National Stock Exchange – How it Works

The National Stock Exchange of India Limited is the country’s leading financial exchange, with headquarters in Mumbai. Incorporated in 1992, this exchange system ranked in the fourth place in the world according to the metric of its trading volume in 2015.

This stock exchange began its operations in 1994, set up by an assembly of leading financial institutions and at the recommendations formulated by Pherwani Committee, this stock exchange comprised of diverse shareholding assets from both global and domestic investors.It was also the first stock exchange in the country to introduce electronic trading facilities, thus facilitating the integration of investors throughout the country into a single base.

How Does NSE Work?

Trading is carried out through an electronic limit order book where order matching takes place through a trading computer. The process does not have the interference of specialists or market makers, when investors place a market order, it is automatically matched with a limit order. Sellers and buyers remain anonymous.

It offers more transparency to investors. The orders are placed via brokers who often provide the facility of online trading to customers. Few institutional investors can avail this facility of placing their orders directly into the trading system. Trading on equities segment is carried on all days except on Saturdays, Sundays and other holidays declared by the stock exchange. The market timings –

Pre-opening session – 

1. Order entry opens at 9.00 hours
2. Order entry closes at 9.08 hours

Regular session – 

1. Market opens at 9.15 hours
2. Market closes at 15.30 hours

National Stock Exchange’s flagship index is the Nifty50 representing about 63% of the total quantum of market capitalisation listed under it. It covers approximately 12 sectors of the economy under 50 variable stocks.The stock exchange is spearheaded by Vikram Limaye as the CEO and Managing Director and Ashok Chawla as the Chairman of the Board of Directors.

Benefits of Listing– 

• This trading system provides comprehensive visibility in various trade and post-trade information. Investors can easily look up the top buy and sell orders on it, along with the total number of securities available for a transaction.
• The volume of trading activity lowers the impact cost on it, which decreases the expenses of trading for investors. The exchange’s automated trading system helps to maintain transparency and consistency with an investor.
•  The NSE is the country’s largest exchange market with capitalisation exceeding $2.25 Trillion.

• The pace at which orders are processed in this Exchange helps investors to avail the best prices. 
•  Listed companies can avail the provision of receiving trade statistics each month, to track the performance of listed companies.

NSE offers investment and trading in the segments mentioned below –

1.This comprises of a volatile class of assets which helps investors to maximise the returns from investments. Equity investment consists of several types of assets, namely, Mutual Funds, equities, indices, Exchange Traded Funds, Security Lending and Borrowing Scheme, Initial Public Offerings, etc. 

2.Derivatives traded include Global indices like Dow Jones, CNX 500, etc., commodity derivatives, currency derivatives, interest rate futures, etc. 

3. Debt type of investment pool consists of various Mutual Funds, Exchange Traded Funds, etc. where the core asset holdings comprise of different long and short-term bonds, corporate bonds, securitised products, etc.

Major Indices in this Exchange System – 

Index is created by choosing a collection of stocks that represent the whole market, or a specific segment of it. The most important broad market indices, consisting of the liquid stocks listed on this stock exchange are –

• Nifty 50 index
• Nifty 100 index
• Nifty Next 50 index
• Nifty Midcap 50 index
• Nifty Smallcap 250 index
• India Vix index

NSE is a premier marketplace enabling efficient trading,visibility and providing high liquidity of assets with accurate prices.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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