Till the advent of NSE, an investor wanting to transact in a security not traded on the nearest exchange had to route orders through a series of correspondent brokers to the appropriate exchange. This resulted in a great deal of uncertainty and high transaction costs. One of the objectives of NSE was to provide a nationwide trading facility and to enable investors spread all over the country to have an equal access to NSE.

NSE has made it possible for an investor to access the same market and order book, irrespective of location, at the same price and at the same cost. NSE uses sophisticated telecommunication technology through which members can trade remotely from their offices located in any part of the country. NSE trading terminals are present in 366 cities and towns all over India.

Market Timings

Trading on the equities segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the Exchange in advance). The market timings of the equities segment are:

1. Normal Market Open : 09:55 hours

2. Normal Market Close : 15:30 hours

The Closing Session is held between 15.50 hours and 16.00 hours

1. Limited Physical Market Open : 09:55 hours

2. Limited Physical Market Close : 15:30 hours

Market Segments

The Exchange operates the following sub-segments in the Equities segment

1. Rolling Settlement
   In a rolling settlement, each trading day is considered as a trading period and trades executed during the day are settled based on the net obligations for the day. Presently (since 01.04.2003) trades in rolling settlement are settled on a T+2 basis i.e. on the 2nd working day. For arriving at the settlement day all intervening holidays, which include bank holidays, NSE holidays, Saturdays and Sundays are excluded. Typically trades taking place on Monday are settled on Wednesday, Tuesday's trades settled on Thursday and so on.

2. Limited Physical Marke
   Pursuant to the directive of SEBI to provide an exit route for small investors holding physical shares in securities mandated for compulsory dematerialised settlement, the Exchange has provided a facility for such trading in physical shares not exceeding 500 shares. This market segment is referred to as 'Limited Physical Market' (small window). The Limited Physical Market was introduced on June 7, 1999.

3. Institutional Segment
   The Reserve Bank of India had vide a press release on October 21, 1999, clarified that inter-foreign-institutional-investor (inter-FII) transactions do not require prior approval or post-facto confirmation of the Reserve Bank of India, since such transactions do not affect the percentage of overall FII holdings in Indian companies. (Inter FII transactions are however not permitted in securities where the FII holdings have already crossed the overall limit due to any reason). To facilitate execution of such Inter-Institutional deals in companies where the cut-off limit of FII investment has been reached, the Exchange introduced a new market segment on December 27, 1999. The securities where FII investors and FII holding has reached the cut-off limit as specified by RBI (2% lower than the ceiling specified by RBI) from time to time would be available for trading in this market type for exclusive selling by FII clients. The cut off limits for companies with 24% ceiling is 22%, for companies with 30% ceiling, is 28% and for companies with 40% ceiling is 38%. Similarly, the cut off limit for public sector banks (including State Bank of India) is 18% whose ceiling is 20%. The list of securities eligible / become ineligible for trading in this market type would be notified to members from time to time.

4. Trade for Trade Segment
   Trading in this segment is available only for the securities

   • Which have not established connectivity with both the depositories as per SEBI directive. The list of these securities is notified by SEBI from time to time.

   • On account of surveillance action

Securities Available for Trading

The Capital Market (Equities) segment of NSE facilitates trading in the following instruments:

1. Shares

   • Equity Shares

   • Preference Shares

2. Debentures

   • Partly Convertible Debentures

   • Fully Convertible Debentures

   • Non Convertible Debentures

   • Warrants / Coupons / Secured Premium Notes/ other Hybrids

   • Bonds

3. Units of Mutual Funds

Circuit Breakers

The Exchange has implemented index-based market-wide circuit breakers in compulsory rolling settlement with effect from July 02, 2001. In addition to the circuit breakers, price bands are also applicable on individual securities.

Trading System - Market Types

The NEAT system has four types of market. They are:

1. Normal Market
   All orders which are of regular lot size or multiples thereof are traded in the Normal Market. For shares that are traded in the compulsory dematerialised mode the market lot of these shares is one. Normal market consists of various book types wherein orders are segregated as Regular lot orders, Special Term orders, Negotiated Trade Orders and Stop Loss orders depending on their order attributes.

