History, Objectives and Features of National Stock Exchange (NSE) – India
History of National Stock Exchange (NSE) – India
The National Stock Exchange was set up in Mumbai in November 1992 with a paid up equity capital of Rs.25 crores. It was promoted by IDBI, ICICI, LIC, GIC and its subsidiaries, SBI and SBI Capital Markets Ltd. The NSE commenced its operations in wholesale debt market in June 1994 and in equity trading in November 1994.
The wholesale debt market or money market segments would serve the needs of banks and Financial institutions to encourage high value transactions in public sector undertaking bonds, UTI units, treasury bills, Government securities and call money. In fact, there is no trading floor of the exchange. It is a fully automated screen-based trading system having a wholesale debt market and capital market segment. Trading is done over the telephone and telex etc., and with the help of personal computer terminals in the office of the brokers.
Both the issuers of securities and investors benefit from NSE as it is screen-based trading with a national network, transparency and cost effectiveness. By the end of March 2001, about 785 companies were listed on NSE. There are about 1600 listed companies in NSE now.
Objectives of NSE
The NSE fulfills the following objectives—
1. The NSE was established in order to offer nation-wide trading facility for equities, debts and hybrids.
2. Trading in NSE occurs simultaneously along with the regional stock exchanges. Thus, it intends to facilitate equal access to investors across the country.
3. NSE ensures fairness, efficiency and transparency of securities trading.
4. It aims at shorter settlement cycle and book entry settlement system.
5. NSE also aims at achieving international standards in respect of securities market.
Features of NSE
1. NSE is a fully automated screen-based trading system and it consists of a wholesale debt market, capital market and derivatives market. The capital market segment deals with equities, convertible debentures and retail trade in debt instruments like non-convertible debentures.
The trading members of the capital market may include individuals, registered firms, institutional members and corporate bodies. The wholesale debt market segment deals with high value transactions in government securities, public sector bonds, commercial papers and other debt instruments. Institutional members, subsidiaries of banks and body corporate are the trading members of the wholesale debt market.
2. The NSE provides the service of trading securities at the same price at any stock exchange in India.
3. There is no trading floor for the National Stock Exchange. Trading is done on the computer with the help of PC terminals in brokers’ offices. The NSE brokers link themselves to the automated quotation system. Brokers are allowed to buy and sell electronically.
4. Press Trust of India publishes information about the owner of the scrips and the number of scrips owned by a specific person.
5. The trading members in the capital market are linked to the computer in Mumbai through satellite. Likewise, the trading members in the wholesale debt market segment are linked to the computer in Mumbai.
6. The trading members place order with the NSE stating the conditions in terms of price, time or size. On placement of the order, an order confirmation slip is prepared. The computer system searches for a match and the deal is struck.
7. When a trade is carried out, the trade confirmation slip is printed at the trading member’s work station. The slip furnishes details of price, quantity, code number of the party, etc.
8. The identity of the trading members is kept secret.
9. After trading, the member is issued a statement showing his net position, the amount of money he has to send to the clearing bank and the securities he has to deliver to the clearing house.
10. Members should deliver securities and cash on the thirteenth and fourteenth day of trading respectively. The fifteenth day of trading is the pay out day.
11. The advantage of the automated trading System is that the investor is able to find the best price for his scrips. Thus, the trading member can do business efficiently.
12. NSE introduced internet trading with effect from February 2000. So it is the first stock exchange in India to provide web-based access to investors to trade directly on the exchange. The investors place orders through internet through the terminals of the designated brokers. If the orders get matched, trade takes place and the investor gets confirmation slips on their PCs.