IT (INFORMATION TECHNOLOGY) IN STOCK EXCHANGE A PROJECT SUBMITTED TO THE UNIVERSITY OF MUMBAI FOR THE DEGREE OF BACHEOLAR OF MANAGEMENT STUDIES

In the partial fulfillment of the requirement of the course BY TUSHAR DILIP PARAB

UNDER THE SUPERVISION OF PROF. PRATHAMA NEMANE

DEPARTMENT OF BMS D.G. RUPAREL COLLEGE MUMBAI – 400016

JANUARY, 2012

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STATEMENT BY THE CANDIDATE I, Tushar dilip parab, wish to state that the work embodied is this project entitled “IT in stock exchange” is carried out under the supervision of prof. Prathama nemane, department of B.M.S., D. G. Ruparel College, Mumbai. This work has not been submitted for any other degree of this or any other universities.

(PROF. PRATHAMA NEMANE)

(TUSHAR DILIP PARAB)

(DR. PRAKASH SALVI) (CO-ORDINATOR, B.M.S.)

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ACKNOWLEDGEMENT
I feel deeply in debted towards people who have guided me in this project. It would have not been possible to make such an extensive report without their help and guidance. I would firstly like to express my gratitude towards my guide “Prof. Prathama nemane.” for having shown so much of flexibility in guiding and always encouraged me. She helped me in deciding the project topic. She showed a lot of openness in her approach and I would like to thank her for her support in a way that has lead to proper & effective learning. Last but not least I am grateful to all my family members & my friends for being my side always. Without their help and Motivation it would have been impossible to complete my project.

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INDEX Chapt er 1 2 3 TITLE Introduction to stock exchange. Technology at stock exchange. i) ii) iii) NSE. Bibliography 44 45 55 56 61 62 64 65 66 67 68 -4– .17 18 19 – 32 33 39 40 4 5 6 7 8 9 A successful trading architecture. SEBI. Future outlook.10 11. BSE. Financial market. 6 . Changing scenario/benefits Adverse impact of IT on stock exchange. Pg no. Conclusion.

INFORMATION TECHNOLOGY IN STOCK EXCHANGE -5– .

on made industry many to emphasis for on information and challenges different countries. change the competitive criterion in stock exchange industry. stock organizations like commercial firms going to adapt with new environment via IT. lead to IT appearance beside of expansion of telecommunication infrastructures. Increasing the development of computer technology. Changing approach of global business from concentration knowledge. IT as one of the new human technologies not only affected by deep transformations but also it is affecting on human life patterns quickly and it is an important growth factor and a device of other sectors too. Now. and revenue maximizing. particularly for developing countries. it would lead us to have no status in the future. Under this circumstance. due to compete in augmentation of market share and etc. stabilization and reinforcement of market and governmental organization. cost minimizing. investment in national economy to reach micro-economical and macro-economical goals has an obvious role. also transformation in technology and inspecting environment. stock exchange in advanced countries is the core of investment and every year conduct too much wandering -6– . Consequently.INTRODUCTION Increase of consistency. changes in organizational structure and establish strategic alliances. The plans of other countries show that effects of IT are too deep and if we ignore it.

The following study is an attempt to study the impact of information technology perspective. increasing the importance of IT prospective world and effective and efficient usage of IT in stock exchange. The growth in technology and communications has impacted every aspect of our business in some or the other form. may be progress and advantage key in future stock market and realization of national goals. Dematerialization is perhaps the single most important factor that has changed every aspect of working of a stock market. with an Indian -7– . The stock market is one such institution whose very existence has been challenged by the growth in information technology. These effects are enduring and have changed the very way in which business is carried out. cash and market efficiency. Therefore. financial departments emphasize on applying IT and global trading. Recently. IT has turned the very idea of a stock market on its head. on the stock market. The study starts with an assessment of the impact of dematerialization on the stock markets.capital to active and generative units of society like production and service units. this study investigates the advanced IT application on stock exchange on market characteristics like trade volume. outcome instability. Regarding of stock exchange role in structure improvement and economical development. Next we examine the impact IT has on the revenue and cost models of the stock exchange.

It was an association of brokers. Each sub broker in the chain mark-up in the price and the investors thus had to pay a much higher price than the actual traded price. accessed market liquidity. As with all trading floors there was no price time priority. Through a chain of intermediaries called ‘sub-broker’. Trading took place by ‘open out cry’ on the trading floor which was inaccessible to users. This means that the trading was supposed to take place for a fortnight until a predetermined ‘expiration date’. Retail brokers and particularly users of the market outside Mumbai. No strict actions could be taken against errant brokers. and imposed entry barriers. It was usual for the brokers to charge the investors a much higher price for that actually traded at. so users of the market were not assured that the trade was executed at the best possible price.We also examine IT-enabled linkages between exchanges and also have a look at RTGS (Real time Gross settlement). PRE-REFORM PHASE:As of 1992 the Bombay stock exchange ltd was a monopoly. The market used ‘future style settlements’ with fortnightly settlements. so that external users of the market often found themselves at the losing end of the price movements. A variety of manipulative practices prevailed. -8– . which led to increased cost of intermediation.

production. companies with each others. IMPORTANCE OF STOCK EXCHANGES Financial institutions increasingly use technology to operation smoothing. more efficiently.A peculiar market practice called Badla allowed brokers to carry positions across settlements periods. clearing. risk reduction decreasing the cost of deals. News transmission highways. -9– . and at last companies and governments. peoples with each others. service development and improvement. private investors rate the internet in the first place as a source of information for investing. These institutions transfer and distribute the risk by using service information networks facilities. In other words even open positions at the end of the fortnightly settlements cycle. and engaged in business operations by visiting different websites. Using electronic networks to data. because people can study annual reports of companies and analysis of analyst. commercial and service activities. goods and etc. is called electronic financial services. citizens and governments. and settlements were done bilaterally which introduced further inefficiencies and costs. The efficiencies of the exchange clearing house only applied for the largest 100 stocks. adopt specifications stock. According to National Association In Capitalization (NAIC) comment. service and money exchanging between people (consumers) and companies. For other stocks. internet. is one of the most efficient and useful computer networks in the world that many different activities can be performed in it and it has many facilities. Network establishing has been developed by reaching one of the important IT goals: quick and communal access to information resources.

. but also major events that have an impact on the working of the company.A lot has been written about the relevance and importance of stock exchanges in the economy. However. at the cost of repetition. some salient points are highlighted here. One of the key advantages is that stock exchanges are an efficient medium for raising resources and channeling savings from the public by way of issue of equity / debt capital by joint stock companies listed on the stock exchanges. The second main benefit is the wide dispersal of information and the need to disclose adequate information — not only the quarterly or year-end financial results.10 – .

