Stock Trading on NEAT and BOLT
Trading, Clearing and Settlement The trading in securities is buying and selling of securities listed on the recognized stock exchanges. The clearing is a process of determination of obligations of member-brokers by the stock exchanges after which the same are discharged by the concerned parties by settlement. The settlement is a process of settling of transactions in securities between buyers and sellers by exchange of money and securities respectively. Stock trading The trading on stock exchanges in India was in open outcry manner till mid 1990s. In order to provide efficiency, liquidity and transparency, NSE introduced, a nationwide, on-line, fully-automated Screen based trading system (SBTS) in November 1994 known as National Exchange for Automated Trading (NEAT) system. BSE online trading (BOLT) by BSE started in March 1995 Screen based trading system NEAT and BOLT are state-of-the-art client-server based applications where at the server end all trading information is stored in in-memory databases to achieve minimum response time and maximum system availability for users. A member, broker enter orders from the Trader Work Stations (TWSs) installed in their offices. A client of these broker can place orders through phone/internet for which he should enter Model Agreement with brokers first. Internet based trading There are many brokers who provide internet based trading facility to their clients. Investors can buy/sell securities through Trader Terminals downloaded on their computers, Trading Apps on their mobiles etc. Both NSE and BSE systems run on ‘Order driven’ systems What is ‘order-driven’ system? In an order-driven system, the traders only put their orders for buying or selling of securities whereas, in ‘quote-driven’ system, the jobbers put buy as well as sell quotes in the same scrip with a price difference. The order-driven system ensures faster processing, matching and execution of orders in a transparent manner. NSE system, is order driven from the beginning while BSE system turned completely order-driven after 13th August 2001. Till then it was both order and quote driven. Trading Hours Regular Trading in equities on the NEAT and BOLT systems are conducted from Monday to Friday between 9:15 a.m. to 3:30 p.m. Thus uniform trading hours are followed by both the stock exchanges. Pre-open session : 9:00 to 9:08 Block deal sessions: 8:45 a.m – 9:00 a.m and 2:05 p.m. – 2:20 p.m Closing session: 15:40 hrs to 16:00 hrs Why trade on recognized stock exchanges only? Investors do not get any protection if he trades outside a stock exchange. Investors gets best prices prevailing in the market on Stock Exchanges No counter-party risk involved Access to investor grievance and redressal mechanism of stock exchanges Protection up to a prescribed limit from the Investor protection fund How to know if the broker or sub broker is registered? Investor should check the Registration Certificate issued by SEBI A broker’s registration number begins with letters ‘INB’ and that of a sub-broker with the letters ‘INS’ The maximum brokerage that can be charged by a broker from his clients as commission cannot be more than 2.5% of the value mentioned in the respective purchase or sale note. What is contract note? Contract Note is a confirmation of trades done on a particular day on behalf of the client by a trading member. It imposes a legally enforceable relationship between the client and the trading member with respect to purchase/sale and settlement of trades. It also helps to settle the disputes/claims between the investor and trading member.