Working Of NSE

( National Stock Exchange)

By: sanskruti vethekar
11a
Roll no- 12
Index

1. Objective of project
2. Introduction on NSE
3. History of NSE
4. Market segment in NSE
5. Trading Mechnanism
6. Investors protection and education
7. Listing process on NSE
8. Role of SEBI in NSE
9. Bibliography
10. Conclusion
 Objective of project
The objective of a project focused on the workings of the National Stock
Exchange (NSE) is to provide a comprehensive insight into the dynamics of
NSE's operations within India's financial markets. This entails understanding
the structure of NSE, including its market segments like equities, derivatives,
and debt instruments, and delving into the trading processes and regulatory
frameworks that govern its functioning. Through historical data analysis, the
project seeks to uncover trends and patterns in market behavior, shedding light
on investor sentiments, market volatility, and economic factors impacting
NSE's performance. By evaluating NSE's compliance with regulatory standards
set by the Securities and Exchange Board of India (SEBI), the project aims to
assess the exchange's commitment to investor protection, market integrity, and
transparency. Additionally, exploring NSE's technological advancements, risk
management practices, and investor education initiatives will contribute to a
holistic understanding of NSE's role in facilitating capital formation, market
liquidity, and investor confidence within India's financial ecosystem.
 Introduction on NSE

The National Stock Exchange (NSE) of India stands as a

cornerstone of the nation's financial ecosystem,
representing a pivotal hub for investors, companies, and
market participants alike. Established in 1992, NSE has
emerged as a premier stock exchange renowned for its
technological innovations, diverse market segments, and
robust regulatory framework. With a focus on
transparency, efficiency, and investor protection, NSE
plays a crucial role in facilitating capital formation,
market liquidity, and fair trading practices. This
introduction sets the stage for exploring NSE's
multifaceted operations, its impact on India's financial
landscape, and its significance as a catalyst for economic
growth and development.
 History of NSE
The National Stock Exchange of India Limited (NSE) was established in
1992, and within a year, it gained recognition as a stock exchange
under the Securities Contracts (Regulation) Act, 1956. This recognition
marked the beginning of a new era in India's financial markets,
characterized by technological innovation and transparency. NSE was
promoted by prominent financial institutions such as the Industrial
Development Bank of India (IDBI) and the Industrial Credit and
Investment Corporation of India (ICICI), among others, reflecting a
collaborative effort to modernize India's stock market infrastructure.

From its inception, NSE adopted a technology-driven approach,

introducing screen-based electronic trading that replaced the
traditional open outcry system. This shift revolutionized trading by
enhancing efficiency, reducing transaction times, and ensuring greater
transparency in price discovery. The introduction of electronic trading
was a crucial step towards making Indian financial markets more
accessible and globally competitive.
One of NSE's significant contributions to India's financial landscape is the development of benchmark indices like the
Nifty 50. Launched in 1996, the Nifty 50 index comprises fifty major stocks listed on the NSE and serves as a widely
recognized benchmark for Indian equity markets. The creation of such indices facilitated better tracking and analysis
of market performance, aiding investors and market participants in making informed decisions.

In 2005, NSE underwent demutualization, separating ownership and management from trading rights. This move
aimed to enhance governance, transparency, and accountability within the exchange, aligning it with international best
practices. Demutualization also contributed to strengthening investor confidence and furthering the development of
India's capital markets.

Over the years, NSE expanded its product offerings beyond equities to include derivatives, currency derivatives, debt
instruments, and mutual funds. This diversification of products contributed to the depth and liquidity of India's
financial markets, attracting a broader spectrum of investors and boosting market activity.

