The National Stock exchange, in Bombay is the largest Stock exchange of the country and the third largest in the world. Before the NSE, the Indian securities industry was inefficient due to lack of proper infrastructure and a few select brokerage firms controlling the industry. There was a great resistance to setting up modern facilities and innovative infrastructure.
The basic idea of setting up the NSE was facilitating computerized market trading. The intention was to set up a vibrant and viable debt market, and in the middle of 1993 it came into existence. The trading started in the middle of 1994.The NSE is jointly owned by a group of financial institutions, Insurance companies, banks and other financial intermediaries. In the completely de-mutualised exchange the ownership has no bearing to trade. The objective is to place all investors across the country in more than 1200 cities on equal footing.
This was done by competitively harnessing the latest technology and adapting a new system of operations through the VSAT (Very Small Earth Based Aperture Terminals) terminals. The fully automatic screen based trading system is based on the principle of an order driven market which provides complete flexibility to the participants. There are no trading floors as in conventional stock exchanges.
The trading is entirely screen based with automatic order processing. One can obtain the entire market information, which is dynamically updated, at the click of a button. The system also conceals the identity of the market operators. As the market investors can sit and operate from their own houses and homes, they have all the facilities of back office support. The connection with other traders through the satellite link is established, and each member receives the market information at the same time.
The NSE is one of the first stock exchanges in the world to use the VSAT system for end-to-end connectivity and computer based trading. NSE has completely shifted the trading platform from the floors of the Stock Exchange to the computer terminals at the brokerage firms and further to personal computers and laptops in the investors’ homes and offices!
The NSE is one of the very few exchanges in the world trading all kinds of securities on a single platform. The three mutually exclusive segments of the NSE are:
The capital Market Segment covers trading in equities and retail trade in convertible and non-convertible debentures and hybrids. This segment covers the securities of medium and large companies with nation wide investor base. This might include securities which are being traded on other exchanges as well. The Capital Market increases the volume of trade and liquidity considerably.
The wholesale and Debt Market segment of the NSE is a facility for institutions including subsidiaries of banks which are involved in financial services and other corporate bodies. The trading system facilitates making of two way quotes in a very flexible manner.
These three trading platforms were established one after the other. The wholesale Debt market commenced its operations in June 1994 and the Capital Market Segment started operating at the end of 1994.The futures and options segment began in 2000, and today the NSE holds the 14th position in the 40 futures and Exchanges today.
A company that wants to get listed with the NSE needs to enter a listing agreement and is required to pay the specified listing fees. It also needs to adhere to all the clauses of the agreement and to send details of book closure, record dates, annual and half yearly reports, and cash flow statements.
The NSE has emerged as the world’s third largest growing bourse today with such a large number of companies being listed everyday. It has outpaced world leaders such as the London Stock Exchange, NASDAQ and NYSE. The NSE can handle up to 1 million trades per day .It recorded a 15% jump in the number of listed firms of 1244 during the one year period which ended in April 2007.