Overview

The National Stock Exchange (NSE) is India's leading stock exchange based in Mumbai.

It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading.

NSE has a market capitalization of around 7,262,507 crore (US$ 1,648.59 billion).

NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities.

Origins

The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company.

In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956.

In June 1994,NSE commenced operations in the Wholesale Debt Market (WDM) segment.

The Capital market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000.

Progress On A Timeline

November 1992 Incorporation April 1993 Recognition as a stock exchange June 1994 Wholesale Debt Market segment goes live November 1994 Capital Market (Equities) segment goes live April 1995 Establishment of NSCCL, the first Clearing Corporation October 1995 Became largest stock exchange in the country April 1996 Commencement of clearing and settlement by NSCCL April 1996 Launch of S&P CNX Nifty November 1996 Setting up of National Securities Depository Limited, first

depository in India, co-promoted by NSE December 1996 Commencement of trading/settlement in dematerialised

securities May 1998 Launch of NSE's Web-site: www.nse.co.in July 1998 Launch of NSE's Certification Programme in Financial Market

•February 2000 Commencement of Internet Trading

•June 2000 Commencement of Derivatives Trading (Index Futures)

•June 2001 Commencement of trading in Index Options

•July 2001 Commencement of trading in Options on Individual Securities

•November 2001 Commencement of trading in Futures on Individual Securities

•January 2002 Launch of Exchange Traded Funds (ETFs)

•June 2003 Launch of Interest Rate Futures

•August 2003 Launch of Futures & options in CNXIT Index

•August 2008 Launch of Currency Derivatives

•August 2009 Launch of Interest Rate Futures

•November 2009 Launch of Mutual Fund Service System

•February 2010 Launch of Currency Futures on additional currency pairs

Indices

NSE has launched several stock indices, including:

•S&P CNX Nifty(Standard & Poor's CRISIL NSE Index)

•CNX Nifty Junior

•CNX 100 (= S&P CNX Nifty + CNX Nifty Junior)

•S&P CNX 500 (= CNX 100 + 400 major players across 72 industries)

•CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200)

S&P CNX Nifty

S&P CNX Nifty is a well diversified 50 stock index accounting for 23 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds.

S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL has a Marketing and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services.

FACTS:

The total traded value for the last six months of all Nifty stocks is approximately 48% of the traded value of all stocks on the NSE.

Nifty stocks represent about 56% of the Free Float Market Capitalization as on Sep 30, 2010.

Impact cost of the S&P CNX Nifty for a portfolio size of Rs.50 lakhs is 0.06%.

CNX Nifty Junior The next rung of liquid securities after S&P CNX Nifty is the CNX Nifty

Junior. We can say that the S&P CNX Nifty and the CNX Nifty Junior as making up the 100 most liquid stocks in India.

As with the S&P CNX Nifty, stocks in the CNX Nifty Junior are filtered for liquidity, so they are the most liquid of the stocks excluded from the S&P CNX Nifty.

S&P CNX Nifty and the CNX Nifty Junior are synchronized so that the two indices will always be disjoint sets; i.e. a stock will never appear in both indices at the same time.

FACTS :

CNX Nifty Junior represents about 11 % of the Free Float Market Capitalization as on Sep 30, 2010.

The traded value for the last six months of all Junior Nifty stocks is approximately 14% of the traded value of all stocks on the NSE

Impact cost for CNX Nifty Junior for a portfolio size of Rs.25 lakhs is 0.09%.

CNX 100

CNX 100 is a diversified 100 stock index accounting for 35 sectors of the economy.

CNX 100 = S&P CNX Nifty + CNX Nifty Junior

CNX 100 is owned and managed by India Index Services & Products Ltd. (IISL). Which is a joint venture between CRISIL & NSE. IISL is India’s first specialized company focused upon the index as a core products.

FACTS:

CNX 100 represents about 67% of the Free Float market capitalization as on Sep 30, 2010.

The average traded value for the last six months of all CNX100 stocks is approximately 61 % of the traded value of all stocks on the NSE.

