Page 122 - DCOM507_STOCK_MARKET_OPERATIONS

Unit 5: Trading System in Stock Exchange

There are no market makers or specialists and the entire process is order-driven, which Notes
means that market orders placed by investors are automatically matched with the best
limit orders. As a result, buyers and sellers remain anonymous.
The advantage of an order driven market is that it brings more transparency, by displaying
all buy and sell orders in the trading system. However, in the absence of market makers,
there is no guarantee that orders will be executed.
Almost all the significant firms of India are listed on both the exchanges.

NSE enjoys a dominant share in spot trading, with about 70% of the market share, as of
2009, and almost a complete monopoly in derivatives trading, with about a 98% share in
this market, also as of 2009.

Both exchanges compete for the order flow that leads to reduced costs, market efficiency
and innovation.

The presence of arbitrageurs keeps the prices on the two stock exchanges within a very
tight range.

5.9 Keywords

Auction Market: In the auction market, auctions are initiated by the exchange on behalf of
trading members for settlement related reasons.
Competitor: The party who enters on the same side as of the initiator is called a competitor.
Initiator: The party who initiates the auction process is called an initiator.

NEAT: National Exchange for Automated Trading (NEAT) is a state of-the-art client server based
application.
Normal Market: Normal market consists of various book types in which orders are segregated
as Regular Lot Orders, Special Term Orders, and Stop Loss Orders depending on the order
attributes.
NSE: NSE is the first exchange in the world to use satellite communication technology for
trading.
Odd Lot Market: The odd lot market facility is used for the Limited Physical Market and for the
Block Trades Session.
Retail Debt Market: The RETDEBT market facility on the NEAT system of capital market segment
is used for transactions in Retail Debt Market session.
Solicitor: The party who enters on the opposite side as of the initiator is called a solicitor.

5.10 Review Questions

1. Explain the Screen-based trading system.
2. Describe the NEAT System.
3. Describe the various Market Types.

4. Differentiate between Logging on and Logging off.
5. Discuss the Features of User ID and Password with suitable application.
6. What are the procedural steps of order management?

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