National Stock Exchange (NSE)
The National Stock Exchange of India (NSE) is one of the world’s largest and most advanced stock exchanges. Established to create a transparent, efficient, and accessible securities market across India, the NSE has played a vital role in modernizing the Indian financial ecosystem and driving the country’s economic growth. Headquartered in Mumbai, it was the first exchange in India to introduce an electronic, screen-based trading system, starting operations in 1994.
History and Background
The NSE was founded based on the recommendations of the Pherwani Committee, which advocated the establishment of a National Market System to overcome the shortcomings of traditional stock exchanges in India. It began its operations in major cities such as Bangalore, Vadodara, Kolkata, Chennai, Delhi, Hyderabad, and Pune.
Governed by a 13-member Board of Directors, including a Chairman, the NSE was set up to bring greater transparency, better accessibility, and world-class standards to India’s securities markets.
Objectives of the National Stock Exchange (NSE)
The NSE was established with several key objectives:
- To provide a fair, efficient, and transparent securities market using electronic trading systems.
- To establish a nationwide trading facility for equities, debt instruments, and hybrid securities.
- To ensure equal access to investors across the country via an advanced communication network.
- To enable shorter settlement cycles, ensuring faster transaction completion.
- To meet international standards of transparency, speed, and market practices.
- To reduce costs and risks through dematerialized trading and book-entry settlement.
- To improve liquidity and market depth, making securities more accessible and tradable.
Promoters of NSE
The NSE was promoted by a group of India's leading financial institutions, which provided the initial funding, credibility, and strategic support:
- IDBI (Industrial Development Bank of India)
- IFCI (Industrial Finance Corporation of India)
- GIC (General Insurance Corporation of India)
- LIC (Life Insurance Corporation of India)
- SBI (State Bank of India)
- ICICI (Industrial Credit and Investment Corporation of India)
- Bank of Baroda
- Canara Bank
- Corporation Bank
- Oriental Bank of Commerce
- Punjab National Bank
- Indian Bank
- Union Bank of India
Special Features of NSE
1. Market Segments
- Capital Market Segment: Includes trading in equities, convertible debentures, and retail trade in non-convertible debentures.
- Wholesale Debt Market Segment: Facilitates high-value trades in government securities, public sector bonds, commercial papers, treasury bills, etc.
2. Listing Criteria
- Companies with a paid-up equity capital of ₹10 crore or more are eligible for listing.
3. Computerized and Satellite-Based Trading
- All trading terminals are linked via satellite (VSAT) to the central computer in Mumbai, allowing for real-time order execution across India.
4. Screen-Based, Order-Driven Trading System
- Trading is conducted electronically with automatic price-time priority order matching, ensuring fairness and transparency.
5. Settlement Cycle
- Trades are settled on a T+2 basis.
- NSE’s clearing house guarantees settlement of all trades, reducing counterparty risk.
NSE Trading Software – NEAT
The NSE uses a highly advanced trading software called NEAT (National Exchange for Automated Trading).
Key Features:
- Electronic trading through computers, eliminating manual processes.
- Members are connected via lease lines and VSAT terminals to the central server.
- All communication is managed via satellite, ensuring reliability and national reach.
- A dedicated Network Management Centre (NMC) monitors and manages the entire trading infrastructure.
Clearing and Settlement – NSCCL
The National Securities Clearing Corporation Ltd. (NSCCL), a wholly owned subsidiary of NSE, handles clearing and settlement operations.
Key Roles:
- Clearing house for all trades – both in physical and dematerialized forms.
- Depository enabled settlements – ensures trades are settled electronically via NSDL or CDSL.
- Funds settlement through clearing banks – credits and debits are processed through designated banks.
- Delivery Versus Payment (DVP) system – ensures
Advantages of the National Stock Exchange (NSE)
- Screen-Based Trading - Offers fast, accurate, and transparent order execution.
- Wider Accessibility - Nationwide access through satellite-linked trading terminals.
- Transparent Transactions - Full visibility into transaction price, time, and order details (without disclosing identities).
- Automatic Order Matching - Orders are matched by the system based on price-time priority, ensuring fairness.
- Efficient Settlement of Corporate Benefits - Dividends, interest, and bonuses are processed efficiently through the system.
- Anonymity of Traders - Trading identities remain confidential, reducing the chance of manipulation.
- Paperless Trading - Eliminates manual paperwork and improves processing speed.
- Quick and Secure Settlements - All debits and credits are managed electronically through clearing accounts.
- Improved Transaction Quality - Demat trading reduces bad deliveries and fraud risks.
- Lower Transaction Costs and Brokerage - Brokerage is around 0.1% at NSE, compared to 0.5% on traditional exchanges like BSE.
Conclusion
The National Stock Exchange of India has revolutionized the Indian securities market with its innovative technology, efficient systems, and investor-friendly practices. With world-class infrastructure, widespread accessibility, and commitment to transparency, NSE continues to be a cornerstone in India’s financial development and a trusted platform for investors around the globe.
FAQ's
How is NSE different from BSE?
NSE was the first to introduce electronic trading, while BSE (Bombay Stock Exchange) is older and initially used an open outcry system. NSE generally has higher volumes and more modern technology.
What is Nifty 50?
Nifty 50 is the flagship index of NSE, comprising the top 50 companies listed on NSE by market capitalization.
Can foreign investors trade on NSE?
Yes, foreign institutional investors (FIIs) and foreign portfolio investors (FPIs) can trade on NSE subject to RBI and SEBI regulations.
How can I invest through NSE?
Investors can open a trading and Demat account with a registered broker and trade online through NSE’s platform.
Does NSE provide derivatives trading?
Yes, NSE offers derivatives trading including futures and options on equities, indices, currencies, and commodities.
