INVESTMENT MANAGEMENT
UNIT-2
SECURITIES MARKETS
THE TRADING SYSTEM
7/31/2017
The OTCEI dealer’s screen has a left and right
half for the sell and buy counters.
 The sell counter gives the rate, the no. of shares
offered and the name of the market maker.
 It is always in ascending order with the lowest
buy quotes given at first.
 The sell quotes are displayed in descending order
and the seller can decide to unload at the highest
price displayed.
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V.Prabakaran, AP/MBA - Securities Market
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Once the deal is struck, it is entered into
computer. To confirm the transaction on line
message appears on screen.
 The confirmation slip or trading document is
generated through the computer in duplicate.
 One copy is retained and other is sent to the
OTCEI counter. This is known as counter receipt.
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V.Prabakaran, AP/MBA - Securities Market
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V.Prabakaran, AP/MBA - Securities Market
counter receipt gives the following
details:
(I) Transaction number
(II) Names of previous holder and the new
holder
(III) Date and time of transaction
(IV) Price and value of transaction
 The name of the dealer, brokerage
charged and distinctive no. of scrips.
 The counter receipts are used for further
transactions.
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 The
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SETTLEMENT SYSTEM
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At present the settlement procedure has five days
trading cycle. Forward trading is not permitted
on OTCEI. Short sales and squaring up have to
be done within the trading cycle and certificate to
the investor must be delivered within a fortnight
from the date of purchase.
 Thus it avoids speculation.

V.Prabakaran, AP/MBA - Securities Market
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OPERATIONAL FEATURES OF STOCK
EXCHANGE
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Market Timing
 Automated Trading System (National Exchange
Automated Trading systems & BSE On-Line
Trading System)

V.Prabakaran, AP/MBA - Securities Market
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ORDER MANAGEMENT IN AUTOMATED
TRADING SYSTEM
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Orders are first numbered and time-stamped on
receipt and then immediately processed for
potential match.
 Every order has a distinctive order number and a
unique time stamp on it. If a match is not found,
then the orders are stored in different 'books'.
 Orders are stored in price-time priority in various
books in the following sequence: Best Price,
Within Price, by time priority
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V.Prabakaran, AP/MBA - Securities Market
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CONT…
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
V.Prabakaran, AP/MBA - Securities Market
Price priority means that if two orders are
entered into the system, the order having the
best price gets the higher priority. Time priority
means if two orders having the same price are
entered, the order that is entered first gets the
higher priority.
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ORDER MATCHING RULES IN AUTOMATED
TRADING SYSTEM
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The best buy order is matched with the best sell
order. An order may match partially with
another order resulting in multiple trades.
 For order matching, the best buy order is the one
with the highest price and the best sell order is
the one with the lowest price.
 This is because the system views all buy orders
available from the point of view of a seller
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V.Prabakaran, AP/MBA - Securities Market
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ORDER CONDITIONS IN AUTOMATED
TRADING SYSTEM
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V.Prabakaran, AP/MBA - Securities Market
Time Related Condition
 Price Related Condition
 Quantity Related Condition

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TIME ORDER
V.Prabakaran, AP/MBA - Securities Market
Order: is an order which is valid for the
day on which it is entered. If the order is not
matched during the day, the order gets
cancelled automatically at the end of the
trading day.
 GTC Order - Good Till Cancelled (GTC) order
is an order that remains in the system until
it is cancelled by the Trading Member. It will
therefore be able to span trading days if it
does not get matched. The maximum number
of days a GTC order can remain in the
system is notified by the Exchange from time
to time.
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 Day
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CONT…
V.Prabakaran, AP/MBA - Securities Market
- A Good Till Days/Date (GTD) order
allows the Trading Member to specify the
days/date up to which the order should
stay in the system. At the end of this
period the order will get flushed from the
system. Each day/date counted is a
calendar day and inclusive of holidays.
The days/date counted are inclusive of the
day/date on which the order is placed. The
maximum number of days a GTD order
can remain in the system is notified by
the Exchange from time to time.
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 GTD
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CONT…
V.Prabakaran, AP/MBA - Securities Market
IOC - An Immediate or Cancel (IOC) order allows
a Trading Member to buy or sell a security as
soon as the order is released into the market,
failing which the order will be removed from the
market. Partial match is possible for the order,
and the unmatched portion of the order is
cancelled immediately.
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
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PRICE CONDITION
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V.Prabakaran, AP/MBA - Securities Market
Limit Price/Order – An order that allows the
price to be specified while entering the order into
the system.
 Market Price/Order – An order to buy or sell
securities at the best price obtainable at the time
of entering the order.
 Stop Loss (SL) Price/Order – The one that allows
the Trading Member to place an order which gets
activated only when the market price of the
relevant security reaches or crosses a threshold
price. Until then the order does not enter the
market.

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QUANTITY CONDITIONS
V.Prabakaran, AP/MBA - Securities Market
Quantity (DQ)- An order with a
DQ condition allows the Trading Member
to disclose only a part of the order
quantity to the market. For example, an
order of 1000 with a disclosed quantity
condition of 200 will mean that 200 is
displayed to the market at a time. After
this is traded, another 200 is
automatically released and so on till the
full order is executed. The Exchange may
set a minimum disclosed quantity criteria
from time to time.
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 Disclosed
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MARKET WIDE CIRCUIT BREAKERS
V.Prabakaran, AP/MBA - Securities Market
In order to contain large market movements,
SEBI has mandated that the Market Wide
Circuit Breakers (MWCB) which at 10-15-20% of
the movements in either BSE Sensex or NSE
Nifty whichever is breached earlier would be
applicable.
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
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CONT…
V.Prabakaran, AP/MBA - Securities Market
case of a 10% movement of either
index, there would be a 1-hour market
halt if the movement takes place before
1:00 p.m.
 In case the movement takes place at or
after 1 p.m. but before 2:30 p.m. there will
be a trading halt for 1/2 hour.
 In case the movement takes place at or
after 2:30 p.m. there will be no trading
halt at the 10% level and the market will
continue trading.
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 In
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CONT…
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V.Prabakaran, AP/MBA - Securities Market
In case of a 15% movement of either index, there
will be a 2-hour market halt if the movement
takes place before 1:00 p.m.
 If the 15% trigger is reached on or after 1:00 p.m.
but before 2 p.m., there will be 1-hour halt.
 If the 15% trigger is reached on or after 2:00 p.m.
the trading will halt for the remainder of the day.

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CONT…
In case of a 20% movement of the either index,
the trading will halt for the remainder of the day.
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
V.Prabakaran, AP/MBA - Securities Market
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V.Prabakaran, AP/MBA - Securities Market
THANKS…
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