It facilitates this function by acting as an intermediary between the borrowers and lenders of money. Now you think. how these two groups meet and transact with each other. So. financial institutions and other intermediaries who are linked by a formal trading rules and communication network for trading the various financial assets and credit instruments. The financial markets act as a link between these two different groups. one who invest money or lend money and the others. we find two different groups. who borrow or use the money. money always flows from surplus sector to deficit sector. Similarly. in business sectors the surplus money flows from the investors or lenders to the businessmen for the purpose of production or sale of goods and services. directing a certain person to pay a certain sum of money only to or to the order of a certain . financial market may be defined as ‘a transmission mechanism between investors (or lenders) and the borrowers (or users) through which transfer of funds is facilitated’. It consists of individual investors. So. signed by the maker. Before reading further let us have an idea about some of the credit instruments:A bill of exchange is an instrument in writing containing an unconditional order.FINANCIAL MARKET We know that.11 – . That means persons having excess of money lend it to those who need money to fulfill their requirement.

signed by the maker. or to the bearer of the instrument. This type of a document is called a Promissory Note. Gopal also has to give some money to Madhu. duly stamped and handed over to Jagan. 20. becomes a negotiable instrument. Suppose Gopal has given a loan of Rs.000 from your friend Jagan.000 to Madhu on demand or after expiry of a specified period. This document is called a bill of exchange. a. The India Money Market has come of age in the past two decades. You can make a document stating that you will pay the money to Jagan or the bearer on demand. This document. In order to study the money market of India in detail. Or you can mention in the document that you will pay the amount after three months. 50. Now. A promissory note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking.12 – . He can endorse it in somebody else’s name who in turn can endorse it further till the final payment is made by you to whosoever presents it before you. which can be transferred to some other person’s name by Madhu. Suppose you take a loan of Rs. which Madan has to return. we at first need to understand the parameters . MONEY MARKET:The money market is a mechanism that deals with the lending and borrowing of short term funds. To clarify the meaning let us take an example. Gopal can make a document directing Madan to make payment up to Rs.person. The financial markets can broadly be divided into money and capital market. Now Jagan can personally present it before you for payment or give this document to some other person to collect money on his behalf. once signed by you. 50.000 to Madan. to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument. In this case.

Though the money market is free from interest rate ceilings. It is due to this disparity between the opposite forces that is prevalent in the money market in India that a well defined income path cannot be traced. Money market is a market for debt securities that pay off in the short term Usually less than one year. This market encompasses the trading and issuance of short term non equity debt instruments including treasury bills. bankers acceptance.13 – . In this market. certificates of deposits. The lenders of funds include the individual investors. banks and special industrial financial institutions. CAPITAL MARKETS Capital market is a market where long term funds can be raised either through issue of securities or by borrowing from certain institutions short term funds can also be borrowed from various agencies.around which the money market in India revolves. Capital market is a market for long-term debt and equity shares. The performance of the Indian Money Market is heavily dependent on real interest rate that is the interest rate that is inflation adjusted. commercial papers. Apart from the call market rates. etc. for example the market for 90-days treasury bills. the . b. Thus business units can raise capital from issue of securities and borrowings (long term and short-term). the institutional investors. the other interest rates in the Indian Money Market usually do not change in the short run. structural barriers and other institutional factors can be held responsible for creating distortions in India Money Market.

This also includes private placement sources of debt and equity as well as organized markets like stock exchanges. You know that companies make fresh issue of shares and/or debentures at their formation stage and. Primary markets or the new issue market is also called the IPO (initial . relatives and financial institutions or by making public issue. You must have learnt about many initial public offers (IPOs) made recently by a number of public sector undertakings such as ONGC. etc. Primary markets:The Primary Market consists of arrangements.capital funds comprising of both equity and debt are issued and traded. who form an integral part of the primary market. GAIL. i. It is usually done through private placement to friends. the companies have to follow a well-established legal procedure and involve a number of intermediaries such as underwriters. NTPC and the private sector companies like Tata Consultancy Services (TCS). Biocon. brokers. subsequently for the expansion of business. Capital market can be further divided into primary and secondary markets.14 – . Jet-Airways and so on. which facilitate the procurement of long term funds by companies by making fresh issue of shares and debentures. In any case. if necessary.

For the management of the company. Money is raised in the primary market for long term needs in the form of shares or debentures.15 – . Majority of the trading is done in the secondary market. Difference between primary market and secondary market: The main points of distinction between the primary market and secondary market are as follows: 1. and aggregating information (via price discovery) that guides management decisions. Secondary equity markets serve as a monitoring and control conduit—by facilitating value-enhancing control activities. the secondary market provides an efficient platform for trading of his securities. For the general investor. ii. Secondary market comprises of equity markets and the debt markets. Secondary Markets Secondary Market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange.public offering) market. Function : While the main function of primary market is to raise long-term funds . enabling implementation of incentive-based management contracts.

4.through fresh issue of securities.16 – . 3. there is no such requirement in case of primary market. the major players in secondary market are all of these and the stockbrokers who are members of the stock exchange. mutual funds. the main function of secondary market is to provide continuous and ready market for the existing long-term securities. underwriters and individual investors. Reasons of applying electronic financial services in are: a) Quick development of electronic exchanges: . which have been approved for the purpose (listed). Listing Requirement: While only those securities can be dealt with in the secondary market. the price of the securities is determined by forces of demand and supply of the market and keeps on fluctuating. Determination of prices: In case of primary market. Participants: While the major players in the primary market are financial institutions. the prices are determined by the management with due compliance with SEBI requirement for new issue of securities. But in case of secondary market. 2.

especially in new markets. Therefore. c) Government role in modification of financial sector: Government interference in financial sector usually has not enough efficiency to State ownership of banks. and to increases the risk of financial crisis appearance. Normal level of capital establishment for partnership in international markets increased from 5 billion dollar in 1990to 30 billion dollar in 2000.The portion of stocks that exchanged by direct electronic exchange in industrial countries has reached 90% from 28% in 2007. supervisory role of government becomes basic and coordinator. e) Ensures transparency in exchange of stocks: . This quick development of electronic services is an evidence of importance of it. d) Globalization of investment and stock exchange process: IT causes capital establishment and stock exchanging transferred to the international financial centers. to prevent development of financial sector. This management method is always failed or leads to support special group's benefits and finally results augmentation in financial supplying costs in economy.17 – . b) Intense change in financial structure and nature: Electronic financial services by inputting external suppliers with internal supplier’s causes cost reduction and augmentation of competition in this sector. Result of these matters is intense augmentation of capital establishment and stock exchanging contribution.

all share index. The importance of Information Technology on the capital market would not be complete without a mention of the internet boom as communication with stockbrokers and shareholders have improved so also information like market capitalization. INTRODUCTION OF TECHNOLOGY IN STOCK EXCHANGES .18 – . are all available.Information technology can be said to be the Messiah of the stock exchange because it has helped to curb a lot of fraudulent schemes from dubious stock brokerages and issuing houses as well as providing a transparent and more efficient mode of operation for this gold mining sector. bulls and bears. This Messianic effect can be seen from the changes that have occurred in the recent past. value and volume of stock traded.

management and trading in the hands of three different sets of people. The use of satellite Communication technology for trading using Very Small Aperture Terminals (VSATs) enabled NSE to rapidly expand across the length and breadth of the country. now re-christened Mumbai. market practices. Now the exchange plans to demutualise and convert itself into a corporate entity. with management clearly separated from ownership. The NSE has been playing a catalytic role and has significantly contributed to the reforming of the secondary markets in India in terms of microstructure. Till recently. the exchange was broker-managed. Mumbai) and more recently the National Stock Exchange of India (NSE) are both headquartered in Mumbai. . The Bombay Stock Exchange (BSE LTD . after BSE LTD was granted the required site permissions.The city of Bombay. the exchange has been demutualised. trading volumes and use of state-of-theart technology. high levels of transparency and faster settlement cycles. now known as The Stock Exchange. with the owners’ Hip. has always been the financial capital of India. Subsequently. BSE LTD was established in 1875 and is the oldest in Asia. BSE LTD was formed as "The Native Share and Stockbrokers Association" (a voluntary non-profit association). it expanded its trading facilities to the remote corners of the land. The NSE was established as a corporate body in 1993 with the primary objectives of ensuring nationwide electronic trading.19 – . Since inception. It has evolved over the years into its present status as one of the two leading stock exchanges in India.

