On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000. The Wholesale Debt Market segment deals in fixed income securities and is fast gaining ground in an environment that has largely focussed on equities.

This segment provides trading facilities for a variety of debt instruments including Government Securities, Treasury Bills and Bonds issued by Public Sector Undertakings/ Corporates/ Banks like Floating Rate Bonds, Zero Coupon Bonds, Commercial Papers, Certificate of Deposits, Corporate Debentures, State Government loans, SLR and Non-SLR Bonds issued by Financial Institutions, Units of Mutual Funds and securitised debt by banks, financial institutions, corporate bodies, trusts and others.

Large investors and a high average trade value characterize this segment. Till recently, the market was purely an informal market with most of the trades directly negotiated and struck between various participants. The commencement of this segment by NSE has brought about transparency and efficiency to the debt market, along with effective monitoring and surveillance to the market.

NSE started trading in the equities segment on November 3, 1994 and within a short span of 1 year became the largest exchange in India in terms of volumes transacted. Trading volumes in the equity segment have grown rapidly with average daily turnover increasing from Rs.7 crores in November 1994 to Rs.6797 crores in February 2001 with an average of 9.6 lakh trades on a daily basis. During the year 2001-2002, NSE reported a turnover of Rs.513,167 crores in the equities segment accounting for 57% of the total Indian securities market.

S&P CNX Nifty was launched in April '96.S&P CNX Nifty is a well diversified 50 stock index accounting for 23 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds.

S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialised company focussed upon the index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services.

• The total traded value of all Nifty stocks is approximately 70% of the traded value of all stocks on the NSE

• Nifty stocks represent about 59% of the total market capitalisation

• Impact cost of the S&P CNX Nifty for a portfolio size of Rs.5 million is 0.10%

• S&P CNX Nifty is professionally maintained and is ideal for derivatives trading.

The next rung of liquid securities after S&P CNX Nifty is the CNX Nifty Junior. It may be useful to think of the S&P CNX Nifty and the CNX Nifty Junior as making up the 100 most liquid stocks in India. CNX Nifty Junior was launched in December '96.

As with the S&P CNX Nifty, stocks in the CNX Nifty Junior are filtered for liquidity, so they are the most liquid of the stocks excluded from the S&P CNX Nifty. The maintenance of the S&P CNX Nifty and the CNX Nifty Junior are synchronised so that the two indexes will always be disjoint sets; i.e. a stock will never appear in both indexes at the same time. Hence it is always meaningful to pool the S&P CNX Nifty and the CNX Nifty Junior into a composite 100 stock index or portfolio.

• CNX Nifty Junior represents about 6% of the total market capitalisation

• Impact cost for CNX Nifty Junior for a portfolio size of Rs.2.50 million is 0.30%

IISL is a joint venture between the National Stock Exchange of India Ltd. (NSE) and the Credit Rating Information Services of India Limited (CRISIL). IISL has been formed with the objective of providing a variety of indices and index related services and products for the capital markets.

IISL has a consulting and licensing agreement with Standard and Poor's (S&P), the world's leading provider of investible equity indices, for co-branding IISL's equity indices.

The Securities & Exchange Board of India (SEBI) approved the report on Internet Trading brought out by the SEBI Committee on Internet Based Trading and Services In January 2000. Internet trading can take place through order routing systems, which will route client orders to exchange trading systems for execution. Thus a client sitting in any part of the country would be able to trade using the Internet as a medium through brokers' Internet trading systems.

SEBI-registered brokers can introduce Internet based trading after obtaining permission from respective Stock Exchanges. SEBI has stipulated the minimum conditions to be fulfilled by trading members to start Internet based trading and services, vide their circular no.SMDRP/POLICY/CIR-06/2000 dated January 31, 2000.

NSE became the first exchange to grant approval to its members for providing Internet based trading services. In line with SEBI directives, NSE has issued circulars detailing the requirements and procedures to be complied with by members desirous of providing Internet based trading and services.

The SEBI Committee on Internet Based Trading and Services in its meeting held on August 2, 2000 approved the minimum requirements for brokers offering securities trading through wireless medium on Wireless Application Protocol (WAP) platform.

SEBI-registered brokers who have been granted permission to provide Internet based trading services can introduce WAP trading after obtaining permission from respective stock exchanges. SEBI has stipulated the minimum conditions to be fulfilled by trading members to start Internet based trading and services, vide their circular no.SMDRP/POLICY/CIR-48/2000 dated October 11, 2000.

NSE became the first exchange to grant permission to its members for providing WAP trading services. The WAP technology has been harnessed jointly by NSE.IT and Bharti Telesoft using Bharti Telesoft's WAP interface and NSE. IT's E-broking products NeatXS/ iXS, leading to convenience of live stock trading for people on the move.