2. Odd Lot Market
   All orders whose order size is less than the regular lot size are traded in the odd-lot market. An order is called an odd lot order if the order size is less than regular lot size. These orders do not have any special terms attributes attached to them. In an odd-lot market, both the price and quantity of both the orders (buy and sell) should exactly match for the trade to take place. Currently the odd lot market facility is used for the Limited Physical Market as per the SEBI directives.

3. Auction Market
   In the Auction Market, auctions are initiated by the Exchange on behalf of trading members for settlement related reasons. There are 3 participants in this market.

   1. Initiator - the party who initiates the auction process is called an initiator

   2. Competitor - the party who enters orders on the same side as of the initiator

   3. Solicitor - the party who enters orders on the opposite side as of the initiator

4. Spot Market
   Spot orders are similar to the normal market orders except that spot orders have different settlement periods vis-à-vis normal market. These orders do not have any special terms attributes attached to them. Currently the Spot Market is not in use.

Trading System - Order Books

The NSE trading system provides complete flexibility to members in the kinds of orders that can be placed by them. Orders are first numbered and time-stamped on receipt and then immediately processed for potential match. Every order has a distinctive order number and a unique time stamp on it. If a match is not found, then the orders are stored in different 'books'. Orders are stored in price-time priority in various books in the following sequence:

Best Price
Within Price, by time priority.

Price priority means that if two orders are entered into the system, the order having the best price gets the higher priority. Time priority means if two orders having the same price are entered, the order that is entered first gets the higher priority.

The Equities segment has following types of books:

1. Regular Lot Book
   The Regular Lot Book contains all regular lot orders that have none of the following attributes attached to them.

   • All or None (AON)

   • Minimum Fill (MF)

   • Stop Loss (SL)

2. Special Terms Book
   The Special Terms book contains all orders that have either of the following terms attached:

   • All or None (AON)

   • Minimum Fill (MF)
     Note: Currently, special term orders i.e. AON and MF are not available on the system as per the SEBI directives

3. Negotiated Trade Book
   The Negotiated Trade book contains all negotiated order entries captured by the system before they have been matched against their counterparty trade entries. These entries are matched with identical counterparty entries only. It is to be noted that these entries contain a counterparty code in addition to other order details.

4. Stop-Loss Book
   Stop Loss orders are stored in this book till the trigger price specified in the order is reached or surpassed. When the trigger price is reached or surpassed, the order is released in the Regular lot book

The stop loss condition is met under the following circumstances:

• Sell order
  A sell order in the Stop Loss book gets triggered when the last traded price in the normal market reaches or falls below the trigger price of the order.

• Buy order
  - A buy order in the Stop Loss book gets triggered when the last traded price in the normal market reaches or exceeds the trigger price of the order.

• Odd Lot Book
  The Odd lot book contains all odd lot orders (orders with quantity less than marketable lot) in the system. The system attempts to match an active odd lot order against passive orders in the book. Currently, pursuant to a SEBI directive, the Odd Lot Market is being used for orders that have quantity less than or equal to 500 viz. the Limited Physical Market

• Spot Book
  The Spot lot book contains all spot orders (orders having only the settlement period different) in the system. The system attempts to match an active spot lot order against the passive orders in the book. Currently the Spot Market book type is not in use.

• Auction Book
  This book contains orders that are entered for all auctions. The matching process for auction orders in this book is initiated only at the end of the solicitor period.

Trading System - Order Matching Rule

The best buy order is matched with the best sell order. An order may match partially with another order resulting in multiple trades. For order matching, the best buy order is the one with the highest price and the best sell order is the one with the lowest price. This is because the system views all buy orders available from the point of view of a seller and all sell orders from the point of view of the buyers in the market. So, of all buy orders available in the market at any point of time, a seller would obviously like to sell at the highest possible buy price that is offered. Hence, the best buy order is the order with the highest price and the best sell order is the order with the lowest price.

Members can proactively enter orders in the system, which will be displayed in the system till the full quantity is matched by one or more of counter-orders and result into trade(s) or is cancelled by the member. Alternatively, members may be reactive and put in orders that match with existing orders in the system. Orders lying unmatched in the system are 'passive' orders and orders that come in to match the existing orders are called 'active' orders. Orders are always matched at the passive order price. This ensures that the earlier orders get priority over the orders that come in later.