located in Bombay. dematerialization and electronic transfer of securities. clearing and settlement mechanism. government security and . The National Stock Exchange (NSE). is India's first debt market. securities lending and borrowing. fully automated screen-based trading system with national reach.INTRODUCTION OF NATIONAL STOCK EXCHANGE (NSE) The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern. professionalization of trading members. compression of settlement cycles. finetuned risk management systems. It was recently accorded recognition as a stock exchange by the Department of Company Affairs. market practices and trading volumes. treasury bills. speed & efficiency. safety and market integrity. demutualization of stock exchange governance. The instruments traded are. emergence of clearing corporations to assume counterparty risks. The market today uses state-of-art information technology to provide an efficient and transparent trading. It opened for trading in mid-1994. It has set up facilities that serve as a model for the securities industry in terms of systems. The Exchange has brought about unparalleled transparency. market of debt and derivative instruments and intensive use of information technology. and has witnessed several innovations in products & services viz. screen based trading. It was set up in 1993 to encourage stock exchange reform through system modernization and competition. practices and procedures. NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure.20 – .

bonds issued by public sector companies. On the Wholesale Debt Market segment.21 – . MEMBERSHIP 1026 trading members on the Capital Market segment. of which around 86% account for corporate. 1997. Of the 470 securities listed. all of which account for corporate. . 267 are Government Securities. GEOGRAPHIC DISTRIBUTION Over 2600 trading terminals Over 1500 VSAT’s across the country with a 24 hour Network monitoring system in over 160 cities as of December 31st. 600 securities are listed and 762 securities are permitted to trade as of December 31st. 1997. 470 securities are listed and 369 securities are permitted to trade as of December 31st. NUMBER OF COMPANIES On the Capital Market segment. and the remaining individuals and firms. The number of members trading on the exchange has been on a steady increase. (Out of these 113 trading members. 1997. T-Bills and the balance account for other securities. helping integrate the national market and providing a modern system with a complete audit trail of all transactions. 113 trading members on the Wholesale Debt Market segment. 106 are members of the Capital Market segment also and are included in the 1026 members indicated above).

32. ’97 the number of trades reached a record high of 2.5.185.44 lakhs in December-97.3.61 crores recorded on 26th June-97. • Number of shares traded has increased from 76.36.60 crores in November -94 to Rs. . • Number of shares traded (depository segment) has increased from 200 shares in December -96 to 1.000 trades per day to more than 10.008 crores in December -97.00.21 lakhs in December-97. • Net traded value has increased from Rs.102 shares in December-97.0.783 trades in November 97. On August 7.125 crores in November -94 to Rs.43 lakhs in December -96 to Rs.10 lakhs in November-94 to 11.7 crores in November-94 to more than Rs. 1480 crores in December-97 with a high of Rs.48. • Net traded value (depository segment) has increased from Rs.549 crores in December-97.19. • Average daily traded value has increased from Rs.00. • The average daily numbers of trades have gone up from over 893 trades in November-94 to over 1.22 – . • Delivered value (settlement wise) has increased from Rs.148.411 which makes NSE one of the largest stock exchanges in the world.000 trades per day.080.CAPITAL MARKET OPERATIONS • NSE is working to increase the capacity of the trading system from the present 4.

Market share of cities other than five metros (Mumbai, Delhi, Calcutta, Chennai & Ahmedabad) which was about 16% in first quarter of 1996 grew to as high as 24% during the last quarter of 1997.

The ratio of contribution to turnover from Non Stock Exchange centres to Stock Exchange centres has risen from 0.36% in first quarter (Jan to Mar) of 1996 to over 10% in fourth quarter of 1997.

The market capitalization of companies has increased from Rs. 292637 crores in November'94 to Rs. 4571663 crores in February'98.

NSE STRUCTURE
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NSE STRUCTURE

CURRENT WORKING OF THE NATIONAL STOCK EXCHANGE (NSE)

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The trading on stock exchanges in India used to take place through open outcry without use of information technology for immediate matching or recording of trades. This was time consuming and inefficient. This imposed limits on trading volumes and efficiency.

In order to provide efficiency, liquidity and transparency, NSE introduced a nation-wide on-line fully-automated screen based trading system (SBTS) where a member can punch into the computer quantities of securities and the prices at which he likes to transact and the transaction is executed as soon as it finds a matching sale or buy order from a counter party.

SBTS electronically matches orders on a strict price/time priority and hence cuts down on time, cost and risk of error, as well as on fraud resulting in improved operational efficiency.

It allows faster incorporation of price sensitive information into prevailing prices, thus increasing the informational efficiency of markets.

It enables market participants, irrespective of their geographical locations, to trade with one another simultaneously, improving the depth and liquidity of the market.

It provides full anonymity by accepting orders, big or small, from members without revealing their identity, thus providing equal access to everybody.

It also provides a perfect audit trail, which helps to resolve disputes by logging in the trade execution process in entirety. This sucked liquidity from other exchanges and in the very first year of its operation, NSE became the leading stock exchange in the country, impacting the fortunes of other exchanges and forcing them to adopt SBTS also. - 25 –

26 – . NSE carried the trading platform further to the PCs at the residence of investors through the Internet and to handheld devices through WAP for convenience of mobile investors. Technology was used to carry the trading platform from the trading hall of stock exchanges to the premises of brokers. This made a huge difference in terms of equal access to investors in a geographically vast country like India.Today India can boast that almost 100% trading take place through electronic order matching. TRADING NETWORK: .

a message is broadcast to the respective member. An investor informs a broker to place an order on his behalf.27 – . which runs under Windows NT and sends signal to the Satellite via VSAT/leased line/modem. On order matching. All orders received on the system are sorted with the best priced . The order confirmation message is immediately displayed on the PC of the broker. The main computer runs on a fault tolerant STRATUS mainframe computer at the Exchange. The broker enters the order through his PC. A message relating to the order activity is broadcast to the respective member.The trading network is depicted in the above figure. NSE has main computer which is connected through Very Small Aperture Terminal (VSAT) installed at its office. Brokers have terminals installed at their premises which are connected through VSATs/leased lines/modems. The signal is directed to mainframe computer at NSE via VSAT at NSE's office. This order matches with the existing passive order(s). The trading system operates on a strict price time priority. otherwise it waits for the active orders to enter the system.

The trading system also provides complete market information on-line. Stock exchanges all over the world have realized the potential of IT and have moved over to electronic trading systems. communication and network technologies have created paradigm shifts in the securities market operations. bring about innovations in products and services. till a fresh order comes in or the earlier order is cancelled or modified. etc. Investors can also know the fate of the orders almost as soon as they are placed with the trading members. which are cheaper. the high and the low. objective and fair. Technology has enabled organizations to build new sources of competitive advantage.e. The trading system provides tremendous flexibility to the users in terms of kinds of orders that can be placed on the system. the last traded price. the one that came in early gets priority over the later one.28 – . the best buy orders match with the best sell order. Orders are matched automatically by the computer keeping the system transparent. price-related (buy/sell limit and stop loss orders) or volume related (all or none. TECHNOLOGY AT NSE:Across the globe. etc) conditions can be easily built into an order. The market screens at any point of time provide complete information on total order depth in a security. immediate or 9 cancel). minimum fill. and to provide for new business opportunities. have wider reach and provide a better mechanism for trade and post trade execution. i. the quantity traded during the day in that security. developments in information.order getting the first priority for matching i. Similar priced orders are sorted on time priority basis.. Several time-related (good till cancelled. it remains in the system and is displayed to the whole market. . Where an order does not find a match.e. the five best buys and sells available in the market. good till day.

