Page 26 - DCOM510_FINANCIAL_DERIVATIVES

Unit 2: Derivatives Market in India

orders originating from all over the country. The book stores only limit orders, which are Notes
orders to buy or sell shares at a stated quantity and stated price. The limit orders are executed
only if the price quantity conditions match. Thus, the NEAT system provides an Open Electronic
Consolidated Limit Order Book (OECLOB).
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 (Good-till-Cancelled, Good-till-Day,
Immediate-or-Cancel), price related (buy/sell limit and stop-loss orders) or volume-related
(All-or-None, Minimum Fill, etc.) conditions can be easily built into an order. Orders are sorted
and matched automatically by the computer keeping the system transparent, objective and fair.
The trading system also provides complete market information on-line, which is updated on
real time basis.

As of December 1996, there were roughly 1200 companies traded on the NSE, as against 5,999
companies listed on the BSE as on the same date. Of the 1,200 odd companies traded on the NSE,
535 were listed and the remaining was permitted securities.
As of January 1997, the market capitalisation of the NSE was ` 2 trillion. The total net turnover
on the exchange was ` 2,16,483 crore in 1996. This was more than nine times higher than the
` 27,814 crore transacted during 1995. Since November 1995, trading volumes on the NSE have
been consistently higher than those on the BSE. On average, trading volumes on the NSE are
slightly more than twice of those on the BSE.
There were 541 companies listed on the National Stock Exchange in 1997 as against 407 in
January 1996. When the NSE commenced trading in the equity segment in November 1994, there
were no companies listed on the NSE. The segment then comprised of 200-odd permitted
companies. During 1995-96, NSE relaxed its listing requirements to cater to wider population of
companies’ seeking listing on the exchange.

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Caution As per the guidelines issued in August 1995, a company seeking listing on the NSE
should have a minimum capital of ` 10 crore and a market capitalisation of at least ` 25
crore if it is listed on any other stock exchange.
The earlier requirement for a listed company seeking listing on the NSE was a minimum market
capitalisation of ` 50 crore. Companies seeking listing on the NSE should have a minimum track
record of profitability of three years.
The total number of VSATs (Very Small Aperture Terminals) installed by the NSE was 1,102 as
on 31 December. The total number of cities spanned by these was 66, out of which 49 have no
stock exchanges. Mumbai has the highest number of VSATs at 346, followed by Delhi with 273
and Calcutta (Kolkata) with 127.
Today, the NSE, since the commencement of its operations in Wholesale Debt Market (WDM)
segment on June 30, 1994 and in Capital Market (CM) segment on November 3, 1994, has
expanded its trade operations to more than 100 cities in India and has come to acquire the status
of a premier stock exchange in the country. The trading activity on the WDM segment, which
covers a variety of debt instrument, has gradually gone up.

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Caution India’s fiscal problems have implied a large volume of issuance of central
government debt, which dominates the table. This has fuelled tremendous growth of
turnover on the debt market.

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