Secondary market trading and settlement system is fundamental to its orderly conduct of business and growth.

Over the years, several path-breaking reforms were implemented to make them on par with global standards.
Indian secondary markets have come a long way, since the days of the open outcry and the ‘badla’ system
prevalent in the BSE. Though the NSE was the first to introduce screen based electronic trading facility
across the country, the BSE quickly introduced its BOLT system as well. The screen based trading system is
an order driven system wherein a member can introduce an order into the system specifying the quantity of
securities and the price at which he likes to transact. The order will search for matches and the transactionsare
executed as soon as it finds a matching sale or buy order from a counter party.
The electronic trading system scores over the traditional open outcry system in many ways:
● Since orders are matched by the system, it adheres to strict price and time priority thereby preventing
loss of orders, errors and malpractices.If an order does not find a matching counter order, it remains
in the system and is displayed to the whole market until a new order comes in or the earlier order is
cancelled or modified.
● Since orders are matched and prices are recorded simultaneously, the system enables real time price
updation, thereby reducing information asymmetry in the market.
● By networking the whole country, it enables seamless trades across geographies, thereby improving
depth andliquidity in the market.
● Since the trading is faceless, the counterparties are anonymous. This mechanism creates an equal
opportunity market for all trading members.
● It provides a perfect audit trail of trades which helps SEBI in its oversight function and in resolution of
defaults and disputes arising from trades by capturing in the trade executionprocess in entirety.
In order to help in order placement, the system incorporates facility to build in several terms in an order
and also displays complete market information on real time orders and their details. Orders may also be
entered as limit orders specifying quantity and price. If the order conditions are not matched, the limit order
does not get executed. The order matching happens in the following manner:
● Eligible limit orders are matched with matching limit orders.
● Residual eligible limit orders are matched with market orders wherein the system determines the price.
● Market orders (those that do not have a price specification) are matched with market orders.
The trading system in the debt and equity markets is almost identical. Trading in all instruments is allowed
during normal trading hours unless there are securities or specified scrips that have been prohibited for
trading by the stock exchange. Whenever a trade takes place through the order matching process, the system
sends a trade confirmation message to each of the counterparties. The information on executed trades is also

disseminated across the market through a ticker window displaying the details of the trade. Limited facility
is also available for trade cancellations subject to confirmation by the exchange.
With the introduction of internet trading by clients, an additional facility is available to investors. Under
this system, investors are provided with web-based access or through a mobile application the facility to trade
directly on the exchange. The orders originating from the devices of the investors are routed to the trading
terminals of the designated brokers with whom they are connected and further to the exchange for trade
execution. Soon after these orders get matched and result into trades, the investors get confirmation about
them on their devices. Only SEBI registered members are allowed to provide these facilities to their clients
with the permission of the stock exchange.