IT. Currently more than 9000 users are trading on the real time-online NSE application.29 – . It uses satellite communication technology to energize participation from around 320 cities spread all over the country.network is the largest private wide area network in the country and the first extended C. NSE's IT set-up is the largest by any company in India.NSE believes that technology will continue to provide the necessary impetus for the organization to retain its competitive edge and ensure timeliness and satisfaction in customer service. operational under one roof to support the NSE applications. in October 1999. In recognition of the fact that technology will continue to redefine the shape of the securities industry. NSE stresses on innovation and sustained investment in technology to remain ahead of competition. There are over 15 large computer systems which include non-stop fault-tolerant computers and high end UNIX servers. This is expected to provide a platform for taking up new IT assignments both within and outside India and attaining global exposure. Today it supports more than 3000 VSATs. a corporate network has been implemented. This coupled with the nation wide VSAT network makes NSE the country's largest Information Technology user. With upgradation of trading hardware. capacity enhancement measures were taken up in regard to the trading systems so as to effectively meet the requirements of increased users and associated trading loads. NSE can handle up to 6 million trades per day in Capital Market segment. connecting all the offices . NSE. NSE is one of the largest interactive VSAT based stock exchanges in the world. In the recent past. The NSE.Band VSAT network in the world. NSE set up a separate company. In order to capitalize on in-house expertise in technology. In an ongoing effort to improve NSE's infrastructure.

In keeping with the current trend. Delhi. . This corporate network enables speedy inter-office communications and data and voice connectivity between offices. Calcutta and Chennai. Currently.nseindia.30 – . NSE is displaying its live stock quotes on the web site (www. Apart from having a 2mbps link to VSNL and our own domain for internal browsing and e-mail purposes. NSE has gone online on the Internet.com) which are updated online. we have also set up our own Web site.at Mumbai.

TELECOMMUNICATIONS NETWORK AT NSE Telecommunication Network of NSE .31 – .

25 is designed to operate effectively regardless of the type of systems connected to the network.25 protocol (an International Standardization Telecommunication Sector (ITU-T) Union-Telecommunication standard for WAN protocol communications that defines how connections between user devices and network devices are established and maintained).25 standard was initiated by the common carriers in the 1970s. It is typically used in the packet-switched networks (PSNs) of common carriers. At that time. optical-fibre links.32 – . The telecommunications network uses X. The WDM participants connect to the trading system through dial-up links.25 is now administered as an international standard by the ITU-T. The development of the X. there was a need for WAN protocols capable of providing connectivity across public data networks (PDNs).NSE uses satellite communication technology through VSAT’s to energize participation from around 400 cities spread all over the country. X. X. such as the telephone companies. . These leased lines are multiplexed using dedicated 2 MBPS.25: IS an International Telecommunication UnionTelecommunication Standardization Sector (ITU-T) protocol standard for WAN communications that defines how connections between user devices and network devices are established and maintained. Subscribers are charged based on their use of the network. It is the backbone of the automated trading system. NSE can handle up to 1 million trades per day. X. The trading members on the Wholesale Debt Market segment are linked to the central computer at the NSE through dedicated 64Kbps leased lines and VSAT terminals.

25 is an ITU-T standard protocol that defines how connections between user devices and network devices are established and maintained. X. X.21bis.SUMMARY: X. which maps to the network layer LAPB.703. EIA/TIA-232. EIA-530. which map physical layer to the . and that operates effectively regardless of the type of systems connected to the network. which map to the bottom three layers of the OSI reference model: • • • PLP.33 – . DCEs.25 devices include DTEs. and PSNs.25 connections contain both SVCs and PVCs within the physical circuit. which maps to the data link layer X. EIA/TIA-449. X.25 uses the following three protocols. and G.

the trading rights and ownership rights have been de-linked effectively addressing concerns regarding . The 'Due Date' for taking over the business and operations of the BSE LTD. by the Exchange was fixed for 19th August. With demutualization.Bombay Stock Exchange Limited received its Certificate of Incorporation on 8th August. under the Scheme. 2005 and Certificate of Commencement of Business on 12th August.34 – . 2005. 2005 Bombay Stock Exchange Limited (the Exchange) is the oldest stock exchange in Asia with a rich heritage. 1956. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act. SENSEX. the Exchange is now a demutualised and corporatized entity incorporated under the provisions of the Companies Act.INTRODUCTION OF BOMBAY STOCK EXCHANGE (BSE) THE BSE LTD (CORPORATISATION AND DEMUTUALISATION) SCHEME.The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index. 2005. it was established as "The Native Share & Stock Brokers Association" in 1875. 1956. 2005 notified by the Securities and Exchange Board of India (SEBI). pursuant to the BSE LTD (Corporatization and Demutualization) Scheme. Popularly known as "BSE LTD ". The Exchange has succeeded the business and operations of BSE LTD on going concern basis and its recognition as an Exchange has been continued by SEBI. Earlier an Association of Persons (AOP). is tracked worldwide.

The systems and processes of the Exchange are designed to safeguard market integrity and enhance transparency in operations. DIDS was commissioned in November. 1992 to . The BSE LTD’s On Line Trading System (BOLT) is a proprietary system of the Exchange and is ISO-27001 certified. and The real conflicts of interest. The Board is inclusive and is designed to benefit from the participation of market intermediaries.perceived Directors. debt instruments and derivatives.35 – . the Board formulates larger policy issues and exercises over-all control. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified. The committees constituted by the Board are broad-based. The day-to-day operations of the Exchange are managed by the Managing Director & CEO and a management team of professionals. the trading volumes on the Exchange showed robust growth. The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. BSE LTD computerized its trading and settlement activities by following a three phased approach. The Exchange is professionally managed under the overall direction of the Board of Board comprises eminent professionals. Phase I: The primary objective of this phase was the real time dissemination of price data through the Display Information Driver System (DIDS). BSE THREE PHASED APPROACH. During the year 2004-2005. The Exchange provides an efficient and transparent market for trading in equity. representatives of Trading Members and the Managing Director of the Exchange. In terms of organization structure.

36 – . The BOLT system was commissioned with the Himalaya K 10. actual rates of transactions and indices on a real time basis.disseminate bids. The system provides for a response time of two seconds and can handle more than two hundred thousand trades in a day . Since then the hardware has been upgraded to the Himalaya K 20. offers.000 system. Phase III: Commissioned on March 14. by the 70th day of its commissioning. all scripts-exceeding 5000 had been put on the BOLT system.000 central trading computer hardware. 1995. settlement related daily transactions inputs and outputs were uploaded and downloaded from the TWS in the broker’s offices. Although. screen based trading started with 818 scrip’s. Phase II: In 1994.