NSE's technological advancements have been instrumental in shaping India's financial landscape. It introduced
features like algorithmic trading, co-location services, and high-frequency trading, catering to the evolving needs of
market participants. These technological innovations have enhanced market efficiency, liquidity, and risk
management capabilities.
 Market Segment in NSE
In the National Stock Exchange (NSE), there are primarily three main market
segments:
1. Equity Market:
● This segment deals with the trading of equity shares of publicly
listed companies.
● Investors buy and sell shares through the NSE platform, and prices
are determined by supply and demand.
● Equity market trading includes both cash (delivery-based) and
derivatives (futures and options) trading.
● The equity market on NSE also facilitates primary market activities
such as Initial Public Offerings (IPOs) and Follow-on Public
Offerings (FPOs).
● Companies raise capital by issuing new shares to investors in the
primary market, which then become available for trading in the
secondary market.
Derivatives Market:
● The derivatives segment includes futures and
options contracts based on various underlying
assets such as stocks, indices, currencies, and
commodities.
● Futures contracts involve an agreement to buy or
sell the underlying asset at a predetermined price
and date in the future.
● Options contracts provide the buyer with the right
(but not the obligation) to buy or sell the underlying
asset at a specified price within a specific period.
● Used for risk management (hedging) and
profit-seeking (speculation) strategies.
Debt Market:
● The debt segment focuses on trading debt
instruments such as government securities,
corporate bonds, debentures, and other
fixed-income securities.
● Investors can buy and sell these debt instruments
on the NSE platform, providing opportunities for
investment diversification and income generation.
● Companies, governments, and financial
institutions issue debt instruments in the primary
market to raise capital.
● Debt instruments in the market
have fixed or floating interest rates,
determining the income (interest)
earned by investors.
 Trading Mechanism
1. Trading Hours and Sessions:
● NSE operates from Monday to Friday, with specific trading
hours for different segments:
● Equity Market: The regular trading hours for the equity
segment are from 9:15 AM to 3:30 PM, with a pre-open
session from 9:00 AM to 9:15 AM and a post-close
session from 3:30 PM to 3:40 PM.
● Derivatives Market: Futures and options trading has
extended hours from 9:00 AM to 11:55 PM (for currency
derivatives) and 9:15 AM to 3:30 PM (for equity
derivatives).
● Debt Market: The trading hours for the debt segment
vary depending on the type of debt instrument and the
trading platform (WDM or RDM).
 2. Types of Orders:
● Market Order: An order to buy or sell securities at the prevailing market price. It is executed immediately at the
best available price.
● Limit Order: An order to buy or sell securities at a specific price (limit price) or better. It is executed only if the
market price reaches or surpasses the limit price.
● Stop-Loss Order: A conditional order to buy or sell securities when the market price reaches a specified trigger
price (stop price). It helps limit losses or protect profits.
● Bracket Order: A combination of a limit order and a stop-loss order, where a trader specifies a target price
(profit booking) and a stop-loss price to manage risk.
3. Clearing and Settlement Process:
● Trade Execution: After an order is matched between a buyer and a seller, the trade is executed on NSE's trading
platform.
● Trade Confirmation: Both parties receive trade confirmations detailing the executed price, quantity, and trade
ID.
● Clearing: NSE's clearing house (National Securities Clearing Corporation Limited - NSCCL) acts as a central
counterparty to clear and settle trades.
● Settlement: Settlement involves the actual transfer of securities and funds between buyer and seller. NSE
follows a T+2 settlement cycle, where transactions settle two business days after the trade date.
● Delivery vs. Payment (DVP): NSE uses a DVP mechanism for settlement, ensuring simultaneous transfer of
securities and funds to mitigate counterparty risk.
 Investors protection and education in NSE
1. Investor Grievance Redressal Mechanisms:
● Internal Mechanisms: NSE has internal mechanisms to address
investor grievances. This includes dedicated customer service
departments, online portals, and helplines where investors can
register complaints or seek assistance regarding trading,
settlement, or other market-related issues.
● Investor Service Centers: NSE operates Investor Service Centers
(ISCs) in various cities, providing a physical space for investors to
seek guidance, resolve grievances, and access educational
resources.
● Investor Protection Fund (IPF): NSE contributes to the IPF, which
serves as a pool of funds to compensate investors in case of
default by trading members or brokers. The IPF enhances investor
confidence by providing a safety net against financial losses.
 ● Arbitration and Dispute Resolution: NSE facilitates arbitration and dispute resolution
mechanisms for resolving disputes between investors and trading members. This
includes arbitration panels and tribunals that adjudicate on financial disputes and
enforce settlement decisions.
● Regulatory Oversight: SEBI oversees investor grievance redressal mechanisms
across all stock exchanges, including NSE. SEBI mandates compliance with investor
protection regulations, ensuring fair treatment of investors and prompt resolution of
grievances