NSE launched ZCYC in September 2000 that will help in valuation of sovereign securities across all maturities irrespective of its liquidity. It aims to create uniform valuation standards in the market. The product has been developed keeping in mind the requirements of the banking industry, financial institutions, mutual funds, insurance companies, etc. that have substantial investment in sovereign papers. NSE ZCYC aims to help in improving Asset Liability Management of institutions with realistic valuations of portfolio of sovereign papers. It has been developed keeping in mind the emergence of a scientific forward curve for the market that will be useful in developing derivative products and STRIPS in the emerging scenario.

NSE commenced trading in index futures on June 12, 2000. The index futures contracts are based on the popular market benchmark S&P CNX Nifty index.

NSE introduced trading in index options on June 4, 2001. The options contracts are European style and cash settled and are based on the popular market benchmark S&P CNX Nifty index.

NSE became the first exchange to launch trading in options on individual securities. Trading in options on individual securities commenced from July 2, 2001. Option contracts are American style and cash settled and are available on 41 securities stipulated by the Securities & Exchange Board of India (SEBI).

NSE commenced trading in futures on individual securities on November 9, 2001. The futures contracts are available on 41 securities stipulated by the Securities & Exchange Board of India (SEBI).

Value-at-Risk (VaR) has been widely promoted by regulatory authorities as a way of monitoring and managing market risk and as a basis for setting regulatory minimum capital standards. The revised Basle Accord, implemented in January 1998, makes it mandatory for banks to use VaR as a basis for determining the amount of regulatory capital adequate for covering market risk beyond that required for credit risk.

NSE has taken initiative in developing a VaR system for measuring the market risk inherent in Government of India (GoI) securities. The NSE-VaR system builds on the NSE database of daily yield curves - the NSE-ZCYC is now well accepted in terms of its conceptual soundness and empirical performance, and is increasingly being used by market participants as a basis for valuation of fixed income instruments. The NSE-VaR system provides measures of VaR using 5 alternative methods - variance-covariance (normal) and historical simulation methods, together with weighted normal, weighted historical simulation and the recently developed extreme value method

An Exchange Traded Fund (ETF) is a mutual fund scheme, which combines the best features of open ended and close-ended funds. It usually tracks an index and trades like a single stock on the Stock Exchange. It is priced continually and can be bought or sold throughout the trading day. Buying / Selling ETFs is as simple as buying / selling any other stock on the exchange allowing investors to take advantage of intra-day price movements. Thus, with ETFs, one can benefit, both from, the flexibility of a stock as well as the diversification and cost efficiency of an index fund.

The increased activity in the government securities market in India and simultaneous emergence of mutual (gilt) funds has given rise to the need for a well-defined Bond Index to measure returns in the bond market. The NSE-Government Securities Index prices components off the NSE Benchmark ZCYC, so that movements reflect returns to an investor on account of change in interest rates only, and not those arising on account of the impact of idiosyncratic factors. The index is available from January 1, 1997 to the present. The index would provide a benchmark for portfolio management by various investment managers and gilt funds. It could also form the basis for designing index funds and for derivative products such as options and futures.

Salient features of the Index:

• The base date for the index is 1st January 1997 and the base date index value is 100

• The index is calculated on a daily basis from 1st January 1997 onwards; weekends and holidays are ignored.

• The index uses all Government of India bonds issued after April 1992. These were issued on the basis of an auction mechanism that imparted some amount of market-relatedness to their pricing. Bonds issued prior to 1992 were on the basis of administered interest rates.

• Each day, the prices for all these bonds are estimated off the NSE Benchmark-ZCYC for the day.

• The constituents are weighted by their market capitalisation.

• Computations are based on arithmetic and not geometric calculations

• The index uses a chain-link methodology i.e. today's values are based on the previous value times the change since the previous calculations. This gives the index the ability to add new issues and also remove old issues when redeemed.

• Coupons and redemption payments are assumed to be re-invested back into the index in proportion to the constituent weights.

• Both the Total Returns Index and the Principal Returns Index are computed.>

• The indices provided are: Composite, 1-3, 3-8, 8+ years, TB index, GS index

With a view to encouraging wider participation of all classes of investors across the country (including retail investors) in government securities, the Government, RBI and SEBI have introduced trading in government securities for retail investors.

Trading in this retail debt market segment (RDM) on NSE has been introduced w.e.f. January 16, 2003. Trading shall take place in the existing Capital Market segment of the Exchange.

In the first phase, all outstanding and newly issued central government securities would be traded in the retail segment. Other securities like state government securities, T-Bills etc. would be added in subsequent phases.

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