NSE or National Stock Exchange – How it Works, Advantages, Statistics & moreLast Updated Date: Nov 17, 2022
Located in Mumbai, the NSE or National Stock Exchange was founded in 1992 by a group of financial institutes to bring better transparency to the Indian capital market and provide access to investors from all over the nation.
It was the first exchange in India to provide completely automated trading. Girish Chandra Chaturvedi is the chairman of NSE, as of 2020.
NSE works on five core values namely Integrity, Trust, Customer-focused culture, respect and care for the individual, passion for excellence, and Teamwork.
All about NSE or National Stock Exchange
The National Stock Exchange of India is a bisection of types of capital markets existing i.e. the primary market and the secondary market.
The primary market, also known as the new issue market, focuses on issuing the securities for the first time.
The capital market or stock exchange is a market for sale and purchase of previously issued or second-hand securities.
The logo of the NSE is a symbolic indication of a nationwide securities trading facility making sure of equality and fair access.
It promises the same to investors and any trading member within the country. NSE was first formed in 1992 as a tax-paying company, a first for stock exchange in India.
It later moved into the capital market and wholesale debt market in 1994 and then the derivative market in 2000. NSE conducts transactions in the wholesale debt, equity, and derivative markets.
It had accumulated $2.27 trillion in total market capitalization. As of June 2020, this makes it one of the world’s largest stock exchanges.
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The working protocol of the NSE
Roughly 7800 Indian companies offer shares for the general public. Out of which, around 4000 companies are in the NSE.
There are estimates that the NSE contributes 4% of the GDP in India. That proves the impact this institution has.
Now, let us discuss how the National Stock Exchange work:
Find a Broker
The first obvious step is to find a broker who deals with the NSE.
Once you are happy with the fees and experiences they had, you must open a couple of accounts to begin stock trading – a Demat, and a Trading account.
A Trading account is where you place a buying or selling order of the interested stock, whereas, the Demat accounts keeps a record of all those shares which you own after you do trading.
Place an Order
Once you sort out the accounts, the broker gives you a Trading platform, where you can monitor your favourite stocks, and place an order whenever you feel the price is right.
Now, once you place an order, the NSE follow up that electronic request to its servers.
Find a Seller
Now, if you are a buyer, the NSE will look into the millions of traders and find a suiter for your order, who is willing to sell the stocks.
Of course, you must mention the number of shares you wish to buy first. One of the interesting features, while you trade here, is you always have the option to stay anonymous to the seller and vice versa.
Find a Buyer
If you are a seller, you can subsequently place an order with the number of shares you decide to sell. The NSE server will find you the right buyer.
Now, the process may get done in minutes, or it can take hours, depending upon various algorithms.
Once each party agrees, NSE will charge the funds from the linked savings account of whoever is the buyer.
Now, if you are the buyer, the amount will get deducted on the day you are trading. However, you can see the purchased stocks delivered to your Demat account after two days from the day you traded.
Meanwhile, you can sell the stocks again, if you wish; the Demat account will get updated after two days from the trading day.
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Data and Information Vending Service of NSE
One of the major features of NSE is of the data and information vending services provided by them.
As per the guidelines of the Data Analytics strategies followed by the concerned exchange, there is a particular setup dedicated just for the Data Services.
This is to provide the market of NSE with quotes and data that we can use to understand the capital market segment and everything related to market data, corporate data, lending, and borrowing.
The real-time data provided by this concern comes under 3 levels. The first level would be – providing the best bid price and ask price, while the level 2 is to provide an in-depth data analysis of the market and give the trader with five best bid and ask prices.
Likewise, the Third Level provides all the services provided by level 2 along with 20 different best bidding and asking prices.
This real-time data will be present in the TCP-IP format. It comes with a dedicated channel and leased line circuits.
The customer will have ownership on this line and it will be connected from the NSE to the premises of the customer. Also, the customer can also take data from potential authorized data vendors.
How does NSE work?
NSE provides the investor with a transparent fall or rise in price of securities through its completely electronic screen.
It informs the investors about the present market stature, so they can plan strategies of investment and make fruitful returns.
The NSE ensures an easy way of trading through getting associated with the depository – NSDL. This allows investors to hold, trade, and invest securities.
Investors are provided with the option of choice, and the freedom to make their personal call of trade digitally.
Such facilities were not accessible by every stock market investor, especially the ones who belong from the remote locations.
Now, it is passed on to everyone, including the remotes locations. These are making the stock market a bit more transparent and a lot easier.
NSE made trading easier as it is fully electronic, it also made trading more transparent. More investors are able to invest as the basic requirements to qualify as an investor are much more simple.
This led to more investment and development in the capital market.
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Why should you trade in the NSE?
