans 'a setup wherein the broker's computer is located in the same arca as the stock exchange's
Server.

The term co-location/proximity hosting services** means space, power, tele-communications, and other
ancillary products and services made available to market participants for the purpose of enabling them to

43
 TBADING
INTRODUCTIONTO
UNIT2"-
Exchange)
(WAP) $EAT lanched he
application Protoed
Wiriss trade fran ey place

stiracdrve by toe. Erchange sor

chmente hen yattedpeais ftemn the Fxchange
fomotrxke at fhen memhers wh have thtaititigpperMNSMT)
regietered vice afle
Only SEl CHi
ifdtodsKetheser
trad1ngs VICES
breakegn wth effect fron Ssh
Ciresit Breskers
snplermented
indexdassd
market-nideciesit
tyrrenent, eatha way VIZ h. 15% and 2.24.
29%.
has f the inlez Prepes call zcion Taal
The Exchange systcmapplies at Bstage Markethaltduration post rarke halt
CHcut brcaket sesion
Trigyertine 15 rmirtes 1Hoar
|Trigyer 45 fminutes 30 Minutes
15rarutes
|limit
Before 10) pm 15 minutcs
pmn up to
At or afte 100 Na applicable
2 30 prn No halt 15miTutes 2 Hour
minutes
At or after 2.30prn Ihour 45 15minutes 1Har
15%
Belore 100pn. 45 minutes
pm up to
At or afte 1:00 Na applicable
2.30 prn Rernainder ofthe day Notapplicable
At or after 2.30 prn Remainder ofthe day
market
20% Any timc during
hours

specified by the
Exchange.
Price Bands on securities as
(eith way) the Exchange
Daily price bands of5% (either way)on securities as specified by are availableor sCTiDts
inchudei
price bands of 10% derivative products
Daily applicable on scripts on which
Noprice bands arederivetive products are
available. preference shares etc).
indices on which rernaining scripts (including debentures. applicable for t
Price bands of 20% (cither
way) on all
Limited Phvsical Market are the same as those
securities in the
The price bands for the Market
securities in the Normal applicable.
price bands of20% are
For auction market the
and making verhalbü
CHAPTER AT AGLANCE
assembling at a central location (exchange trading ring)
traded by
Open Outcry System: Brokers
Screen-Based Trading System (SBTS)
Advantages of the of members
accepted without revealing the identity
Secrecy and Equal Access: Orders are informaton into prices
of price-sensitive
Informational Efficiency: Faster incorporation
investor confidence. degh
Transparency: Full market visibility increases enhancing marke
trading across different locations
Geugraphical Independence: Enables simultaneous
ime PriorityreducS!
liquidity. orders based on Price Ti
Electronic matching of
Cost, Risk, and Fraud Reduction :
Capital Market Types and NEAT Systenm Segments
Ternm Orders, and Stop Loss U s
Normal Market: Or der Types :Regular Lot Orders, Special
Auction Market: Participants: Initiator, Competitor, and Solicitor. orderssmalle
thanther
0dd Lot Market: Usage :Limited Physical Market and Block Trades Session for
segment.
Retail Dcbt Market: Function :Transactions similar to equity trading in the
capital arket

44
 UNIT 2M - INTRODUCTIONTO TRADING
Corporate Hierarchy
Crporate Mnnage :-lighestIevel, receives end-of-day reports, sets order limits, and mamages all branches and isers
Branch Manager:-Manages dealers under the branch,sets user limits, and handles branch-specific operations.
Dealer -I owest level, manages personal orders and trades without access to other dealers' information.
NEAT Sstem Features
First to lsc Satellite Technology: Enabled by NSE.
Order Driven Market Orders matched on time and price priority.
Functional Support: Various tasks like placing, modifying, and monitoring orders.
Data Storagc: In-memory database ensures minimum response time and high availability (99.7% uptime).
Logon Screen of NEAT CM
User ID: - Multiple users per Trading Member, provided by NSE after certification.
Trading Member ID: Assigned to registercd members participating in trading.
Password:-Inital default pasword (Ncat@CM1), changcable after first login, reset by corporate manager if forgotten.
Log OffExit Options
Permanent Sign Off: -Completcly logs off the user.
Temporary Sign Off:- Disallows trading tenporarily while continuing to receive updates.
Exit: - Returns to the sign-off screen.
Market Phases
Opening: Setting up Market Watch before the market opens.
Pre-open Session: Order entry/modi fication from 9:00 to 9:08 am, followed by order matching.
Normal Market Open Phase: Trading from 9:15 am to 3:30 pm with full trading activities.
Market Closc: End of trading, no new orders accepted.
Post-Close Market: From 3:40 pm to 4:00 pm, only market price orders allowed.
SURCON: Post-market close period for inquiries only.
Milestones in Trading Platform
Internet Broking :
SEBI approved the use of Internet as an Order Routing System.
NSE laun ched intemet trading in February 2000.
Co-location :
to the exchange's server.
Started in January 2010, allowing faster access to trading engine data by placing servers close
3. Wireiess Application Protocol (WAP) :
Launched in November 2000 for trading via mobile devices.
GLIMPSE
VSAT: Very SmallAperture Terminal VSAT
OECLOB Open Electronic Consolidated Limit Order Book
have inquiry
SURCON: Surveillance and Control is period after market close during which, the users
access only.
ORS Order Routing System
|Parties in NEAT
Initiator Who initiates the auction proccss
of the initiator
Competitor Who enters orders on the same side as
the initiator
Solicitor Who enters orders on the opposite side as of
Placed at the highest level in a trading firm.
Corporate manager manager.
Branch manager: Assigned to a user who is placed under thecorporate
Dealer Placed at the lowest level of the hierarchy
NEAT SCREEN 15 inutes i.c. l'rom 9:00 am to 9:15
am
Pre-open session The pre-open session is lor duration of

