National Stock Exchange of India

History

The National Stock Exchange of India Limited (NSE) was incorporated in April 1992 as a company with the Reserve Bank of India as the promoter and 95 percent equity held by it. The NSE commenced trading in April 1994 to promote the development of the securities market in India. The NSE is the first among the recognized stock exchanges in India to be converted into a public limited company. The NSE moved to a new building in February 2000, with a floor space of 33,000 square meters, having an additional 7,000 square meter area to house the trading and clearing systems. On May 1, 2001, the National Stock Exchange became a company limited by guarantee. This was a historic change in the structure of the Exchange as till then it was a Section 25 company fully owned by the Reserve Bank of India (RBI).

Structure and Functioning of NSE

The NSE operates two trading systems

- NDS-Shubh and NDS-Widening.

NDS-Shubh is a fully automated auction trading system for securities listed on the NSE. NDS-Widening is a multilateral trading system that facilitates trading in both cash and derivative segments of the NSE.

NDS-Widening’s Cash segment facilitates trading in securities listed on the NSE. The system’s functionality includes order matching, order routing, and order execution. The NDS-Widening Derivative segment facilitates trading in Futures and Options on equities, equity indices, and equity indices.

- NSE Clearing System - The NSE Clearing System operates as a central counterparty for all trades executed on the trading platforms of the NSE. The Clearing System settles trades through the use of a clearing house that holds collateral for all trades and ensures the timely payment of trade proceeds to the winning trader.

Key Features of NSE

- Deep and liquid market - The NSE is one of the most liquid markets in the world, with a daily trading volume of approximately INR 10 trillion, and an average daily turnover of around INR 1.7 trillion.

- Low trading and transaction costs - The NSE charges the lowest trading fee in the world at 0.03 percent. The NSE also charges a fee of INR 1,000 per trade for retrading, which is much lower than the fees charged by other exchanges.

- Wide investor base - The NSE is the primary equity market for Indian companies to list their shares, which makes it a primary destination for retail as well as institutional investors.

- Timely settlement and delivery - The NSE is one of the few exchanges in the world that consistently achieves the delivery of securities and payment within a day of the trade.

How to Trade on NSE?

The NSE trading system allows traders to buy and sell shares for their accounts or on behalf of their clients. Investors can use computer-based trading systems or brokers to place orders to buy or sell shares. All orders to buy and sell shares placed on the trading systems are reconciled against all other orders to buy and sell before they are executed. Traders can use charts to identify the best time to buy or sell shares. They can also use both the moving average and exponential moving average indicators to determine the strength or weakness of a particular share.

NSE Membership Types and Their Benefits

- Investor Member - Investors who do not wish to trade on the NSE can choose this membership. They are allowed to access all information about share prices, but they cannot trade on the NSE.

- Trading Member - Traders who wish to trade shares on the NSE must obtain a Trading Member (TM) license.

- Associate Member - Entities that provide services to the NSE, such as banks and clearing corporations, can become Associate Members (AM).

- Clearing Member - Clearing Corporations (CCs) that service clients on the NSE can become Clearing Members (CM).

Bottom line

The National Stock Exchange of India Limited (NSE) is the premier equity market for listing companies and operating markets for trading securities in the domestic market. Established as a company under Section 25 of the Companies Act, 1956 on April 9, 1992, with its registered office at MasKEND Arcade, Church Gate, Fort, Mumbai – 400020. The NSE is one of the most liquid markets in the world, with a daily trading volume of approximately INR 10 trillion, and an average daily turnover of around INR 1.7 trillion. It charges the lowest trading fee in the world at 0.03 percent. The NSE also charges a fee of INR 1,000 per trade for retrading, which is much lower than the fees charged by other exchanges.