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National Stock Exchange (NSE) - An Overview Research Team | Posted On Tuesday, April 14,2009, 11:28 AM

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National Stock Exchange (NSE) - An Overview



With the liberalization of the Indian economy, it was found expected to lift the Indian stock market trading system on par with the international standards, on the basis of the recommendations of high powered Pherwani Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, preferred commercial banks and others.

Trading at NSE can be classified under two broad categories :

  • a .Wholesale debt market and
  • b .Capital market.

There are two kinds of players in NSE :

Wholesale debt market operations are like money market operations, institutions and corporate bodies enter into high value transactions in financial instruments such as government securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc.

  • 1 .Trading member.
  • 2 .Participants.

Known members of NSE are called trading members who trade on behalf of themselves and their clients. Participants include trading members and great players like banks who take direct settlement responsibility.

Trading at NSE takes place through a fully automated screen-based trading mechanism which adopts the principle of an order-driven market; trading members can stay at their offices and carry out the trading, since they are linked through a communication network. The prices at which the buyer and seller are eager to transact will appear on the screen. When the prices match the transaction will be completed and a verification slip will be printed at the office of the trading member.

See Also: Foreign Exchange Market In India

NSE has several advantages over the traditional trading exchanges. They are as follows :

  • NSE brings an integrated stock market trading network across the nation.
  • Investors can trade at the same price from anywhere in the country since inter-market operations are streamlined coupled with the countrywide access to the securities.
  • Delays in communication, late payments and the malpractice’s prevailing in the traditional trading mechanism can be done away with greater operational efficiency and informational transparency in the stock market operations, with the support of total computerized network.

Unless stock markets provide professionalized service, small investors and foreign investors will not be interested in capital market operations. And capital market being one of the major sources of long-term finance for industrial projects, India cannot afford to damage the capital market path. In this regard NSE gains vital importance in the Indian capital market system.

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