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Unit 2: Securities Market: An Overview

government securities with settlement through SGL, liquidity support to PDs to enable them to Notes
support primary market and undertake market making, special fund facility for security
settlement, etc. Other measures include abolition of TDS on government securities and stamp
duties on transfer of demat debt securities.

Market Infrastructure

As part of the ongoing efforts to build debt market infrastructure, two new systems, the Negotiated
Dealing System (NDS) and the Clearing Corporation of India Limited (CCIL) commenced
operations on February 15, 2002. NDS, interalia, facilitates screen based negotiated dealing for
secondary market transactions in government securities and money market instruments, online
reporting of transactions in the instruments available on the NDS and dissemination of trade
information to the market. Government Securities (including T-bills), call money, notice/term
money, repos in eligible securities, Commercial Papers and Certificate of Deposits are available
for negotiated dealing through NDS among the members. The CCIL facilitates settlement of
transactions in government securities (both outright and repo) on Delivery versus Payment
(DvP-II) basis which provides for settlement of securities on gross basis and settlement of funds
on net basis simultaneously. It acts as a central counterparty for clearing and settlement of
government securities transactions done on NDS.
Further, there was adoption of modified Delivery-versus-Payment mode of settlement (DvP III
in March 2004). The settlement system for transaction in government securities was standardized
to T+1 cycle on May 11, 2005. To provide banks and other institutions with a more advanced and
more efficient trading platform, an anonymous order matching trading platform (NDS-OM)
was introduced in August 2005. Short sale was permitted in G-secs in 2006 to provide an
opportunity to market participants to manage their interest rate risk more effectively and to
improve liquidity in the market. ‘When issued’ (WI) trading in Central Government Securities
was introduced in 2006.

As a result of the gradual reform process undertaken over the years, the Indian G-Sec market has
become increasingly broad-based and characterized by an efficient auction process, an active
secondary market, electronic trading and settlement technology that ensure safe settlement
with Straight through Processing (STP).

Self Assessment

Fill in the blanks:
11. Positions in option contracts shall not be considered for ................................ margining
benefit.
12. The computation of cross margin shall be at ................................ level on an on-line real
time basis.
13. For institutional investors the positions in Cash segment shall be considered only after
confirmation by the custodian on ................................ basis and on confirmation by the
clearing member in F&O segment.
14. The positions in the Cash and F&O segment shall be considered for ................................
margining only till time the margins are levied on such positions.
15. Cross margin is available for ................................ trades.

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