To facilitate smooth transaction. The BOLT platform capacity has been enhanced to 70 lakhs orders per day by upgrading the hardware. BSE LTD had replaced its open outcry system with BSE LTD On-line Trading (BOLT) facility in 1995. 'Operations & Trading Department' continuously upgrades the hardware. thus enabling the Exchange to enhance the quality and standard of service provided to its members and other market intermediaries. The . BOLT has been certified by DNV for conforming to ISO27001 security standards.com.TECHNOLOGY AT BSE LTD BSE LTD places great deal of emphasis on Information Technology to strengthen its functioning and performance. This totally automated screen based trading in securities was put into practice nation-wide within a record time of just 50 days.37 – . software and networking systems. Exchange has also introduced the world's first centralized exchange based Internet trading system. BSE LTD WEBx.

com provides comprehensive information on the stock market. WAN set up within Mumbai and across some major metros in India and VSAT set up across the country. Leased MLLN circuits from MTNL / BSNL are provided with ISDN / TTML leased circuit backup. BSE LTD 's team of experts and professionals. Real time data dissemination . BSE LTD’s Campus LAN covers around 350 member offices across three BSE LTD buildings P.J.system . BSE LTD WAN setup connects approximately 2000 member offices within Mumbai and some major metros to BSE LTD systems. Around 300 circuits are of 2Mbps capacity and rests all are of 64Kbps capacity. Unique Client Code registration (UCC). Electronic Contract Notes (ECN).Data feed. which uses full transponder on INSAT 3B satellite to cater to roughly 2000 locations in over 400 cities across the country? . BSE LTD’s website www. along with its strategic partners have put into place several critical systems such as Derivatives Trading & Settlement System (DTSS). In year 2000 BSE LTD set up its own VSAT Master Earth Station (HUB).Towers.bseindia. Integrated Back office System CDB / IDB. BSE LTD also operates one of the largest private networks in India. It is one of the most popular financial websites in India and is regularly visited by financial organizations and other stakeholders for updates. Book Building System (BBS) & Reverse Book Building System (RBBS) etc. Rotunda and Cama building. comprising campus LAN.initiative enables investors anywhere in the world to trade on the BSE LTD platform.38 – .

Settlement. Chandigarh.39 – . The system enables the Exchange to detect market abuses at a nascent stage. It uses Integrity Non-stop systems for its online trading systems (BOLT). Pune and Rajkot provide cost-effective reliable services to members. Ludhiana. There are powerful RISC based Unix severs rp8420 from hp for our Derivatives. Delhi.Integrated (BOSS – I ). The trading and settlement activities of the member-brokers are closely monitored through On-line Real Time System known as BSE LTD Online Surveillance System (BOSS). The regional technology hubs are commissioned in Ahmedabad. The systems are facilitated by the use of the robust and high available storage subsystems from hp. Back office. Currently. Jaipur. The systems have been designed to deliver the best performance without compromising on key factors of availability. Hyderabad. Kolkata.Regional Hubs for local fan out of leased lines within Metros backed by high availability trunk backbone to BSE LTD. ROI and TCO. RBBS and other systems related to trading / non-trading and related functionalities. Chennai. We use one of the most powerful Intel blade servers for our Internet based trading system (ITS) enabling the end user to carry out the trading activities from any location facilitated by the internet. . Data feed. Bangalore. BSE LTD is in the process of evolving an integrated system for online surveillance of Cash and Derivatives Segment through BSE LTD Online Surveillance System . Indore. BBS. scalability. improve the risk management system and strengthen the self-regulatory mechanisms. BSE LTD uses higher end fault tolerant systems for its trading and related functionalities.

. one of the best portals on information related to capital markets. BSE LTD strictly adheres to IS policies and IS Security policies and procedures for its day to day operational activities on 24 x 7 bases which have enabled us to achieve the ISO27001 certification.We also use Intel blade servers for BSE LTD india. In addition.99%.40 – . BSE LTD has also been successful in maintaining systems and processes uptime of 99.com web site.

Following the recommendations of this committee the capital issues (control) act 1947.41 – . In a fast evolving environment. was repealed in May 1992 and SEBI was made the regulatory authority in regard to new issue of companies. An amendment to the SEBI act 1992 carried out on march 25. the speedy and effective communication between the SEBI’s own departments at Mumbai and its regional offices spread throughout the country are critical prerequisites for quick and timely response.SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) The securities and exchange board of India (SEBI) was set up in 1988 was given statuary recognition in 1992 on recommendations of the Narsimha Committee. The SEBI is in the process of implementing an organizationwide database from which individual officers would draw information to facilitate their day to day work. 1995 has empowered SEBI to register and regulate new intermediaries in the capital market. To achieve this objective it is necessary to network all the computers in a manner . With this empowerment all intermediaries associated with the securities market are now regulated by SEBI ADOPTION OF TECHNOLOGY BY SEBI: • AUTOMATION :The underlying philosophy for the SEBI’s information technology strategy is to equip its officers with an electronic office wherein the required information is readily available at their desktop itself.

42 – . press releases and investor related information. These servers are equipped with fault tolerant and security features to ensure uninterrupted and controlled access. guidelines relating to SEBI. the entire computing infrastructure was upgraded during the previous year with the introduction of 250 "Pentium" workstations.in.sebi.com. officers were also being provided with e-mail and Internet access to encourage the transmission of electronic information and to help users access the vast resources of the Internet relating to securities markets. As part of the SEBI’s information technology plan. the site was substantially redesigned during the year. This is expected to provide the basic infrastructure for unified database access. regulations. Initiatives were taken in 1997-98 to implement a Local Area Network (LAN). These computers were provided with the latest productivity tools including software products for word processing. In response to the needs and comments of users. This site was heavily accessed during the year. client-server computing as well as the foundation for sharing information.sebi. These were supplemented in the year under review with the addition of 100 "Pentium" workstations and over 50 high end multimedia computers. . rules. A mirror site is also hosted at http://www. A training programme was organized to enable users to make effective use of information technology and computing resources within the SEBI. annual reports. spreadsheets and presentations. With the implementation of the LAN. draft prospectuses. The site contains statutes. The SEBI’s web site is hosted at http://www. Database servers were acquired to initiate the development of the SEBI’s own database and application systems.gov.that they act as a single corporate resource.

enhancement of Network Communication and implementation of workflow applications. A suitable security and audit mechanism has also been implemented to protect the data from unauthorized access. Investments by Foreign Institutional Investors (FII). • SEBI’S DATABASES:With the installation of state-of-the-art database servers. the emphasis was given to migration and re-engineering of SEBI’s internal databases from legacy systems to Relational Database Management Systems (RDBMS). legislation matters. . securities market intermediaries. video conferencing and electronic data interchange are being explored for their feasibility and introduction within the organization. The internal database primarily comprises of information pertaining to initial public offers.43 – . the SEBI initiated the process of consolidation of databases to implement effective Management Information Systems on the securities market.New technologies such as imaging. investigations/action taken. Investor Grievances and Internal Administration. document management. during the year 1999-2000. During 1999-2000. Consequently the application software packages have been developed and deployed for up-to-date maintenance of these databases. • STATUS OF INFORMATION TECHNOLOGY IN SEBI:The SEBI has continuously been in the process of adopting emerging technologies to maintain the status of advanced users of the modern techniques. workflow.

• NETWORKING:During the year 1999-2000. SEBI Bulletin.sebi. The enhancements included Daily Market Trends pertaining to FII and Mutual Funds. As part of the Wide Area Network (WAN) between SEBI offices and the offices in Mumbai have been inter-connected by Integrated Services Digital Network (ISDN) link for the unified Database Applications and Web access. Database applications. with an aim to provide Executive Information System and to provide quick response to the departmental needs. The local area network (LAN) was established at all the regional offices for implementing the basic infrastructure for client-server computing. the application software development is being done in-house. • SEBI WEB SITE:As part of our constant endeavor in promoting the development of the securities market by providing the latest information. the Network Communication Systems were enhanced. Contents. A feasibility study has also been initiated to form a SEBI-Net linking Head-Office and the Regional Offices. etc. the official web site of SEBI http://www. Department-Wise Classification of . With the installation of LAN at the Regional Offices. Hosting Draft Prospectus. Internet and Intranet were all configured in tandem with the head-office.gov.in was enhanced during the year 1999-2000.44 – . E-mail.With the strengthening of the team of IT Professionals at SEBI.