There are several significant reasons why you should trade in the NSE. Prior to the fact that it is the best stock exchange in the country, and of the best in the world, let us check some other aspects that make it unique:
Transparency and visibility
If you are a trader, the first thing that you should check is the stocks’ performance over the years. Based on that, you can make an assumption whether you should buy, sell, or hold a particular stock.
What NSE provide is complete visibility. You can get tons of stats that can give you its performance, and there are much news feeds where you can get a lot of information about the companies.
Eventually, every data you get is in front of you.
According to a survey back in 2015, the stocks traded in the NSE are 4th in the world when we compare the total share volume. Therefore, the stock price gets impacted and tends to get low.
So, each time when you trade, you do bear less expense for trading. Of course, the NSE is elite in sharing the records at full transparency.
Thus, if you do the right deals, the stock exchange won’t be a roadblock for you to earn more.
Seamless Order Placing
When you perform deals in the NSE, everything is automated. You won’t have to submit any record that needs to get verified.
The entire process is autonomous. Your headache starts and ends at making proper deals while trading. So, you can leave the rest to the institute.
One more exciting feature is the rate of order placing. The entire process is quick and robust, and most of the time gets done in minutes.
That is why it breaks the highest number of trades in a day record almost every other day.
Trade via several popular indices
Some of the most popular indices from the NSE are the Nifty 50 index and Nifty 100 index, which are, of course, the front liners.
On top of that, there are Nifty Next 50 index, Nifty Midcap 50 index, Nifty Smallcap 250 index, and India Vix index to match the status.
Apart from that, there are several indices that the NSE also deals with which are thematic, strategy, hybrid and fixed income-based.
What are the various segments that the NSE deals?
The National Stock Exchange practically deals with several forms of trading and investments. However, we can, anytime, distinguish them by three main categories:
Equity: The NSE’s primary job is to avail trading facilities to deal in companies’ equity assets. Now, it can be equity shares, trading via several indices, mutual funds, and many more.
The core idea is to increase ROI.
Equity Derivatives: The second segment associated with the NSE is Derivatives. There are tons of Global indices that fall under this category.
The Dow Jones and CNX 500 are two of the best examples. In recent years, it has added new features index futures and derivative contracts.
Debt: All the core mutual funds, exchange-traded fund, and many more fall under this category. Here, you usually have to deal with corporate bonds, company bonds, and securitized products.
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Advantages in NSE – Trader Perspective
The major advantage involved for a trader while dealing in the National Stock Exchange is that they can be sure of the fact that it is a premium Marketplace. It has an automated trading system promising consistency and transparency in the trade.
Further, it matches the trade efficiency thereby increasing the confidence of the investor and visibility of the market. The system provides seamless trading experience and end to end information post the trade.
The exchange’s online portal provides all corporate announcements and results. This proves the fact that listing on NSE can promise reach, true.
This stock exchange also provides a trading platform that extends all over the country. The investors can avail of any trading facility provided by this exchange.
The exchange makes use of advanced communication Technologies and provides instant reach, which can be accessed through any given location.
National Stock Exchange provides the investor with services and education. It helps them in dealing with all the issues that are provided for trade via their platform.
This body also believes that it is important to educate and empower investors. There are several investor service centers run by the National Stock Exchange, and equally spread across the country.
It is specifically to cater to the needs of the investors.
NSE Relocation Permissions
On that note, NSE has permitted the relocation of the trading terminals and went to unauthorized regions.
In a recent circular by the concern, regarding business continuity during COVID-19, they have confirmed details regarding the relocation and it has conditions the traders need to understand.
The exchange asks for broking houses to come up with an internal policy that showcases proper monitoring and controls.
It is to make sure unauthorized trading activity does not happen. Also, the brokerage house should provide details of users whom they have permitted to operate from remote locations.
The brokerages will be responsible to make sure that the approved users have the access to terminals.
Terminal Operations of National Stock Exchange
Before the terminal operations start from alternate locations, the board has asked for approved users.
The list includes terminal details, certificate details, and location address. The brokerages or the traders should submit all of this to the exchange.
According to the existing policies, the trading terminal can operate only from the main office or the respective branches. The brokers will be displaying SEBI registration certificate as well on the notice board.
The exchange has promised the temporary measure for these requirements and certain relaxation for the locations.
Also, the board has confirmed and set that the internal policy for working from different locations requires approval.
Besides, it should be from the senior authorities and it could be the CEO, director, or compliance officer.
The board has also issued a work-from-home advisory for the employees and according to certain sources, the employees are categorized into 2 categories – one set working from home and the other set that need to visit the exchange premises.
The exchanges and regulatory authorities are also focusing on stock market functioning even in the wake of the coronavirus outbreak.
NSE or National Stock Exchange – Conclusion
NSE has played a huge role in encouraging and helping investors invest. It has huge volumes of share and is a hub of opportunities for companies and investors alike.
It also bridges the gap between the two by facilitating smooth trading and investments.
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