Impact cost for CNX 100 for a portfolio size of Rs. 50 Lakhs is 0.07%.

S&P CNX 500

The S&P CNX 500 is India’s first broad based benchmark of the Indian capital market.

S&P CNX 500 = CNX 100 + 400 major players across 72 industries

Industry weightages in the index reflect the industry weightages in the market. For e.g. if the banking sector has a 5% weightage in the universe of stocks traded on NSE, banking stocks in the index would also have an approx. representation of 5% in the index.

FACTS:

The S&P CNX 500 represents about 90% of the Free Float Market Capitalization and about 87% of the total turnover on the NSE as on Sept 30, 2010.

CNX Midcap

The primary objective of the CNX Midcap Index is to capture the movement and be a benchmark of the midcap segment of the market.

The CNX Midcap Index has a base date of Jan 1, 2003 and a base value of 1000.

All constituents of the CNX Midcap Index must have a minimum listing record of 6 months.

All companies in the CNX Midcap Index have a minimum track record of three years of operations with a positive net worth.

Markets

Currently, NSE has the following major segments of the capital market:

•Equity

•Futures and Options

•Retail Debt Market

•Wholesale Debt Market

•Currency futures

•MUTUAL FUND

•STOCKS LENDING & BORROWING

Equity

NSE started trading in the equities segment (Capital Market segment) on November 3, 1994 and within a short span of 1 year became the largest exchange in India in terms of volumes transacted.

Trading volumes in the equity segment have grown rapidly with average daily turnover increasing from Rs.17 crores during 1994-95 to Rs.15,687 crores during FY 2009-10.

Under equity we will be discussing the following points:

LISTING

TRADING

CLEARING AND SETTLEMENT

LISTING•Listing on NSE provides qualifying companies with the broadest access to investors, the greatest market depth and liquidity, cost-effective access to capital, the highest visibility, the fairest pricing, and investor benefits.

•Securities listed on the Exchange are required to fulfill the eligibility criteria for listing.

Eligibility Criteria for Listing

IPOs by Companies

1.The paid up equity capital of the applicant shall not be less than Rs. 10 crores and the capitalisation of the applicant’s equity shall not be less than Rs. 25 crores

2.The Issuer shall have adhered to conditions precedent to listing as emerging from inter-alia from Securities Contracts (Regulations) Act 1956, Companies Act 1956, Securities and Exchange Board of India Act 1992.

3.Atleast three years track record.

4. The applicant desirous of listing its securities should satisfy the exchange on the following:

a)No disciplinary action by other stock exchanges and regulatory authorities in past three years

b)Redressal Mechanism of Investor grievance

c)Distribution of shareholding

d)Details of Litigation

e)Track Record of Director(s) of the Company

Listing ProcedureAn Issuer has to take various steps prior to making an application for listing its securities on the NSE. These steps are essential to ensure the compliance of certain requirements by the Issuer before listing its securities on the NSE. The various steps to be taken include:

Approval of Memorandum and Articles of Association

Approval of draft prospectus

Submission of Application

Listing conditions and requirements

Listing Fees

Companies which have a paid up share, bond and/ or debenture and/or debt capital, etc. of more than Rs.500 crores will have to pay minimum fees of Rs.3,75,000 and an additional listing fees of Rs.2,500 for every increase of Rs.5 crores or part thereof in the paid up share, bond and/ or debenture and/or debt capital, etc.

Companies which have a paid up share, bond and/ or debenture and/or debt capital, etc. of more than Rs.1,000 crores will have to pay minimum fees of Rs.6,30,000 and an additional listing fees of Rs.2,750 for every increase of Rs.5 crores or part thereof in the paid up share, bond and/ or debenture and/or debt capital, etc.

TRADINGThe NSE trading system called 'National Exchange for Automated Trading' (NEAT)

Circuit BreakersThe Exchange has implemented index-based market-wide circuit breakers in compulsory rolling settlement with effect from July 02, 2001.