2. Investor Awareness Programs:

● Educational Workshops and Seminars: NSE organizes educational workshops,
seminars, and webinars to enhance investor knowledge about financial markets,
investment products, risk management, and regulatory compliance.
● Investor Education Websites: NSE maintains investor education websites with
resources such as FAQs, guides, videos, and interactive tools to help investors
understand market concepts, trading processes, and investment strategies.
● Investor Protection Initiatives: NSE participates in investor protection initiatives,
including disseminating information about regulatory updates, market risks, and
investor rights. This includes providing information on how to verify the credentials
of brokers, report suspicious activities, and safeguard personal financial information.
 Listing Process On NSE
Step 1: Submit application for In-principal
approval
The issuer shall apply for in-principle approval by submitting

the following documents on listing@nseifsc.co.in

(a) Draft listing particulars

(b) Draft Listing Application Form

(c) Eligibility checklist

(d) If applicable, the written request for the omission of

information from listing particulars

Step 2: Issuance of In-principal approval
NSE IFSC Team will review the documents, if there is no observation then the

Exchange issues “no comments” and grant in-principal approval to the issuer

Step 3: Submit Application for Listing & Admission to Trading

The following documents must be submitted to the Exchange

(a) Listing Application Form

(b) Offering Circular

(c) Pricing Supplement

(d) Listing Agreement

(e) Intimation of Allotment date of securities

Step 4: Admission to Trading

Approval letter will be issued to issuer for listing and trading of debt securities
 Role of SEBI in National Stock Exchange

SEBI's role in the National Stock Exchange (NSE) of India is

pivotal in ensuring the smooth functioning, transparency, and
investor protection within the exchange. Here's how SEBI
influences and collaborates with NSE:

Regulatory Oversight:
● SEBI provides regulatory oversight to NSE, setting
guidelines, rules, and regulations that govern the
exchange's operations, trading mechanisms, and
market participants. This oversight ensures
compliance with securities laws, market integrity,
and investor protection.
Market Surveillance:
● SEBI conducts market surveillance activities to monitor trading activities, detect market manipulation,
insider trading, and other fraudulent practices within NSE. This surveillance helps maintain market
transparency, fairness, and investor confidence.
Listing Requirements:
● SEBI mandates listing requirements for companies seeking to list their securities on NSE. These
requirements include eligibility criteria, disclosure norms, corporate governance standards, and
compliance with SEBI regulations to ensure transparency and investor trust.
●
Issuer Regulations:
● SEBI regulates issuers of securities listed on NSE, ensuring compliance with disclosure norms, periodic
reporting requirements, and corporate governance standards. SEBI's oversight promotes transparency,
accountability, and investor confidence in listed companies.
Investor Protection:
● SEBI plays a crucial role in investor protection within NSE. It implements investor education programs,
awareness initiatives, and grievance redressal mechanisms to safeguard investor interests, promote
financial literacy, and address investor complaints.
Market Development:
● SEBI collaborates with NSE to foster market development initiatives, product innovation, and
infrastructure enhancements. This includes facilitating market access for retail and institutional
investors, introducing new trading products, and promoting market liquidity.
Regulating Market Intermediaries:
● SEBI regulates market intermediaries operating within
NSE, such as stockbrokers, clearing members, depository
participants, and mutual funds. SEBI sets eligibility
criteria, compliance standards, and codes of conduct to
ensure market integrity and investor protection.
Enforcement Actions:
● SEBI has the authority to take enforcement actions
against market participants and entities violating
securities laws, trading regulations, or SEBI guidelines
within NSE. This includes imposing penalties, initiating
investigations, and enforcing compliance measures.
Policy Formulation:
● SEBI collaborates with NSE and other stakeholders in
policy formulation, rulemaking, and market reforms.
SEBI's inputs and guidance contribute to the
development of effective regulatory frameworks, risk
management practices, and market infrastructure
improvements within NSE.
 Conclusion

The National Stock Exchange (NSE) of India is a key player in the country's
financial landscape. It offers diverse market segments such as equities,
derivatives, and debt instruments. NSE's electronic trading platforms ensure
efficient and transparent market operations. Regulatory oversight by SEBI
promotes investor protection and market integrity within NSE. Companies benefit
from NSE's platform to raise capital through IPOs and FPOs. NSE's market indices,
like Nifty 50, serve as benchmarks for market performance. Technological
advancements and risk management systems enhance NSE's reliability and
security. Compliance with SEBI regulations and listing requirements upholds
corporate governance standards. NSE's role is pivotal in fostering liquidity, price
discovery, and investor confidence. Overall, NSE's contributions drive economic
growth and capital market development in India.
 BIBLIOGRAPHY

nseindia.com
economictimes.com
investopedia.com