The Work has been initiated to foster the knowledge base management. . and enhancement of the correspondence tracking system. Intranet and workflow applications have been implemented. featuring hosting of internal circulars. by way of electronic hosting of internal bulletin and discussion forums. various application formats etc. During 1999-2000 state-of-the-arts multimedia notebook computers equipped with latest office automation tools for presentations and mobile computing were procured.• ELECTRONIC OFFICE:Pursuing the philosophy of "Less Paper" office.45 – .

and have a very large nationwide network. Stock exchanges worldwide now conduct a bulk of its business online through its brokers and partners.A SUCCESSFUL TRADING ARCHITECTURE INDIAN EXCHAGES:The NSE and BSE LTD are among the largest exchanges in the country. As promised by technology visionaries and forecast groups over the last decade. a major shift from the traditional method.000 registered users in both segments and an average of around 9500 users is logged in at a time. The trading volume figures in both the exchanges are huge. almost all exchange transactions are conducted online. There are around 13. the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE LTD) have been conducting online trade successfully for some time now.17 lakhs. The average daily traffic volume is around one million trades per day in the capital markets segment and around 50. The trend has slowly picked up in India and two of the largest exchanges. In developed countries. . They handle very large daily trading volumes. support large amounts of data traffic.10 crore and the number of average daily trades was Rs 5. At BSE LTD the average daily turnover in 2001-2002 (AprilMarch) was Rs 1244. The average daily turnover in the capital markets segment at NSE is around Rs 2300 crore and in the derivatives segment.46 – .000 trades per day in the derivatives segment. around Rs 1300 crore. the Internet has indeed opened up new avenues for conducting business.

and have adequate backup and recovery processes. . NSE-IT. secure. equal. Then one has to follow stringent RBI regulations to store at least 7 years of transactional and financial data. NSE now has the country's largest VSAT network with over 3000 VSATs and expects to grow to more than 4000 VSATs soon. It makes one shudder to think of the expected losses in case of a ten minute downtime when daily trade crosses Rs 3000 crore. Network elements like storage. and transparent access across all our nationwide locations. talks about the design philosophy of his online exchange.47 – . "The basic design objective was to provide fair.NETWORK DESIGN:Needless to say. the technology was maturing and was costly. any online exchange needs to be alwayson. security. redundant. VP. availability. Back in 1993. Leased lines cost almost ten times as much as it does today." NETWORK ELEMENTS:A look at the massive trading volumes and traffic bulk is enough proof of the critical nature of systems.M Shenoy. An important aspect was to provide connectivity to our trading members as soon as possible. and the different applications must be carefully planned and commissioned. backup and recovery processes." "The telecom sector is fairly liberal today. G. Satellite technology was a boon since it allowed quicker deployment than leased lines.

As a backup to our VSAT network at NSE.Storage: For such high amounts of critical data it's natural to deploy network-based storage like NAS or SAN. index computation. The hardware and software elements should be built around layered security architecture. surveillance. . and accounts may be developed in-house or by external software developers. a terrestrial-based trading network was deployed in the middle of 2000. perhaps a lot of emphasis was not placed on this aspect. Security: This should be a vital and integral part of the design architecture. Exchanges usually prefer to host its infrastructure inhouse and not use the services of an external data center. NSE is the only stock exchange in the country to have a fully-redundant business continuity site in Chennai. clearing. NSE has more than 850 leased lines connecting nationwide locations. Availability: Ideally online exchanges should have 'five-nine' availability. and number of locations. trading volumes. Backup and recovery: This has emerged as one of the vital aspects of business continuity. Applications: It's difficult to deploy out-of-the-box applications at exchanges as each has a unique architecture based on factors like operations flow. And it should be held in place with a well-documented security policy. When online exchanges were designed a few years ago. However it's not difficult to add business continuity processes to an existing network. risk-management. membership.48 – . The applications like trading. NSE is implementing a SAN as it feels that its data volumes have grown 'phenomenally'. number of users. number of members. as it is today. listing.

.THE 'BIG TWO' ARCHITECTURES NSE and BSE LTD. partners. the 'big two' exchanges believe in updating and upgrading its technology systems to keep delivering according to commitments and promises made to its members.49 – . and customers.

50 – ..

NSE ARCHITECTURE – NEAT: NSE has deployed NIBIS (NSE's Internet Based Information System) for real-time dissemination of trading information over the Internet and NEAT a client-server-based application to help its operations.51 – . .

wherein orders match on the basis of time and price priority.NEAT stores all trading information in an in-memory database at the server end to achieve minimum response time and maximum system availability for users. The WDM participants connect to the trading system through dial-up links. The trading members on the Wholesale Debt Market segment are linked to the central computer at the NSE through dedicated 64 Kbps leased lines and VSAT terminals. NEAT is a state-of-the-art client server based application.25 protocol and is the backbone of the automated trading system.5 front ends are used for the exchange functions. Each trading member trades on the NSE with other members through a PC located in the trading member's office. all trading information is stored in an in-memory database to achieve minimum response time and maximum system availability for users. Applications like Oracle 7 and SQL/Oracle Forms 4.52 – . At the server end. The exchange uses RISC-based UNIX servers from Digital and HP for back office processing. These leased lines are multiplexed using dedicated 2 MB optical-fiber links. The trading server software runs on a fault tolerant STRATUS main frame computer while the client software runs under Windows on PCs. NEAT System: The NEAT system supports an order driven market. All quantity fields are in units and prices are quoted in Indian Rupees. The regular lot size and tick size for various securities traded is notified by the Exchange from time to time. The telecommunications network uses the X. The trading server software runs on a fault-tolerant STRATUS mainframe and the client software runs on Windows PCs. BOMBAY STOCK EXCHANGE LTD – SYSTEMS ARCHITECTURE .

The systems claim to handle up to three million trades a day.53 – . VSAT and Managed Leased Data Network (MLDN). Other services like information dissemination. BSE LTD has setup a MLDN Network comprising 300 2 Mbps lines and 1500 64 Kbps lines which connect all regional stock exchanges and offices in Mumbai.The nonstop systems act as the backend to more than 12000 Trader Workstations networked on Ethernet.TRADING ENGINE LAN WAN VSAT MEMEBERS OFFICE ROUTER IDU MEMBERS OFFICE ROUTER MEMBERS OFFICE BSE LTD ARCHITECTURE – BOLT: BSE LTD has deployed an Online Trading system (BOLT) on March 14. and position monitoring are also provided by the system. 1995. BOLT has been interfaced with various . BOLT has a two-tier architecture. A transaction monitoring facility in the Tandem architecture helps keep data integrity through non-stop SQL. The trader workstations are connected directly to the backend server which acts as a communication server and a Central Trading Engine (CTE). With the help of MTNL. It works on a nonstop platform . index computation. Access to market related information through the trader workstations is essential for the market participants to act on real-time basis and take instantaneous decisions.