The market-wide circuit breakers are triggered by movement of either the BSE Sensex or the NSE S&P CNX Nifty, whichever is breached earlier. In case of a 10% movement of either of these indices, there would be a one-hour market halt if the movement takes place before 1:00 p.m. In case the movement takes place at or after 1:00 p.m. but before 2:30 p.m. there would be trading halt for ½ hour. In case movement takes place at or after 2:30 p.m. there will be no trading halt at the 10% level and market shall continue trading.In case of a 15% movement of either index, there shall be a two-hour halt if the movement takes place before 1 p.m. If the 15% trigger is reached on or after 1:00p.m. but before 2:00 p.m., there shall be a one-hour halt. If the 15% trigger is reached on or after 2:00 p.m. the trading shall halt for remainder of the day.In case of a 20% movement of the index, trading shall be halted for the remainder of the day.

Apart from circuit breakers, price bands are also used.

LocationsNSE trading terminals are present in various cities and towns all over India.

NSE uses sophisticated telecommunication technology through which members can trade remotely from their offices located in any part of the country.

Computer to Computer Link (CTCL) facilityNSE offers Computer-to-Computer Link (CTCL) facility to its trading members by which members can use their own trading front-end software in order to trade on the NSE trading system.

Trading HoursNSE's normal trading sessions are conducted from 9:15 am India Time to 3:30 pm India Time on all days of the week except Saturdays, Sundays and Official Holidays declared by the Exchange (or by the Government of India) in advance.

CLEARING & SETTLEMENT (EQUITIES)Clearing is the process of determination of obligations, after which the obligations are discharged by settlement.

NSCCL has two categories of clearing members:

1. Trading Clearing Members: Trading members can trade on a proprietary basis or trade for their clients. All proprietary trades become the member’s obligation for settlement.

2.Custodians: Custodians are clearing members but not trading members. They settle trades on behalf of their clients that are executed through other trading members.

Some of the custodians empanelled with NSCCL are Axis Bank Ltd., Citibank N.A., Deutsche Bank A.G.,  ICICI Bank Ltd.

Settlement Cycle

NSCCL follows a T+2 rolling settlement cycle. For all trades executed on the T day, NSCCL determines the cumulative obligations of each member on the T+1 day and electronically transfers the data to Clearing Members (CMs). All trades concluded during a particular trading date are settled on a designated settlement day i.e. T+2 day.

Risk ManagementA sound risk management system is integral to an efficient clearing and settlement system.

NSCCL has put in place a comprehensive risk management system, which is constantly upgraded to pre-empt market failures. The Clearing Corporation ensures that trading member obligations are commensurate with their networth.

Risk containment measures include capital adequacy requirements of members, monitoring of member performance and track record, stringent margin requirements, position limits based on capital, online monitoring of member positions and automatic disablement from trading when limits are breached, etc.

InnovationsNSE has remained in the forefront of modernization of India's capital and financial markets, and its pioneering efforts include:

•Being the first national, anonymous, electronic limit order book (LOB) exchange to trade securities in India. Since the success of the NSE, existent market and new market structures have followed the "NSE" model.

•Setting up the first clearing corporation "National Securities Clearing Corporation Ltd." in India. NSCCL was a landmark in providing innovation on all spot equity market (and later, derivatives market) trades in India.

•NSE pioneered commencement of Internet Trading in February 2000, which led to the wide popularization of the NSE in the broker community.

•Being the first exchange that, in 1996, proposed exchange traded derivatives, particularly on an equity index, in India. After four years of policy and regulatory debate and formulation, the NSE was permitted to start trading equity derivatives

•Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in India.

•NSE.IT Limited, setup in 1999 , is a 100% subsidiary of the National Stock Exchange of India. A Vertical Specialist Enterprise, NSE.IT offers end-to-end Information Technology (IT) products, solutions and services.

Certifications

NSE also conducts online examination and awards certification, under its programmes of NSE's Certification in Financial Markets (NCFM). Currently, certifications are available in 19 modules, covering different sectors of financial and capital markets. Branches of the NSE are located throughout India.

References

www.nseindia.com www.wikipedia.org