Page 199 - DMGT513_DERIVATIVES_AND_RISK_MANAGEMENT

Derivatives & Risk Management

Notes Status (OS), Market Movement (MM), Market Inquiry (MI), Net Position, On line backup, Multiple
index inquiry, Most active security and so on. Relevant information for the selected contract/
security can be viewed. We shall look in demand at eh Market by Price (MBP) and the Market
Inquiry (MI) screens.
1. Market by Price (MBP): The purpose of the MBP is to enable the user to view passive
orders in the market aggregated at each price and are displayed in order of best prices. The
window can be invoked by pressing the [F6] key. If a particular contract or security is
selected f, the details of the selected contract or security can be seen on this screen
2. Market Inquiry (MI): The market inquiry screen can be invoked by using the [F11] key. If
a particular contract or security is selected, the details of the selected contract or selected
security defaults in the selection screen or else the current position in the market watch
defaults. The first line for the screen gives the Instrument type, symbol, expiry, contract
status, total traded quantity, life time high and life time low. The second line displays the
closing price, open price, high price, low price, last traded price and indicator for net
change from closing price. The third line displays the last traded quantity, last traded time
and the last traded date. The fourth line displays the closing open interest, the opening
open interest, day high open interest, day low open interest, current open interest, life
time high open interest, life time low open interest and net change from closing open
interest. The fifth line display very important information, namely the carrying cost in
percentage terms.
14.6.4 Placing Orders on the Trading System

For both the futures and the options market, while entering orders on the trading system,
members are required to identify orders as being proprietary or client order. Proprietary orders
should be identified as ‘Pro, and those of clients should be identified as ‘Cli’. Apart from this, in
the case of ‘Cli’ trades, the client account number should also be provided.
The futures market is a zero sum game i.e. the total number of long in any contract always
equals the total number of short in any contract. The total number of outstanding contracts
(long/sight) at any point in time is called the “Open interest”. This Open interest figure is a good
indicator of the liquidity in every contract. Based on studies carried out in international exchanges,
it is found that open interest is maximum in near month expiry contracts.

14.6.5 Market Spread/Combination Order Entry

The NEAT F&O trading system also enables to enter spread/combination trades. This enables
the user to input two or three orders simultaneously into the market. These orders will have the
condition attached to it that unless and until the whole batch of orders finds a countermatch,
they shall not be traded. This facilitates spread and combination trading strategies with minimum
price risk.

14.6.6 Basket Trading

In order to provide a facility for easy arbitrage between futures and cash markets. NSE introduced
basket-trading facility. This enables the generation of portfolio offline order files in the derivatives
trading system and its execution in the cash segment. A trading member can buy or sell a
portfolio through a single order, one he determines its size. The system automatically works
out the quantity of each security to be bought or sold in proportion to their weights in the
portfolio.

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