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Unit 5: Trading System in Stock Exchange

It provides full anonymity by accepting orders, big or small, from members without Notes
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.

Figure 5.1: Trading Network
Satellite

NSE Mainframe Broker's premises

An investor informs a broker to place an order on his behalf. The broker enters the order
through his personal computer, which runs under Windows NT and sends signal to the Satellite
via VSAT/leased line/modem. The signal is directed to a mainframe computer at NSE via VSAT
at NSE’s office. A message relating to the order activity is broadcast to the respective member.
The order confirmation message is immediately displayed on the PC of the broker. This order
matches with the existing passive order(s), otherwise it waits for the active orders to enter the
system. On order matching, a message is broadcast to the respective member.
The trading system operates on a strict price time priority. All orders received on the system are
sorted with the best priced order getting the first priority for matching i.e., the best buy orders
match with the best sell order. Similar priced orders are sorted on time priority basis, i.e. the one
that came in early gets priority over the later one. Orders are matched automatically by the
computer keeping the system transparent, objective and fair. Where an order does not find a
match, it remains in the system and is displayed to the whole market, till a fresh order comes in
or the earlier order is cancelled or modified. The trading system provides tremendous flexibility
to the users in terms of kinds of orders that can be placed on the system. Several time-related
(immediate or cancel), price-related (buy/sell limit and stop loss orders) or volume related
(disclosed quantity) conditions can be easily built into an order. The trading system also provides
complete market information on-line. The market screen at any point of time provides complete
information on total order depth in a security, the five best buys and sells available in the
market, the quantity traded during the day in that security, the high and the low, the last traded

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