45
 UNIT 2 KNOWING THE NEAT GAGA
Introduction
Thc trading on National Stock Exchange is done through software known as NEAT, NEAT Scrcen Windt

Neat Screcnt

Ticker Market
Titte bar:
Window Tool Bar Message Watch Snap Quote
Window Window

NEAT Sereen
NEAT Screen: The trader workstation screen of the trading member is divided into the following windows:
1) Title bar:
Displays trading system name (trading member name. user id, user type, the date and the current time.
) Ticker Window: Displays information about a trade as and when it takes place.
The user has the option to set-up the securities which appcar in the ticker.
The ticker selection facility is confined tothe securities of capital market segment onlv.
The first ticker window, by default,displays all the derivatives contracts traded in the Futures and
Options segment.
3) Tool Bar:
Has functional buttons which can be used with the mouse for quick access to various functions such as
Buy Order Entry, SellOrder ntry, Market By Price (MBP), Previous Trades (PT), Outstanding Order
(00), Activity Log (AL), Order Status (OS), Market Watch (MW), Snap Quote (SQ), Market Movement
4)
(MM), Market Inquiry (MI), Auction Inquiry (Al), Order Modification (OM), Order Cancellation (0CXL)
Message Window:
This enables the user to yiew messages broadcastby the exchange such as corporate actions, any market
news, auctions related information etc.
These messages appear as and when the event takes place in a chronological order
5) Market Watch Window:
Third windowfrom the top of the screen that is always visible to the user, The purpose is tosetup and yiew
trading details of securities that are of interest to users. Displavys trading information for the selected
securities. Key features
a) Market Watch Download: A user has to set up securities after the first download of the software. After
setting up the market watch, it is suggested that the user should log out normally. This will help the user to
save the freshly set up market watch securities in a file.
b) Market Information Displayed: The one line market information displayed in the market watch screen is
for current best price orders available in the Regular Lot book.
c) Information Update: - Changes in the best price and quantities are highlighted on a dynamic basis (in all
pages of Market Watch). The blue color indicates that price/quantities have increased, while the red color
indicates that the price/quantities have decreased
d) Setting up Securities: Facility toset up 500 securities in the market watch. The user can view up to 30
securities in one page of the market watch screen.
6) Security/Portfolio List:-This is a facility for the user for setting up the securities in the market watch screen.
This screen also has a new facility of allowing the user to setup his own portfolio.
1. Security List: The user can select securities based on Symbol, Series, Instrument Type and Market
Type. Ablank/partial scarch for Symbol and Series is also possible.
2. PortfolioList: Once the security is selected, the same can be used for setting up a portfolio. The user
can give a name to the list so selected.
The existing portfolio can be modified and/or removed. The user can also set-up a particular
portfolio in market watch.
a. Portfolio created can be used for basket order entry also. Order files can be generated based on the
portfolio created using basket tradigg option.
 NEAT
KNOWINGTIHE
UNIT2M - positioninthe
details ofthecurcnt markct watch defau
Navigation:Thc sclectionscrecn. folloue.
e) Easy inquiry indicatorsareas
sCrccnandthe Indication: The
)
CorporateActions
XD
X
Ex-Dividend
Ex- Intcrcst
CD
CR'
CB
Cum-Dividend
Cum- Right
Cum- Bonus
XB*
Ex- Bonus
Ex-Right C*
Cum- Interest
In case of
XR oneof
morethan
Y* incaseof CB, CI more thran
XD,XR. XB,XI
information
***Snap Quote: instantancous market
member to get Market Watch
Allows a trading
thoscarc nct
already set in the window.
securitics selected.
e Used for: ofthe security
" Displays the security status suspended;
indicates that the sccurity is
(a) 'S' preopen
the security is in
(b) 'P'indicates that
***Security Descriptor:-Information such as Security ame, Book Closure Start and End )Dates, Ex-Do:
Start and End Dates, Tick Size, daily price range, Face Value, ISIN and Remarkss is displayed in tthe Seoh
for a security for the current
Daily Price Range, displays the permissible price band
The DPR i.e.
To provide
***Market Movementinformation to the user regarding the movement of a security for the current d
The information displayed is from the time the market was opened today and|in chronological s
Provides information to the User regarding the movement of a security for the current day
done today,