1.information vendors like Bloomberg.54 – .. BSE LTD’s online trading system is designed and developed by CMC LTD. BSE LTD with around 685 members has seen an average daily turnover of Rs.162 crore in July 2002. and Reuters. Market information is fed to news agencies in real time. SQL Server 2000. and IIS Server. Bridge. now a Tata Group company. The Exchange plans to enhance the capabilities further to have an integrated two-way information flow.e. This screenbased trading system replaced the manual out-cry method of trading in the ring and went live on March 1995. BOLT: BOLT i. For further expansion of its activities. THE BOLT SYSTEM HAS ENABLED THE EXCHANGE TO MEET THE FOLLOWING OBJECTIVE: . BSE LTD decided to provide web-based trading facility to the members as it was felt that Internet trading would fundamentally change the way exchange and brokers interact with their customers. Currently. Tata Consultancy Services developed the system (BSE LTD WebX) with the objective of enabling the exchange to service its members and the customers of the members in an efficient and cost-effective manner using the Internet Applications used by BSE LTD Windows.This enabled BSE LTD to provide floorless and fully automated screen-based trading facilities in capital market (CM) instruments with equal access to investors all over the country.

Provide for on-line and off-line monitoring. orders. Provide analytical data for use of the Stock Exchange.55 – . Provide a sophisticated. Odd lot segment. easy to use. etc. Improve market transparency. Smooth market operations using technology while retaining the flexibility of conventional trading practices. rules and controls centrally . graphical user interface (GUI) to all the users of the system. Today. in-house deals. Provide brokers with their trade data on electronic media to interface with the Broker's Back Office system.• • • • • • • • • • • Reduce and eliminate operational inefficiencies inherent in manual systems. control and surveillance of the market. The system is capable of handling 2. Continuous Net Settlement. indices for all users of the system and allow the stock exchange to do information vending. auction orders as the case may be to the Central Trading Engine (CTE) through the Broker Work Station (BWS). eliminate unmatched trades and delayed reporting. The brokers / traders operate from their own offices and send their quotes. Set up various limits. Provide public information on scrip prices. Increases trading capacity of the stock exchange. Promote fairness and speedy matching . WORKING OF BOLT: Trading on CMC's Trading system BOLT can be carried out for Normal segment as well as in the Auction. The Best Bid and the Best Offer (based . negotiated deals. there are around 9000+ BSE LTD trading terminals spread across India.5 million orders per day.

BOLT ARCHITECTURE: . The BBO of all the scrip’s in the market are available to all the BWS through a mechanism called broadcast of the market information. trade confirmations are sent to the respective workstations.56 – . which can be printed on-line. The buy and sell orders placed by the broker / trader will be matched at the best available price in the market for that scrip. BOLT was developed on Non Stop Tandem platform keeping in view the criticality of the application.on price and time priority) in the market form what is known as the Best Bid and Offer (BBO) for each scrip. at the time of the order. SuBSE LTD quent to matching.

eliminates unmatched trades. for better control. limits. Improves transparency. no delay in reporting. • • Increases the trading capacity of the stock exchange. • Allows setting of various checks. .57 – .STRENGTHS • Reduces or eliminates operational inefficiencies inherent in manual systems. • Smooth market operations using the latest technology .

Provides analytical data to the stock exchange.• Provides trade data using electronic media to the broker using an interface with the broker's back-office system. CHANGING SCENARIO/BENEFITS • Dematerialization: .58 – . • • Provides user information (like scrip prices and indices) to all users.

Dematerialization has benefited the market and the market players in more than one way.While the NSE modernized the trading system. with compulsory trading on shares in Demat form in specified scrips by institutional investors from Jan 15. Dematerialization in simple terms means the conversion of shares from physical to electronic form. fake and forged shares and signature mismatches. The Stock Holding Corporation of India. Demat is instrumental in – • Abolition of market lots . has made rapid strides and the value of shares dematerialised has crossed Rs one trillion. it was helpless against paper related problems. the National Share Depository Ltd. set up in the early eighties had not made much headway in transiting to a depository and continued to operate as a custodian. Initially.59 – . the NSE tried to work with the SHCIL. In less than two years. Demat. The introduction of compulsory dematerialization in select scrips by SEBI has enabled it to move towards a rolling settlement in a few of these stocks. but in 1996 it decided to pitch for setting up the depository on its own. 1998. UTI was one of the first institutions to use Demat when it decided to dematerialize 50% of its holdings in 1997. for the investments of financial institutions. Its reaction was to promote a Depository to push the move towards paper less trading. Demat in India started with the creation of NSDL (National stock depository limited) in 1996. enabled by the use of technology is probably is single most important factor which has repercussions on every aspect of the stock markets. SEBI gave a boost to Demat.

which integrates your Brokerage. was an electronic (computerized) exchange. This means that you can buy and sell shares and forget about the hassles of settlements. NSE. Transfers of shares from/to your Demat account and transfer of money from/to . However. Bank and one or more Demat accounts. The premise being elimination of problems due to loss of allotment letters. both these exchanges moved to SBTS (Screen Based Trading System) in 1997. started as a floor-based exchange.60 – . setup as an alternative to BSE LTD. trading compulsorily in Demat form with an option of holding shares in physical form for retail investors..While NSE introduced NEAT (NSE’s Online Trading System) in May 1997. With advancements in technology. share certificates etc. The outcome has phenomenal with respect to the number of trades taking place on these two exchanges.• • • • • Introduction of rolling settlements Enhancing liquidity Bringing stamp duty to zero Reducing chances of bad delivery Increased lending by banks and other FIs SEBI extended Demat to IPO’s during capital reforms in capital markets in 2002. BSE LTD is the first exchange to be set up in India. • Online trading:An online trading account is more than a brokerage account. encouraging shareholders to opt for Demat credit of allotments. It offers you a unique 3-in-1 feature. BSE LTD introduced BOLT (BSE LTD’s Online Trading System) in September 1997 in Mumbai.

whereby a further variation of 4 percent in the scrip beyond 8 percent. His ledger and portfolio account get updated online. for all scrips under compulsory rolling settlement. . it is confirmed on real time basis. • Internet Broking:SEBI Committee has approved the use of Internet as an Order Routing System (ORS) it communicates clients' orders to the exchanges through brokers.your Bank account take place automatically with no paperwork. it checks the authenticity of the client electronically and then routes the order to the appropriate exchange for execution. In June 2000. Price band which were originally fixed at 8 percent. To contain abnormal price variations. further trading was allowed to the price band.61 – . • Circuit breakers/ price bands:Circuit breakers were first introduced in 1987 in the US in the wake of sharp fall in the share prices. was allowed. the price band was relaxed by 8 percent (from 4 percent earlier) with half an hour cooling period the scrips had hit the initial price band of 8 percent. scrip-wise specify daily price bands or circuits breakers in India were introduced in 1995 where by the trading automatically got suspended if the price varied either side beyond 8 percent. Once the broker’s system receives the order. payments and delivery obligations through the system. Investor receives reports on margin requirement. On execution of the order. Online investing is just a click away and settlements are no longer a problem. after a cooling off period of 30 minutes. ORS enables investors to place orders with his broker and have control over the information and quotes and to hit the quote on an on-line basis. were relaxed in January 2000.

this is a system for large-value interbank funds transfers.NSE launched internet trading in early February 2000. Basically. Soon after these orders get matched and result into trades. the investors get confirmation about them on their PCs through the same internet route. NSE. . This serves primarily retail investors who are mobile and want to trade from any place when the market prices for stocks at their choice are attractive. • Wireless Application Protocol (WAP):SEBI has also approved trading through wireless medium on WAP Platform. This provides access to its order book through the hand held devices. Only SEBI registered members who have been granted permission by the Exchange for providing Internet based trading services can introduce the service after obtaining permission from the Exchange. rather than just at the end of the day. The orders originating from the PCs of the investors are routed through the Internet to the trading terminals of the designated brokers with whom they are connected and further to the exchange for trade execution. This system lessens settlement risk because interbank settlement happens throughout the day. which use WAP technology.62 – .IT launched the Wireless Application Protocol (WAP) in November 2000. It is the first stock exchange in the country to provide web-based access to investors to trade directly on the exchange. • RTGS (REAL TIME GROSS SETTLEMENT):The continuous settlement of payments on an individual order basis without netting debits with credits across the books of a central bank.