Main FUNCTIONS

Market by Previous
Price Activity Log Trade Order Status Auction
Enquiry

1. Market by Price:
To view outstanding orders in the market aggregated at each price and are displaved in order of bs
Asthe name suggest it shows best five buy/sell rates on the basis of price time priority with quant
available for a specified security.
This window is dynamically updated.
Special Features of MBP
Regular lot &special term orders can be viewed in the MBP.
No untriggered stop-lossorder will be
The percentage change for last trade pricedisplayed
on the MBP screen
with respect
for aday, low price a day and the average trade price oftothe
previous
securityday's
in theclosing
giiven price,
marketopeare the
pt addits
in the screen.

50
UNIT 2M" KNOWING THENEAT
2. Activity Log:
Shows all the activities that have been performed on any order belonging to
These activities inchude order modification/canccllation, partial/full trade, and that user.
Itdocs not display those orders on which no trade modification/cancellation.
activity has taken place
Special Features of Activity Log
a. The AL gives details of all activities in
chronological orders.
b. Details appcar with the oldest activity first and the latest last.
C. The activity consists only of orders entercd by the
d. This inquiry oplion is not available to requesting trading member.
users in inquiry mode.
The following activities are displayed:
For buy orders, this indicates a match.
S For sell orders, this indicates a match.
OC This indicates an order was cancellcd.
OM This indicatcs an ordcr was modificd.
TC For both buy and sell orders this indicates that a trade
was cancelled involving this order
TM For both buy and sellorders this indicates that a trade
order was modified. involving this

3. Previous Trades:
Provides security-wise information to users for own trades.
Trade cancellation can be requested from the Previous Trade
screen.
Trades are displayed in a reverse chronological order. First all buy tradcs are displayed and
then sell trades
are displaved.
The main advantage of this function is that it facilitates viewing the
The fields that are available
details of each trade separately
the selection screen are Symbol, Series, and Market type, Auction Number,
Trading Member ID, Branch ID, Dealer, CLI, Buy/Sell and Time.
4. Order Status(OS):
To look into the status of one of dealer's owm specific orders. The screen
provides the current status of
orders and other order details.
The order status screen is not dynamically updated. In case the order is traded, the trade details are also
displayed. In case of multiple trades the display is scrolled. To view the status of an order, type the Order
Number and press 'Enter'
OS screen is divided into three parts. The first part covers order related information, the second part covers the
trade related information if the order has resulted in a trade and the third part gives summary details
Special Features of Order Status
a) The OS provides the user the current status of the order i.e. whether order has been modified, order was
cancelled, order was traded.
b) The data is presented in chronological order.
c) The dealer can view order status of orders entered under that Dealer ID only.
d) This option is not available to Users in Inquiry mode
5. Outstanding Orders
This function is used to enable the User to view the outstanding orders (buy/sel) for aselected security,. An
outstanding order is an order that has bcen entered by the user, but which has not yet been completely traded
or cancelled.
The User is permitted to see his own/client's orders and can modify/cancel the orders till it gets executed.
All the figures arc tillthe time of invoking the window.
Special Features of Outstanding Orders
(a)The user can modify orders from the outstanding orders sereen.
(b) The user can cancel orders from the outstanding orders screen.
(c) The user can view status of a particular ordeg1from the outstanding orders screen
 THE NEAT
UNIT 2" -KNOWING
Toenable the user to viewthe market statistics,for a particular market, for asecurity.
6. Market Inquiry:
previous close pricc for a sccurity.
open price and Symbol, Series,
Italso displays the availablc onthe sclection screcn arc and Markct
The ficlds that arc
and Odd Lot.
market type as Normnal
Features of Market Inquiry
Special
(b) The net change indicator for lastupdated.
dynamically trade price with respect to the previous,daay's closing
(a) This screcn is rot
with respect to the previous day's
change percentage for thelast trade price equal to the previous day's closing
is
a security for the day
(c) The base price ofThus, inthe market inguiry screen field indicating the
the price of he:
circumstances.
(d) price
Ifthefor
base
theprice
closing prICe
day. is manually changed(dueto a corporate action) then the market ingquiny alswia
closing price field
new base price in the

OTHER
FUNCTIONS

Multiple
Buy Back Index
Basket
Online Shares Broadcast and Auetior
Backup
Trading Grapl1
Enquiny
Facility
1. Online that the user can invoke to take a backup of all order and tradee related information for the :
Backup
for the current day only.
Theinformation
The online backup facilityisinvolves
available a number of filtering options, like the market type, the 1nStrutgt
date and time.
can be specified in terms of
the duration of required report the files to any drive of the computer.
This tility na
The user is provided the option to copy can specify any filename for Orders and Td
The user
files namely Order.txt and Trade. txt.
2. Basket Trading order mb:
NEAT users with a facility to create offline
The purpose of basket trading is to provide
selected portfolio.
selects a portfolio from combo box. The portiolot
In the basket trading functionality, the user first
box is user defined portfolios.
for the sclected portfolio of securitics according tot
On in putting the valuc, the orders are created
their market capitalizations.
less than or equalto Rs. 3000 lakh.
The amount entered is in lakh and must be

3. Buy Back Trades secondir

1998, buyback of sccurities is permitted in the
As per SEBINotification, dated Nov 14, such buyback orders are required to ce
trading facility and
Stock Exchanges having clectronic
upfront in the electronic trading screen as buyback orders.
about the buyback trades exccuted from uie sa
The purpose is togive information to the market period is currenty u
buyback
buyback period till current trading date in the securities whose

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UNIT 2M KNOWING THENEAT
4, Multiple Index Brondeast andGraph:-This scrccn displays information of NSE indices namely Nifty 50.The
indices are labeledvertically and the information is displayed against each index horizontally. The data displayed
for cach index is as follows:
Curent Index. High Index, LowIndex
4 Open Index, Close Index
o change in Current Index (W.r.t. previous close index)
4 52weck High,52 week low
4 Up Moves, Down Moves
Market Capitalization (in Rs. Lakh)
5. Auction Inquiry screen :
" The purpose of Auction Inquiry (A) is to enable the users toview the auction activities for the
current
trading day. This window displays information about auctions currently going on and auctions that have been
completed.
The following are the different status displayed for an auction security:
S Auction is in Solicitor Period
M System is matching the order
Auction is over
Auction is deleted
Auction is pending and yet to begin.
NEAT SCREEN (GLIMPSE OF THE CHAPTER)
Market watch window
This screen allows continuous monitoring of the securities that are of specific interest to the
user. It displays trading information for the selected securities
Order/trade window Enable the trading member to place orders in the market
Mcssage window Enables the user to view mcssages broadcast by the exchange such as corporate actions, any
Imarket news, auctions related information
Outstanding orders Order that has been entered by the user, but which has not vet been completely traded or
cancelled.
Market watch Third wvindow from the top of the screen that is always visible to the user. The purpose of
market watch is to setup and view trading details of securities that are of interest to users
Market by Price To view outstanding orders in the market aggregated at each price and are displayed in
order of best prices.
Activity log Shows allthe activities that have been performed on any order belonging to that user
Previous trades To provide security-wise information to users for own trades.
Snap quote Allows a trading member to gct instantaneous market information on any desircd security.
This is normally used for securities that are not already set in the market watch window
Market inquiry To enablethe user to view the market statistics, for a particular market, for a security.
Market movement To provide information tothe uscr regardingthe movement of asecurity for the current day.
Online backup The user can invoke to take a backup of all order and trade related information for the user.
Basket Trading Provide NEAT users with afacilityto create ofline order entry file for aselected portfolio.
Security/portfolio list User for seting up the securities in the market watch screen. This screen also has anew
facility of allowing the user to setup his own portfolio
Multiple Index Displays information of NSE indices namely Nifty 50, Nity50 .The indices are labeled
Broadcast and Graph vertically and the information is displayed against cach index horizontally
Order status The purpose of the order status (OS) is to look into the status of one of dealer's own specific
orders. The screen provides the current status of orders and other order details
Security descriptor Information such as security name, book closure start and end dates,ex-date, no-delivery start
and end dates, tick size, daily price range, face value, ISIN
Auction Inquiry To enable the users to view the auction activities for the current trading day. Displays
SCreen information about auctions currently going on and auctions that have been completed.

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