One major factor. and Saraswat Co-operative bank the system now includes 23 banks. Starting with State Bank of India. In August 2004. is the weak banking system. which means that they have to wait one extra day (compared to India) in order to get money for shares sold.63 – . spurred by similar systems all over the world and partly by the BASEL-II regulations.RTGS now has been implemented in major countries all over the world. . RBI went ‘live’ with the RTGS system in March 2004. in New York. India is already ahead of the world in terms of being at T+2 settlements. The Reserve Bank of India (RBI) enabled RTGS for straight through processing (STP). For example. HDFC Bank. The measure is expected to pave the way for ‘T+1’ settlement for stock exchanges and lead to settlement of securities one day after the day of trade. A look at the RTGS systems in place around the world indicates that these systems have been responsible for reduction in systematic risks and increased trading in the financial markets including stock markets. which has held back the move to T+1. Standard Chartered Bank. T+3 settlement is used. Back home in India.

Anonymity . ADVERSE IMPACTS OF IT ON STOCK MARKETS .Users could look at price at computer screen before placing order at the screen. Operational efficiency – automation eliminated vagaries of manipulative trading. This has helped the user outside Mumbai and has been a major impetus to the development of financial sector outside Mumbai.As a result of which NSE about 1000 new brokerage firms have entered the markets. This has reduced transaction costs sharply.Electronic trading is completely transparent about prices and quantities and completely opaque about identities.64 – .• OTHER BENEFITS : Transparency .NSE’s satellite based trading gave equal assess to the trading flow from all locations in India. Competition in the brokerage industry . Gains out side Mumbai.

In the meantime. workers. and only then does their value become a part of stock-market capitalization. or market rises or falls within a short-term period. We have argued that aggregate valuation can fall below the present value of dividends because capital may "disappear" right after a major technological shift. It does so by making machines. Finally. more kinds of financial instruments allow investors more opportunity to move their money to more kinds of investment positions when conditions change. We have gone further and argued that major technological change—like the IT revolution— destroys old firms. commodity. private companies. these companies are IPO’s. An obvious reason for market volatility is technology. the stock market declines. and their stock-market entry takes even longer. and the resulting price alignment arbitrage causes. Volatility: The degree to which the price of a security. more kinds of financial instruments. This includes more timely The faster information is information dissemination. improved technology to make trades and disseminated. Improved trading technology makes it easier to take advantage of arbitrage opportunities.65 – . the quicker markets can react to both negative and positive news. Later. as new capital forms in small. SOME OTHER IT TOOLS USED IN STOCK TRADING . and managers obsolete. Product-market entry of new firms and new capital takes time.Some other interesting observations about impact of technology on stock markets – Vintage capital model teaches us that technological change destroys old capital.

weaknesses and financial trends. • Watchlist:. • Company watch:Concise reports designed to give a rapid understanding of anycompa nis financial health with a graphical five-year overview of its strengths. chart the historical valuation of the portfolio and compare and chart your portfolio performance against indices or sectors. monitor the profit/loss. view all the latest news.• Email alerts:Interested investors or potential investors may conveniently receive E-mail alert messages whenever certain new company information is posted to the site. tools and analysis including stock screeners and heat maps. • Exchange insight:Access to level 1 and level 2 real-time prices and a wide range of premium data. The fluctuations in the stock market are also alerted to the users by the help of email messages • Portfolio:Creating a portfolio helps to Track holdings.66 – .

67 – . You can quickly and easily transfer a stock from a watchlist to a portfolio.Helps to create a watch lists to monitor potential investment opportunities at a glance. FUTURE OUTLOOK .

listed companies. providing fair investment opportunities for people. and in improving economies. to best meet the needs of investors and companies. The stock markets of the future will have a redefined purpose and reinvented architecture due to the advent and widespread use of technology. Sebi has permitted the regional exchanges to form subsidiary companies. around 22 in India. This new market will bring benefits to investors. and the economies of countries. Raising capital for companies will be easier. faster and settlement will be simpler and with reduced risk. These companies have acquired membership of both BSE LTD and NSE at confessional entry fees and permitted their members to trade on the BSE LTD and NSE thus increasing trade volumes and business in both BSE LTD and NSE. The leaders in this new world of investing will be the ones willing to be agents of change. If done right. the future of the regional stock exchanges. thus contributing directly to economic expansion. Trading will be cheaper. .68 – . which are akin to super brokers. creating jobs. the stock markets of the future will be even better vehicles than today in helping companies grow. is likely to be very uncertain and even their very survival is a question mark.With increasing globalization and consolidation amongst exchanges. and to do what is best for these two principal stakeholders in the capital markets. Information and stock price quotations are available almost instantaneously and more importantly investors can act on this data by executing a trade from anywhere at any time.

once full capital account convertibility is permitted in India one could well witness an expansion of trading volumes and its resultant economic benefits to the thriving and ever-young metropolis of Mumbai. are visionary. proactive and increasingly use leading-edge technologies to effectively compete in the global environment.Both the exchanges. . In the not-too-distant future. BSE LTD and NSE.69 – .

inherent in the process itself. Transfer of large information and storing capacity for a long period also has some draw backs. For example manipulation of message is very easy and it requires small level of technical literacy. we all think about our development. who can make better presentations.CONCLUSION As a human being. All in all. Due to development in technology. It opens the door of several avenues as well as has brought in several threats. But as the technology developed. Everyone likes to cover bigger area as much as he can cover. earlier which required lot of time.70 – . And all of us should prepare ourselves to make it easier for us and should use it in ethical ways then only we would be able to survive in the global market. It is also observed that master in a subject may not be many times able to express his views effectively as compared to a person having less knowledge of subject but more computer literacy. the development of new information technology should be welcomed because it is the need of the hour. As we plan for our development we also have to decide our working area. Initially we had a small area of operation in each segment of life. . we become part of global market and now we are able to cope with the market development at large. which should be analyzed carefully. Information technology has made a tremendous development in respect of our approach at amass level. or the most possible / approachable area. the information can be transferred from one place to another in very short span of time. Here the knowledge part of the core subject has been compromised with proficiency with technology.

Technology has been able to make the stock markets accessible to every individual. The use of technology should be preceded by a detailed study and assessment of all other alternatives.71 – . Regulation and knowledge dissemination are still important. . it cannot be applied as a panacea for all problems. we can say that computerization and automation are not to be avoided. The key to successful use to technology is the appreciation of its constraints. as some experiences have indicated.To sum up. It has also led to positive developments in terms of reduced costs and fewer errors. But.

bseindia.com • • • .gov.BY SUSAN THOMAS. • .72 – .BY RAJ KAPILA AND UMA KAPILA – VOLUME CAPITAL MARKETS (DEALERS) -MODULE WORK BOOK.com www.sebi.nseindia.BIBLIOGRAPHY REFERENCE:• 2. SECURITIES MARKETS: TOWARDS GREATER EFFICIENCY INDIA’S BANKING AND FINANCIAL SECTOR IN THE NEW MILLENIUM .icicidirect.in www. WEBSITES:• www.com www. • • SEBI READING MATERIAL FOR WORKSHOP.